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A Beginners Guide to Bitcoin: Everything You Need to Know Starting Out in Bitcoin

A Beginners Guide to Bitcoin: Everything You Need to Know Starting Out in Bitcoin

If you’ve been paying any attention to the news cycle over the past couple of years, you’ll likely have seen the huge increase in attention given to the subject of cryptocurrency.

Cryptocurrency as a form of investment is on the rise, and a wealth of advertisements, company adoptions, and financial recommendations have come with it.

If you’re new to the whole world of crypto, you might want to start by getting familiar with where it all started. Bitcoin was the original cryptocurrency, and reading through our beginner’s guide to Bitcoin can help you to understand the basics of how the whole cryptocurrency system works.

What is Bitcoin, where did it come from, and what does it mean for the world as we know it? Read on and we’ll walk you through what you need to know.

What Is Bitcoin?

Let’s start with the million-dollar question: what is Bitcoin, anyway? The answer is going to take us back to the more relatively innocent days of 2008 when we hadn’t yet understood the full arc of where new tech was taking us.

Believe it or not, no one actually knows who created bitcoin. It was crafted and released to the world by an anonymous individual or group, working under the fake name Satoshi Nakamoto. To this day, no one knows who Nakamoto really is, and there’s been no confirmation of any details about them.

Bitcoin is a form of digital currency. It can be used to buy products and services online, in the same manner, that you would use any other form of payment.

The whole idea behind bitcoin is that it was designed to be secure, anonymous, and free from the control of any world government. Bitcoin is decentralized, meaning there is no overarching power that controls the creation or distribution of the currency.

Unlike, say, the American dollar, there is no government that can step in to create more, restrict, or otherwise meddle in the currency’s value or flow. This freedom from government intervention is one of the many reasons that Bitcoin catapulted so quickly to extreme world fame.

Bitcoin was creating an open-source code, meaning anyone from around the world would be able to use it. It has been used as a model in the creation of many more cryptocurrencies. Today, there are thousands and thousands of different cryptocurrencies in circulation around the world.

Bitcoin is the original cryptocurrency, and it’s the form that still has the most respect, value, and users.

Operating on Blockchain Technology

How does Bitcoin operate, especially if there is no larger government entity in place to help manage the flow? In place of these power structures, the creators of Bitcoin created something called the blockchain.

The blockchain is an official digital ledger of all transactions around the world that take place using Bitcoin. Each cryptocurrency in existence uses its own blockchain ledger, with Bitcoin transactions taking place on the Bitcoin blockchain.

The blockchain records each and every single transaction made in bitcoin, and a transaction can not be taken back once it occurs. The blockchain is in place to keep a record of all bitcoin transactions so that no one can abuse the system or dispute any sort of transaction.

It is used to certify the legitimacy of all bitcoin-based transactions. Thus, it’s very important. In order to secure it, the blockchain is hosted simultaneously on a network of thousands and thousands of computers around the world.

In this way, it makes it exceptionally difficult to get access to and hack the blockchain in any way.

Bitcoin Mining

How is bitcoin created? This would be a logical next question to jump into your mind, and it’s an important one.

The process of creating a new bitcoin is known as bitcoin mining. Anyone can create bitcoin, but it requires a huge amount of computing power and a great deal of time.

To put it as simply as possible, the mining process involves working through an incredibly complex math problem. This math problem requires a massive amount of computer processing to work through. Once a certain amount of computational effort and resources has been used, the bitcoin network will create a new bitcoin.

In this way, the ‘mining’ of bitcoin requires actual time, resources, and effort, just like the creation of other forms of currency.

Bitcoin has come under fire in recent years due to the need for this computational energy. It turns out that all of the work required to create bitcoin is actually quite bad for the environment, which has drawn some people away from the crypto giant and has led to much criticism.

Elon Musk, the head of Tesla, is one of the more recent people to speak out against the negative environmental impact of Bitcoin.

How Much Is Bitcoin Worth?

Unlike gold or other physical holders of value, there is no physical form of Bitcoin. This means that its value to people around the world is entirely theoretical.

There is a finite amount of bitcoin that exists and can be created. Built into the system of Bitcoin is a stopping point, where no more Bitcoin can be mined and all the Bitcoin that will ever exist will be in rotation.

This limited quantity does create a system of supply and demand, which thus helps to establish a price for the cryptocurrency. However, since supply and demand is really the only deciding factor behind Bitcoin’s value, the price of the currency can vary wildly.

