About Bitcoin (BTC)
Bitcoin (BTC) is a digital currency intended to be used for peer-to-peer transactions and is free of control from any centralized group, such as the government. As it’s completely decentralized, there is no third-party involvement at any stage; every stage of the transaction is modified and regulated by mathematical algorithms. At times, miners get rewarded with bitcoins for helping complete transactions. Decentralized exchanges (DEX) are hubbubs where you can easily purchase bitcoins or sell them.
The token’s origin dates back to 2009. Satoshi Nakamoto – which apparently is a false name for the developer who introduced it, published a paper in 2008 on Bitcoin.org. This document guides how Bitcoin is used nowadays. All Bitcoin transactions are publicly recorded on ledgers hosted on thousands of computer servers (also nodes) worldwide. Cryptographic algorithms (also known as hash algorithms) are employed in determining and verifying the legitimacy of completed transactions, unlike traditional money, where the bank regulates every process.
Every completed transaction on the Bitcoin Blockchain is gathered into a “block”. Blockchain blocks are publicly held records that are hosted on the Blockchain and details all transactions made with BTC by people, agencies, companies and every other qualifying entity.
Bitcoins are stored in digital wallets like you’d store a dollar note in an actual back-pocket wallet. In reality, most exchanges are not decentralized and are operated by independent third parties. Fortunately, these exchanges can work nicely on smartphones with extra configurations. There are cases where some exchanges have been breached with millions in coins carted away. We recommend studying any chosen exchange’s credibility and security history before signing up with them.
In principle, a wallet is a consensus that a particular party owns a coin. Your proof of ownership for a group of Bitcoins is ascertained with a private key. Should you lose the key, you’d automatically forfeit your ownership rights to the bitcoins.
How Does Bitcoin Work?
All crypto tokens, including Bitcoins, are digital assets that can be bought and sold like traditional commodities. Though Bitcoin’s value is often quoted per coin, it’s possible to also own fractional shares of a Bitcoin, as with traditional securities. Bitcoins can be split as low as a Satoshi. Satoshis are the same as one hundred millionth of a Bitcoin token.
Bitcoin runs on a cryptographic network of its own called a ‘blockchain’. Bitcoin’s Blockchain oversees that the public ledger on which Bitcoin transactions are recorded is untampered and that transactions are effectively organized into blocks. In other words, the Blockchain ensures independent entities do not falsify transaction records and that all Bitcoin users reach a conclusive agreement on who owns what tokens.
Bitcoin blocks are individual units that carry info regarding every transaction made with Bitcoin. This information is generally made up of a date/time, transacted Bitcoin amount, and a unique and special code for each transaction. The term ‘blockchain’ is derived from the visual interpretation of chaining blocks of transactions together chronologically.
Bitcoins are units of data. Purchasing bitcoins implies that you’re paying to own data which, at the core, are nothing but binary digits. These pieces of data are stored in ‘wallets’. Wallets can be accessed either with a private key or a public one. There are two main types of wallets. These are custodial and non-custodial wallets.
The keys to a custodial wallet are held by another party, most notably an exchange. For non-custodial wallets, you take the sole responsibility for the safety of your keys and the management of your wallet.
To send Bitcoin tokens to a peer, you must have the receiver’s wallet address at hand. You’d also need to provide your transaction key to validate the transfer. The transaction would need to be authenticated by miners to complete. This may take up to half an hour as all completed transactions are typically lumped into one huge pile termed the ‘mempool’.
Bitcoin Price Today
Several factors influence the Bitcoin price USD graph. These mainly are demand & supply, government regulations/sanctions, competition from other cryptos and overall public perception (Public Perception was one of the major instruments that bolstered the currency’s prices to its all time high of $69,000 in November 2021).
