Did you know that the first official transaction made using Bitcoin as a currency was for two pizzas sold by a pizzeria in Jackson, Florida? The person purchased two pizzas in exchange for 10,000 BTC. That same amount of Bitcoin tokens would be worth $372,770,000 based on Bitcoin prices at the time of writing. Astounding, isn’t it?
Bitcoin has come a long way from its initial days, leading a revolution that is slated to change the global financial landscape. You might have seen Bitcoin making headlines quite often over the years. Unless you’ve been an enthusiast for a while, most of it might be going over your head.
Let’s suppose you have no idea about Bitcoin and managed to avoid any exposure to cryptocurrencies. Learning all the basics could help you bring yourself up to speed so you can also make more informed decisions about investing in Bitcoin and cryptocurrencies.
This Crypto for Beginners edition will kick things off by giving you a beginner’s guide to Bitcoin.
What Is Bitcoin?
Bitcoin is the world’s first cryptocurrency. It is a digital and decentralized currency that doesn’t rely on a government or financial institution regulating it. Purchases and exchanges made using Bitcoin are directly between anonymous Bitcoin users on the blockchain network. The system uses no identifiers like names or account numbers, ensuring privacy for Bitcoin users.
Bitcoin uses blockchain technology and cryptography to create and maintain a secured ledger of transactions. A public ledger containing the records for all Bitcoin transactions exists worldwide. Consensus on who owns which coins is reached cryptographically across various nodes on the blockchain network instead of relying on a centralized source of trust, like a bank.
When Was Bitcoin Created?
The origins of Bitcoin are shrouded in mystery. The first-ever mention of Bitcoin was in an academic white paper published in 2008, labeled “Bitcoin: A Peer-to-Peer Electronic Cash System,” authored by an individual called Satoshi Nakamoto.
There is no record of who Satoshi Nakamoto is, and the mysterious inventor of cryptocurrencies has not made any statements for a while now. There has been considerable speculation about who it could be, but there is no way to tell who is behind it.
The white paper laid down the groundwork for the invention of Bitcoin, and on January 9, 2009, the software described in the document launched. Satoshi continued working on the project until 2010. Satoshi Nakamoto has not made any public statements since.
What Is Bitcoin Mining?
Bitcoin mining is the process used to maintain the cryptocurrency’s blockchain network. It is also how new coins are created and enter circulation. Mining crypto is not like physically mining the asset. Rather, the process sees complex cryptographic calculations take place to verify transactions. The large chunks of transactions, once processed, form blocks of data that are added to the blockchain network – hence the name.
Users responsible for lending computing power to mine Bitcoin are called miners. The first miner to solve the next blockchain will broadcast the block of data to the blockchain, where it will be added if verified. The miner is rewarded with a certain amount of the newly created Bitcoin.
How To Store And Use Bitcoin?
Bitcoin is unique in how it is stored. There aren’t any physical tokens or currency notes that you can tuck away under your mattress. Instead, you use Bitcoin wallets to store your assets. A Bitcoin wallet is like a physical wallet, but it is used to store the private keys linked to the Bitcoins you can spend instead of holding the currency itself. Bitcoin wallets let you see how many of the tokens you hold and facilitate Bitcoin transactions.
There are various types of Bitcoin wallets, and they differ by the storage method. Hot storage is when your cryptocurrency is stored online, and cold storage is when your assets are held completely offline.
Software Bitcoin Wallets
Software wallets include mobile, desktop, and online wallets. These wallets exist as software, and some of them fall under the hot storage category because they are cloud-based storage options. Hot storage for Bitcoin makes for easier transfers and quicker access but may be more susceptible to cybercrime.
- Desktop wallets are software wallets you can download to your computer and can only be accessed through that device.
- Online wallets are cloud-based and the easiest to use. However, they are the easiest to hack. Ideally, you should only store a portion of your Bitcoin holdings in online wallets to keep most of your Bitcoin away from any risk in case the wallet provider is compromised.
- Mobile wallets operate through apps and can be one of the most convenient options to consider because you can access them on the move.
Hardware Bitcoin Wallets
Hardware wallets are physical storage options that could be external storage devices like USBs or hard drives. You can access them only by plugging them into a device and logging in. Hardware wallets fall under the cold storage category because these devices are not connected to the internet.
Cold storage is regarded as the most secure method to store large sums of crypto. However, hardware wallets can be susceptible to physical damage if not stored properly, and they can be stolen if not adequately secured.
Paper Bitcoin Wallets
Paper Bitcoin wallets, as the name suggests, are literally pieces of paper that contain your private keys. This low-tech wallet is also a cold storage method for crypto. They are easy to generate, but you have to ensure that you store them safely and keep them from getting damaged.
Wrapping It Up
Regardless of all the criticisms surrounding Bitcoin and other cryptocurrencies, the fact of the matter is that it is decentralizing finance and putting power back into the hands of people. Bitcoin’s soaring popularity since its first introduction is a testament to how progressive and tech-centric the world has become.
Whether Bitcoin remains the world’s most popular cryptocurrency several years from now remains to be seen. However, it has made it clear that Bitcoin and other cryptocurrencies are here to stay.
Did you find this beginner’s guide to Bitcoin helpful? Keep following the Crypto World for more exciting news and other content related to Bitcoin and the cryptocurrency world.
