What is Bitcoin? How does it work?

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Among many people around the world, the word Bitcoin rings a bell. Despite the crypto space being occupied by over 30,000 cryptocurrencies, Bitcoin stands out from its rivals. Not only is Bitcoin the most popular cryptocurrency, but also it was the first.

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This supremacy of digital currency over fiat has increased over the years. Recently, many people have started gaining interest in cryptocurrency, and investors have sprung, unlike during its introduction. This article has been created with the help of the team at Bitcoin Revolution.

What is Bitcoin?

Bitcoin was introduced in 2009 by a group known as Satoshi Nakamoto and was the first cryptocurrency that came into existence. We can say that the other cryptocurrencies in existence are descendants of Bitcoin. Bitcoin was created purposely to be used as a means of exchange, just as we do with fiat.

Bitcoin is a decentralized system that means that a Central Bank does not regulate it, unlike fiat. Upon learning that, you might be asking how Bitcoin is then regulated. Bitcoin running on a decentralized system doesn’t mean that Bitcoin can be oversupplied or is not secure.

Bitcoin is so safe because it runs on a technology called a blockchain. A blockchain is a network of blocks containing information about a cryptocurrency. The blockchain network is linked to computers and is available publicly. Bitcoin cannot be oversupplied since it uses cryptography which is a security encryption method

The rise of Bitcoin

Since Bitcoin was introduced, it has undergone a lot of changes, especially in its value. Cryptocurrencies are volatile, and Bitcoin is the biggest culprit. This characteristic has caused drastic changes in the value of a single Bitcoin.

During its introduction, the value of a single Bitcoin was 0.0008 dollars, and by 2010 its value rose to 0.08 dollars. The low value of Bitcoin in the early years of its introduction was influenced by the number of investors willing to buy Bitcoin then, and that is why the value did not see any significant growth at the start.

As people started giving attention to cryptocurrency and several investors participating in buying Bitcoin, its value increased significantly. In 2021 January’s Bitcoin value had risen to $41,000, which is the highest value Bitcoin has ever had for the past years.

Despite Bitcoin’s value increasing, it sometimes collapses, making it hard to predict its value in the future.

Where to get Bitcoin

So far, you have understood what Bitcoin is, and you have a piece of knowledge about its history. Where does Bitcoin come from? There are two ways you can acquire Bitcoin, which are:

1. Mining

This is a process that involves solving complex mathematical equations and on a blockchain network. Upon completion, a miner is rewarded with a new Bitcoin. Notably, this method of acquiring Bitcoin is expensive since it requires expensive and powerful computers that consume a lot of energy.

2. Exchange Platforms

Unlike mining, this method of acquiring Bitcoins is simple, and anyone can acquire Bitcoin. Exchange platforms are a marketplace where traders sell and buy cryptocurrencies.

The traders exchange their cryptos for either cash or cryptocurrencies, which have an equivalent value of their cryptos.

Best exchange platforms for Bitcoin

Here are some exchange platforms that you can acquire Bitcoin from.

Cash App

This is a fantastic platform for beginners who would like to trade in Bitcoin. The platform currently supports just Bitcoin. sIts user interface is simple, and interacting with the platform is so easy.

Coinbase

This platform was established in 2012. This platform supports many digital currencies for users to trade, with Bitcoin being included.

The platform has a large number of users which is an indicator that it is a good platform.

Gemini

This platform has some security features to ensure that your holdings are safe. Users can trade Bitcoin and other cryptocurrencies from this secure platform.

Where to safely keep your Bitcoins

After an exchange, you will require a crypto wallet. A crypto wallet is where you store your cryptocurrencies. Some of the platforms that you trade with will offer an online wallet they provide on their platforms. No matter how safe a platform is, it is essential to have a crypto wallet that you can have complete control over and ensure the safety of your Bitcoin.

Is Bitcoin a risky investment?

Like a regular investment or trade, there is a possibility of encountering a few issues along with the transaction, and Bitcoin investment is not an exception. Despite Bitcoin being a good investment, some investors have lost their holdings.

Several different reasons have attributed to such a turn of events. The following are some things to have in mind before investing in Bitcoins.

Volatility

The volatile nature, as seen earlier, makes it almost impossible to predict the prices of Bitcoin. Today’s value might be high, but in a few days, its value drops. Being a new investor, you have to have this in mind

Security

Security is not to be ignored, especially when it comes to Bitcoin. Being a digital asset that runs online, hackers have not been left behind. They are always on the lookout, and any Bitcoin trader who might not have prioritized security on their assets can become their victim.

Especially for users who use trading platforms, always be on the lookout. Hackers create clones to the platform’s website, and once the unknowing trader enters their data, hackers later use to steal their holdings. Always make sure you use the correct link, especially if your platform is on a website.

Frauds

Several frauds have surrounded the crypto trade. Some of the fraudsters even create pseudo-social media accounts for a specific platform and lure unsuspicious traders into sending money by sending them emails pretending to be customer support employees.

The frauds can be very cunning, especially on media platforms, since they use official logos and the names of a platform.

Conclusion

With the digitalization of so many things around the world, Bitcoin is a game-changer. Most fiat currencies experience inflation, but Bitcoin does not, which means people will opt to adapt using Bitcoin as a store of value in the future. Since the early 2010’s most companies accept Bitcoin as payment. It is only a matter of time, and we might be buying groceries with Bitcoin.

 

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