- Supply & Demand: If you’ve studied basic economics, then you’d know that the prices of several commodities are determined by supply & demand. To a large extent, Bitcoin to USD market value is determined by what buyers are ready to pay in addition to how many coins are currently in the market. At release, Bitcoin was deliberately capped at 21 million coins. Logic supports that based on price history, the then-current bitcoin price would increase the closer the available circulating coin approaches the set price now.
- How Competition Affects the Price of Bitcoin: Bitcoin has the largest market cap of all cryptocurrencies. Even at that, tons of other coins compete with it for bigger market shares. Back in 2017, Bitcoin’s market cap was about 80% of the total cryptos market. It declined considerably to 50% by 2022.
The waning in Bitcoin’s market influence is largely attributed to other tokens’ increased awareness and superior functionality. For instance, Ethereum has evolved as an investor favourite mainly due to its promising applications in revolutionizing the finance industry. The Ether token is critical to Decentralized Finance (DeFi), a finance system with no central players. Ethereum’s market cap is 20% of the cumulative market cap.
Where is Bitcoin Used Now?
By design, Bitcoin can not be subjected to regulation by any authority. For this reason, many countries have limited its use cases in their jurisdiction, while others have banned it outrightly. As of April 2023, nine countries in total, including Morocco, Qatar, Tunisia, Nepal, China, Algeria, Bangladesh, Egypt, and Iraq, have eliminated the use of Bitcoin by stymying all efforts of Bitcoin-driven companies to transact within their financial system.
As it’s a digital asset you can exchange for money, you can buy anything you could otherwise purchase with Fiat money with Bitcoin. You only need to be sure that the merchant or vendor accepts Bitcoins. For proper context, items you can purchase with Bitcoin include:
- Cars: Lamborghinis, Subarus, Mercedes etc., are just a few of the brands you can patronize with Bitcoin. Recently, Elon Musk announced that whoever wanted could purchase Tesla vehicles with BTC.
- News Media: Notable media outlets – for instance, the Chicago Sun – allow clients to subscribe for annual subscriptions with Bitcoin.
- Household Items/Giffen Goods: Notable retailers and vendors of commercial items, such as BitDials, Franck Muller etc., allow payments in Bitcoins for their offerings.
- Insurance: Some insurers have started warming up to the token and now allow policies purchase to be made with the coin. For instance, at AXA, clients can opt to purchase any available policy (except life insurance) with BTC. Metromile is another notable insurer that permits auto policy coverage with the token.
Who Created Bitcoin?
Who developed Bitcoin? Sure, a person (or perhaps a group of developers) registered a Bitcoin.org domain name in 2008 under the name “Satoshi Nakamoto”. Even at that, there are credible reasons to believe the appellation might be a false name.
Even though Satoshi Nakamoto claimed to be a 37-year-old male who lived in Japan in 2012 on his P2P foundation profile, there are several pointers to the likely fact that this is untrue, especially the “living in Japan” bit. His Use of English was near native-level perfect, and he generously used slang (“bloody hard”, for example) that did not align well with his Japanese-origin claims.
Speculators have previously had sufficient reasons to suspect Satoshi Nakamoto could be any of Nick Szabo, Hal Finney, Dorian Sakamoto and Craig Wright. However, all those claims have been satisfactorily nullified beyond doubt, and it’s still quite uncertain who Satoshi Nakamoto is.
How to Buy Bitcoin (BTC)?
There are several ways you can bank to buy bitcoins. Whether you intend to keep the coins as investment tokens or complete transactions with them doesn’t matter. Those options work out just fine. Exchanges, for example, Coinbase and even some traditional stock chart brokers, are a few platforms you can purchase your Bitcoin from. We’ve outlined how you can complete your Bitcoin purchase.
Cryptocurrency exchanges are the major method we recommend to purchase your tokens. Fees differ with exchanges, though. Complete a thorough check on operational policies, transaction fees and even if or not the service is available in your country before signing up with the exchange. Exchanges that’ve been breached once could likely be breached again, and we recommend shunning those.
