This article explains elementarily all that needs to be known about bitcoin as a cryptocurrency, how bitcoin works, what is used for, and the future of bitcoin and other cryptocurrencies in general.
Have you heard about Bitcoin before?
Do you have a Bitcoin wallet?
If you have no idea or have heard but are not sure what it is exactly, keep on reading.
For a while now, there have been lots of talks about Bitcoin. From Bitcoin investments to Bitcoin trading, to Bitcoin mining and everything in between.
So many still do not understand what it is about or how it works. For some, it sounds much techier and should be avoided. For others, it is like one of those Ponzi schemes that will crash someday.
Just last year, the news broke about Bitcoin reaching $60,000 per coin. Yes, I know what you are thinking.
That is a lot of money to be equivalent to a ‘coin.’ This was the same coin that was equal to $1 just about a decade ago.
I will be sharing a bit about Bitcoin, and possibly you pick an interest to invest in it too. Bear in mind that it is no Ponzi or scam, you just have to understand how it works.
Table of Contents
What to Know About Bitcoin?
There have been multiple attempts to create a digital alternative to the usual paper currency (fiat money). Bitcoin is a cryptocurrency that is used in trade exchanges online.
You should note that bitcoin is not the only cryptocurrency, Other cryptocurrencies that are not bitcoin is known as an altcoin.
An altcoin is any cryptocurrency that is launched after the success of Bitcoin. Generally, most altcoins see themselves as better alternatives to Bitcoin.
The term “altcoins” simply refers to all cryptocurrencies other than Bitcoin. As we speak, there are over 10,000 altcoins currently existing in the world.
Bitcoin and altcoins are not physical currencies like naira, dollar, euro, or pounds, but are used not only for buying and selling on the internet but also for trading.
Bitcoin (BTC) is free of all government oversight; this is because it is monitored by a peer-to-peer internet protocol.
In simple terms, Bitcoin is money that you can not touch or carry around, but you can buy and sell still, simply with the internet.
Bitcoin was created in 2009 by Satoshi Nakamoto, a software developer. The origin or true identity of the so-called Satoshi Nakamoto is unknown to the world.
In truth, no one is still certain whether it is an individual or group that goes by that name. There is no face pinned to the name, either.
If you have vital information about Satoshi Nakamoto, it will be appreciated if you can share it with the world.
It will be a good kickstart for the world to understand more about the coin, and to know if there is any secret behind it.
How does Bitcoin Work?
Bitcoins are generated by using a free application called Bitcoin miner. The technicality behind the creation is a combination of computer processing power (CPU) and complex algorithms, and you have Bitcoin.
With Bitcoin, you create a mine and generate a Bitcoin wallet, buy Bitcoin, and store it till you either want to resell or purchase an item.
Bitcoin became the first viable option to come to life before others started springing up. Examples of other cryptocurrencies include Ethereum, Ripple, Litecoin, etc.
What makes Bitcoin so important and different from the conventional money we are used to is the fact that it is decentralized.
What this means is that no single institution controls the Bitcoin network, unlike other known currencies.
For instance, the dollar is controlled by the United States Federal Reserves, and the naira is controlled by the Central Bank of Nigeria.
This means that a “big bank” somewhere isn’t in control of your money. It is in your direct charge and eliminates the middleman (bank) in handling your money. Amazing right?
Blockchain Technology
The blockchain is maintained by a network of computers known as nodes.
These nodes validate and record transactions, ensuring the integrity and security of the network.
The decentralized nature of blockchain means no single entity controls the entire network.
Decentralization of Bitcoin
Decentralization is one of the core principles of Bitcoin.
It ensures that the network is not controlled by any single entity, reducing the risk of manipulation and increasing trust among users.
What is Bitcoin used for?
Bitcoin is used to buy and sell virtually on the internet today. Although it is generally not fully in line with government policies yet, it is accepted in some countries for major purchases and sales, as well as some bit e-commerce stores.
You can spend your Bitcoin on a boutique tour, alcohol, restaurants, order pizza, clothes, dresses, whatever you wish.
You can swap your coins for dollars, naira, or other currencies. One can buy or sell bitcoins on Coinbase.
What is the future of cryptocurrency like Bitcoin?
Cryptocurrency is wild and growing very fast. New cryptocurrency emerges almost every day, those who got hold of it early got very wealthy, and investors lost money.
Every cryptocurrency comes with a promise, mostly a big story to turn the world around. (like most things tech).
Few survive the first months, and most are pumped and dumped by speculators and live on as dumb coins until the last holder loses hope ever to see a return on his investment.
But over the years, there has been a consistent growth in the value of Bitcoins with a few drops in value every now and then.
It is still the strongest and gives hope of totally changing the future of currencies in the world.
As Bitcoin has hit $60,000 for a coin, it shows that there is no going back on the growth. Though it is an unsure investment, it makes it a better risk to invest.
Mining Bitcoin
Bitcoin mining involves using specialized hardware to solve complex mathematical problems.
Miners are rewarded with new bitcoins for their efforts.
However, mining has become increasingly difficult and resource-intensive over the years.
Types of Bitcoin Wallets
Bitcoin wallets are used to store and manage Bitcoin. They come in various forms, including hardware wallets, software wallets, and paper wallets.
Hardware wallets are considered the most secure, as they store Bitcoin offline.
Making Transactions with Bitcoin
Transactions with Bitcoin are straightforward. Users can send Bitcoin to another address by entering the recipient’s wallet address and the amount.
These transactions are typically confirmed within minutes.
Benefits of Bitcoin
Financial Freedom: Bitcoin offers financial freedom by allowing users to control their own money. It eliminates the need for intermediaries like banks, reducing fees and delays.
Low Transaction Fees: Compared to traditional financial systems, Bitcoin transactions often have lower fees, especially for international transfers. This makes it an attractive option for cross-border payments.
Privacy and Security: Bitcoin transactions can be conducted pseudonymously, providing a level of privacy. Additionally, the security of the blockchain technology helps protect against fraud and hacking.
Risks of Bitcoin
Volatility: Bitcoin is known for its price volatility. While this can lead to significant gains, it also poses a risk of substantial losses. Investors should be prepared for this fluctuation.
Regulatory Concerns: The regulatory environment for Bitcoin is still evolving. Governments around the world are grappling with how to regulate this new form of currency, leading to uncertainty.
Security Risks: While Bitcoin itself is secure, the platforms and wallets used to store and trade it can be vulnerable to hacks. Users must take precautions to protect their assets.
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