In instances where public sentiment turns against the cryptocurrency, the price can dive and value can decrease by a huge margin. It can also soar suddenly to steep highs. Getting a bitcoin value can be difficult because the price of this and other cryptocurrencies can be so temperamental.

Public perception is the most important thing to keep in mind when it comes to crypto. The more people want to invest in Bitcoin, the more the price will go up.

This is why some people are skeptical about crypto advertisements and large pushes because it feels like an artificial way to drive the price for current investors upwards.

Understanding Bitcoin Wallets

If you think you want to invest in Bitcoin, there are a number of simple steps you’ll need to take in order to get started. You’ll need something known as a Bitcoin wallet.

What is a Bitcoin wallet? You can think of it as something like a bank account, but a digital one that is only used for bitcoin. This Bitcoin wallet will be an important part of all transactions that you engage in using the cryptocurrency.

Every Bitcoin wallet has two ‘keys,’ or access points. One is public and one is private. The public key is an ID that can be used to identify the Bitcoin wallet in question. You can think of it as a bank account routing number – a way to identify a specific account and to direct needed people or entities in that direction.

If someone was going to pay you in Bitcoin, for example, they would need your public wallet key. The blockchain would then record the transaction as however much Bitcoin leaves one wallet and goes into another.

Bitcoin wallets can be completely anonymous and the Blockchain ledger only records these public keys, not any other personal information. In this way, it’s possible to do business with bitcoin without leaving any sort of paper trail that could lead back to yourself.

Some people find this worrying, but many people see it as one of the main advantages of the Bitcoin system.

Bitcoin Wallet Private Keys

In order to send money out to another person, business, or provider, you’ll need your private key. You can think of this as something like a debit card ID – something used to prove that you own the bitcoin in this particular wallet.

The only catch with a private key? It’s absolutely essential that you don’t lose it. As we’ve mentioned, there is no larger power that is controlling the Bitcoin system. That means if you lose your private key (generally a long and unique string of numbers and letters) there will be no way for you to get it back.

There is no customer service support number you can use to get your forgotten key back. You’ll lose access to your Bitcoin and everything in the wallet will become inaccessible.

One last important thing to note: your Bitcoin isn’t actually stored in your digital wallet; it is stored directly on the blockchain. However, your wallet is a recorded representation of how much of that existing Bitcoin belongs to you.

Many Bitcoin servers and providers, such as Byte Federal, can provide you with a Bitcoin wallet if you need one. There are all kinds of different ways to get a Bitcoin wallet online, but you’ll want to do your research and ensure that you are working with a reputable provider.

How to Buy Bitcoin

It can be helpful to think of the stock exchange when it comes to investing in Bitcoin. Just like you need a brokerage account in order to trade and invest in the stock market, you’ll need a cryptocurrency trading account to get Bitcoin.

At this point in time, there are a seemingly endless amount of cryptocurrency platforms that you can look into. There is the aforementioned Byte Federal, as well as popular favorites like CoinBase, CashApp, Kraken, Gemini, and many, many more.

All of these providers offer different variations on the same general service, but some may be better for your individual needs than others. It’s important to take the time to read reviews and compare offers from these providers to see which might be the best for you to get started with.

Many offer different kinds of promotions that might be alluring.

These days, larger and more established companies like Square and PayPal have also created more streamlined ways to invest in Bitcoin and other cryptocurrencies, although they don’t yet offer many of the opportunities these other carriers do provide.

If you’re strictly interested in Bitcoin as a form of investment, and not as a form of currency, doing business with these services might be suitable.

Is Bitcoin a Good Investment?

Still on the fence about whether or not Bitcoin will be a good investment for you? You’re in the same situation as most people across the country. The price of Bitcoin today hovers somewhere around $40,000, a huge deal more than it was at its inception over a decade ago.

It certainly proved to be a worthwhile investment for those who got in early and picked it up for a few hundred dollars each back at the turn of the decade.

Today, determining the value of this kind of investment is more difficult. Will Bitcoin continue to rise, or is it currently at the peak of its dominance?

It’s impossible to say for sure, and despite the thought of various pundits, no one really knows for sure. You’ll have to make the decision for yourself and be aware of the risk and volatility that comes with this kind of investment.

Beginners Guide to Bitcoin

If you’re just now wanting to learn about cryptocurrencies, the above beginner’s guide to Bitcoin can provide a stellar foundation.

There’s a lot to learn when it comes to the original cryptocurrency, but the above should help you understand all you need to know about where Bitcoin came from and where it could head in the future.

Have more questions about crypto, or personal finance in general? Keep scrolling to our blog for more.

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