Only a few traditional stockbrokers offer support for crypto transactions. Robinhood is one of the major brokers to support making trades with crypto. Other platforms that support crypto trades include Firstrade, SoFi Active Investing, TradeStation and WeBull.
Peer-to-peer bitcoin owners
P2P platforms connect you directly with other crypto owners. They’re especially handy when your government bans direct crypto purchases with available local currency. Though there are no attached fees to transactions, these platforms are less regulated than dedicated exchanges and are subsequently privy to scam raids. Conduct transactions only with an escrow or with people you trust. Popular P2P platforms include LocalBitcoins.com, Bisq, and Bitquick.
Grayscale Funds is an investment group that manages only digital assets. Its ‘Grayscale Bitcoin Trust’ is publicly traded, meaning you can purchase Bitcoin via trust from several brokers. GBTC shares are often more expensive than actual Bitcoin. Transaction fees and their applicable costs are all included in the live price computation.
Is Bitcoin Using Mining?
Bitcoin Mining refers to the process by which all transactions made with BTC are validated and uploaded to its Blockchain. Mining is accomplished with a global network of servers hosting the Blockchain code. Miners (people who solve complicated hash functions on computers in a bid to validate transactions) are rewarded with BTC for every set amount of transactions uploaded to the Blockchain. This serves as an incentive to keep mining.
- Mining is accomplished by verifying new Bitcoin transactions against its Blockchain network. Ultimately, it results in the creation of new Bitcoins, as for every block of Bitcoin uploaded, only a specified number of Bitcoins get released.
- Bitcoin mining is achieved with the use of hash algorithms that take on the whole verification procedure and ultimately add the transactions to the public ledger.
To add a block, miners must solve complicated math problems. Computers employed in solving these typically require very high processing power and an obscene amount of energy to function. To mine BTC successfully, the computers must guess the proper hash in a process known as ‘proof of work’. The whole Proof of Work system is random and involves guessing as many numbers as quickly as possible. The speed of completion is determined primarily by the processing speed.
The mining computers are specially designed and are known as ASICs or application-specific integrated circuits. It’s not uncommon for these to cost as high as $10,000. These computers require a large amount of electrical power to work. This, understandably, limits the profitability of miners. For every block a miner manages to upload to the Blockchain, they’ll be credited 6.25 BTCs. This amount gets halved every four years.
How to Safely Store Bitcoin
BTCs, alongside every other cryptocurrency, are stored on Blockchain networks. A crypto wallet conveys the real-world equivalent of storing cryptos on the Blockchain. Wallets are indispensable for completing transactions with cryptocurrencies. To access a wallet, you’d need a private key known, ideally, only to you. Most exchanges assign the key – which could be some random 20+ words – to you, and you don’t get to choose what your key would be.
- Hardware Wallet: These are not crypto wallets in a strict sense. They merely are physical items (a piece of paper, a safe deposit box etc.) on which you’ve stored your key. Some wallets are electronic and can be configured to connect with your smartphone or PC via Bluetooth, Wifi or even a USB cable.
- Software wallet: Software wallets are digital wallets where you store your crypto. They could be mobile apps, browser extensions or even web apps.
- Custodial wallet: Custodial wallets are controlled by crypto exchanges. You can easily store your purchased tokens on these wallets as a client. Most exchanges would even rid you of the need to use private keys every time you sign in. Create an account and sign in to make transactions with your tokens.
- Hot and cold wallets: Hot wallets are stored online and are linked to a web server. Cold wallets are based offline and have no active connections with the internet.
Many wallets require a mnemonic – a secret/recovery key to generate a private key. It’s significantly easier to memorize the mnemonic, as they often are random combinations of a specified number of words, than to memorize the private key. Fortunately, seed phrases are not configured to work with a specific exchange or device/wallet type. Unless you’ve activated several two-step authentication features, it’d be quite easy for a third party to access your wallet if they knew your seed phrases. Guard your seed phrases as securely as you’d a password.