The entire world has heard of cryptocurrencies at this point, and it is very likely that the first word they heard related to this phenomenon was “Bitcoin”. The reason why this is the case is due to the incredible popularity that this particular coin has managed to gain in the past few years.
What is Bitcoin?
Bitcoin is a digital currency that was created in 2009, the first of many existing digital coins and the most successful and popular one as of today.
Although the internet is loaded with its images and logos, Bitcoin isn’t FIAT currency (government-issued physical currency, such as the USD) and is actually a decentralized software that records every single transaction in a distributed ledger (similar to a bank’s ledger) called a blockchain.
Due to its very secure technology, Bitcoin allows performing secure peer-to-peer payments and transactions online.
Bitcoin Basic Facts:
- Bitcoin was created in 2009 by Satoshi Nakamoto; most people believe that this mysterious name seems to be pseudonymous and that the creation of Bitcoin was done by several people who wanted to remain anonymous.
- Bitcoin is also known as BTC
- The actual value of Bitcoin when it was introduced was $0, but it was already being traded for free.
Once it started to gain popularity as a decentralized currency option, it was able to reach $1 in value in 2011, which then took a leap all the way to $1,000 in value by the month of November 2013.
Since then, it has reached incredible values and is currently at 50,635 USD.
- The maximum amount of Bitcoin that will ever exist is limited to 21 million coins.
- Every transaction ever made with a Bitcoin is tracked and recorded in a blockchain (similar to a bank ledger) and it is transparent to everyone across the network.
How Bitcoin works?
The way cryptocurrency works is completely different from the way we use standard currencies, and involves a lot of technological elements; however, this is not a process that needs to be complicated for people without a major technical knowledge to understand;
keeping it simple – each bitcoin is actually a computer file that contains a unique key, that is stored in a digital wallet (a wallet that enables to store the keys to digital currencies safely).
People can transfer and send Bitcoin to each other using those wallets, while every single transaction is recorded by a distributed ledger called a blockchain.
since the blockchain is public and transparent, it makes it possible for everyone to trace every Bitcoin and its transaction history.
You can find a broader technical explanation about how bitcoin works in the following video:
What is Bitcoin Mining?
The first (and most common) option of putting your hands on a Bitcoin, is by purchasing it from a crypto exchange platform; the second option, is mining.
Given that Bitcoins are not physically printed, their origins are purely digital and the process in which they are made is called mining.
Bitcoin mining is the process of creating new bitcoins (by adding a new block of transactions to the blockchain), solving intricate mathematical problems that will verify the transaction of the currency.
The process requires very expansive computers with high-end graphics cards (the same ones that people use for video gaming) and a huge amount of electricity. Mining rewards for successfully completing one block currently stands for 6.25 Bitcoin.
Also, the reward halves every 210,000 blocks or an average of every 4 years.
The last time bitcoin halved its mining reward (from 12.5 BTC to 6.25 BTC) was May of 2020. The growth in the number of miners has also made it more difficult for mathematical problems to be solved, but this has led to the strategy of pooled mining, a way for miners to work together and avoid unnecessary setbacks.
Investing in Bitcoin
Now that Bitcoin has become so valuable and popular, there are people who dedicate a lot of time to the process of buying and selling this cryptocurrency. This works in a way that is very similar to Forex in the sense that people trade based on expectations of the way the currencies are going to behave in the coming days, weeks, months, and even years.
Investing in cryptocurrencies, in general, is not the same as investing in Bitcoin. The main reason for this is that Bitcoin is vastly superior in popularity and value to any other cryptocurrency in the market. The point of this is that the advantages and disadvantages that we will present below are all for Bitcoin and not for all cryptocurrencies.
- Bitcoin is the first coin ever created, and has a proven record of growth and potential to continue to grow in value in the coming years and decades, and has a potential for high returns.
- It has the current highest market cap in the world of cryptocurrencies.
- despite some fluctuation from time to time, Bitcoin maintains a steady and stable value.
- Bitcoin is backed by blockchain technology, which enables buyers to complete transfers and transactions without sharing any personal or financial information, and keeps them safe from hacks & payment frauds.
- Nobody owns the Bitcoin network – no country, company/corporation or any third party is in control of it, and will never be; anyone can become a part of the network at any given moment.
- Every transaction ever made is transparent.
- The main concern for many investors is that there is a constant risk of regulatory forces coming into play and ruining the essence of the cryptocurrency world by centralizing the transactions and trying to turn these coins over to a specific financial entity.
- There are always security & fraud risks when handling transactions (not due to any lack of efficiency in terms of blockchain security).
- Some experts are concerned that this is a bubble that will burst and leave people with bitcoins that currently have very little value; however, this concern has been there since day one, and millions have profited since.
- Risk of losing access to your assets: if for some reason you will lose access to where you store Bitcoin keys (example: damaged wallet/file), There’s no way to recover it, and those coins will be lost forever.
- At the end of the day, a Bitcoin is an investment, and like in any other investment – nothing guarantees profitability.
There is an undeniable curiosity for Bitcoin, even in people who are hesitant about investing in regular currencies. There is always a level of uncertainty and risk involved with any type of financial process, however, but Bitcoin has shown to be a very solid opportunity for people to get optimal results from their efforts; As long as people remember that risk is part of the process of investing in any cryptocurrency, they are going to be able to start their journey into the world of Bitcoin.