What is Bitcoin? A Simple Guide for Newbies
“Bitcoin” is no strange word as it has become increasingly popular. You may wonder, however, what really is this famous bitcoin?
In this article, you’ll find answers to these questions:
- What is bitcoin?
- How did bitcoin start?
- What is blockchain and how does it relate to bitcoin?
- Should you invest in bitcoin?
Table of Contents
What is Bitcoin?
Bitcoin is a digital currency that can be transferred from one person to another electronically throughout the world. It is not owned by anyone. The transfer of bitcoin from one person to another cannot be controlled by any individual or central authority. Hence, the word, ‘decentralized’.
Bitcoin has a limited supply of 21,000,000. Only 21 million bitcoins will ever exist. Currently, more than 18,000,000 bitcoins are in existence. It is estimated that the last bitcoin will be mined in 2140.
A bitcoin address is a unique set of 58 characters that is used to identify the destination of a bitcoin transaction. It is similar to an email address that indicates where an email should be sent or the bank account details that point out where money should be paid.
Bitcoin is rightly referred to as money because it can be used as a medium of exchange. Fractions of bitcoin can be used for the exchange of goods and services in many parts of the world. A good example is El Salvador, the first country to adopt bitcoin as a legal tender.
A Brief History of Bitcoin
Bitcoin is the genesis of all cryptocurrencies. This is because bitcoin was the very first cryptocurrency that existed.
Bitcoin was launched in 2008 by a person, or group of people, known as Satoshi Nakamoto. Before that time, all the world knew was physical money. This is why Bitcoin is said to be the new evolution of money.
An interesting aspect about the history of Bitcoin is that nobody knows the identity of Satoshi Nakamoto. We do not know whether the name belongs to a male or a female, nor can we ascertain that Satoshi Nakamoto is an individual or a group.
Blockchain and How it Relates to Bitcoin
A blockchain is a public digital ledger that is used to make records of cryptocurrency transactions. Once a record is made in a blockchain, it cannot be changed.
To illustrate: Imagine that a blockchain is an exercise book. A whole page inside this book is a block of transactions while a single line on that page is one transaction.
When a fraction of bitcoin is transferred, the transaction is recorded in the blockchain. The Bitcoin network is a blockchain that verifies, validates and records the transfer of bitcoins. Once inputted, a record on the blockchain cannot be altered, nor can a transaction be reversed.
Bitcoin (with capitalization B) is the blockchain while bitcoin (starting with small letter b) is the currency. The use of blockchain to verify transactions is exceptional as this contributes to bitcoin’s high resistance to counterfeiting.
Why Invest in Bitcoin
Should you invest in bitcoin? First, let us consider some popular reasons why people invest in bitcoin.
Bitcoin is an open source technology that allows anybody to participate in it. Just like any other asset, you can invest in bitcoin when the price is low and make money by selling when the price is high.
Compared to bank transaction fees, bitcoin transaction fees are low.
Bitcoin transactions are not controlled by anybody, hence investing in it is secure.
It is worthy of note that bitcoin is volatile and the price is unstable. This is evident in how much the value of Bitcoin has dropped in the past few months.
Now back to the question: Should you invest in bitcoin? The decision is yours to make. However, it is important to know that bitcoin, as a digital currency, is a good store of value in the long-term.
Bitcoin is not as complicated as it may seem, provided we study the basics. In this article, we’ve gotten a brief overview of what bitcoin is and how it started. We’ve also examined some reasons why people invest in bitcoin and whether or not investing is profitable.