What is Bitcoin ? [Complete Beginner Guide]

What is bitcoin and where did it come from?

Bitcoin has been a hot topic this year, and will likely remain a hot topic into the future. Today we’re going to start from scratch and answer the one of most searched terms on Google, what is Bitcoin. By the end of this article, you’ll know more about Bitcoin and how it works than half of the population. So, let’s get started.

BITCOIN:

“Bitcoin is a decentralized digital currency that you can buy, sell and exchange directly, without an intermediary like a bank. Bitcoin’s creator, Satoshi Nakamoto, originally described the need for “an electronic payment system based on cryptographic proof instead of trust.”

exchange of crypto

Origin of Bitcoin:

Before we talk about Bitcoin, I want to take a moment and talk about money. What is money exactly? At its core, money represents value. If I do some work for you, you give me money in exchange for the value I gave you. I can then use that money to get something of value from someone else in the future. Throughout history, value has taken many forms and people used a lot of different materials to represent money. Salt, wheat, shells, and of course gold have all been used as a medium of exchange.

bitcoinn

However, for something to represent value people have to trust that it is indeed valuable and will stay valuable long enough for them to redeem that value in the future.

We all said, “let’s just forget about gold and trade paper instead”. So, people continued to trade with receipts (paper money) that are backed by nothing but the government’s promise. Not only were these pieces of paper much easier to carry, but you could spend a dollar on a cup of coffee and not have to cut your gold bar into a thousand pieces. And why did that continue to work? Well, because of trust. Even though there is no actual commodity backing paper money.

Today we mainly use credit cards, wire transfers, and other digital money. As today money is digital it works in a centralized way. When you swipe your bank card to pay for groceries at the store, your bank is taking your money from your account, giving it to the grocery store for you, and then charging you for it. Well, that’s essentially how banks, credit cards, and our traditional financial system currently works.

Drawbacks of Banking System:

Fiat Money has two Main Drawbacks Firstly, it is Centralized and secondly, it has no Limit. So, if money today is digital, how does that even work? If I have a file that represents a dollar, what’s to stop me from copying it a million times and having a million dollars? I mean, if I have a file that represents a dollar, what’s to stop me from copying it a million times and having a million dollars?

You may not know this, but there were many attempts to create alternative forms of digital currencies, however, none were successful in solving the double-spend problem without a central authority.

fiat currencey

One example of this is Venezuela, where the government has printed so much money, and the value of it has dropped so much, that people are no longer counting money but are weighing it instead. The last issue is controlled. You are giving away all control of your money to the government or bank. At any point in time, the government can decide to freeze your account and deny you access to your funds.

How Does Bitcoin Work?

Well for the first time since digital money came into existence. The revolution of money began in 2009 and these days we are seeing it change money as we know it. We now have an alternative to the current system. Bitcoin is a digital currency (cryptocurrency) offering a decentralized solution to money. Bitcoin is a form of money that no government or bank can control. When you “own” Bitcoin it means that you own the right to access a specific Bitcoin address record in the ledger and send funds from it to a different address. Bitcoin has several advantages over the current system. First, it gives you complete control over your money and only you can control your money. Bitcoin was created as a way for people to store and send value around the world, anytime, anywhere, at virtually no cost, without using a financial business or fiat currency.

What exactly is a bitcoin?

The idea is that this is a virtual currency that isn’t backed by anything physical. It’s important to know that this isn’t a stock. It is a currency. It’s a little bit different than something like a U.S. dollar, or a euro, or the yen, which are all backed by specific countries. But the same idea still applies here.

The Bitcoin Network uses Blockchain technology. The uniqueness of Bitcoin as a digital currency and payment network is due to its underlying blockchain foundation.

How does blockchain work?

Blockchain simply represents groups of transactions data linked together. Blockchain records bitcoin transaction data stored on a network of computers around the globe.

future

Pillars of Blockchain Technology:

1.Decentralization

2.Transparency

3.Immutability:

1.Decentralization:

The word decentralization is two-fold. Firstly, it means that instead of data being stored in one place, like one computer in one office, data is stored on multiple computers all around the world. And secondly, decentralization also means that no one person, corporation, government, authority, or any entity controls any aspect of the data recording and storage process. For example, Now, the central banking system we use is controlled by the government. In contrast, blockchain allows transaction data management to be decentralized on a network of computers around the world using open-source software.

2: Transparency:

Transparency in blockchain describes how transaction data is recorded on a public ledger that is available for anyone to see. This ledger of transactions is saved on a network of computers around the world which makes it impossible for the data to be changed or altered.

3: Immutability:

Immutability means that the data recorded and stored on the blockchain cannot be changed, forged, or altered

Storage of Bitcoin:

To store and transfer bitcoin, you need to use bitcoin wallets. There are several types of bitcoin wallets and some types are more secure than others. The two general categories of bitcoin wallets are hot storage and cold storage.

Is Bitcoin Safe?

Well yes, bitcoin has skyrocketed in value this year. There is no guarantee that it is going to continue in the future. And if you’re not okay with a risky thing like that, then bitcoin is probably not for you. Even though the blockchain is secure, there’s nothing stopping someone from being able to steal your bitcoin using your wallet.

nft

Should You Buy Bitcoin?

So, if you would like to hedge against our traditional system and invest in bitcoin, feel free to check out the ultimate beginner’s guide on how to buy bitcoin by clicking on the link given below. In this guide, we walk through the process together step-by-step, making it as easy and simple as possible and ensuring everything is set up safely and correctly. Don’t forget, this isn’t financial advice and we are not liable for anything you might or might not do.

Why is Bitcoin such big news? We will see exactly how Bitcoin works and how to use it. We will learn about Bitcoin mining, Bitcoin wallets, how to buy Bitcoins, and much more.

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4 thoughts on “What is Bitcoin ? [Complete Beginner Guide]

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