Bitcoin 101: What is BTC?

What is Bitcoin

Bitcoin is a decentralized currency that may be bought, sold, and exchanged without the use of a middleman such as a bank.  Every Bitcoin transaction that has ever been made is recorded on a public ledger that is accessible to everyone, making transactions difficult to reverse and spoof. That’s on purpose. Because of its decentralized structure, Bitcoins are not backed by the government or any issuing institution, and their worth is only guaranteed by the proof encoded into the system.

Bitcoin’s value has soared substantially since its public introduction in 2009. Because its supply is restricted to 21 million coins, experts predict that its price will continue to rise over time, especially as more major, institutional investors begin to utilize it as a hedge against market volatility and inflation.

How does it work?

Bitcoin is structured on a blockchain, which is a distributed digital ledger. Blockchain is a connected body of data made up of units called blocks that include information about each transaction, such as the date and time, total value, buyer and seller, and a unique identification code for each transfer.  Entries are connected in a time stamped sequence, forming a digital block chain.

Blockchain is decentralized, meaning it is not controlled by a single entity. While the concept of anybody being able to modify the blockchain may appear dangerous, it is precisely what makes Bitcoin trustworthy. To be included on the Bitcoin blockchain, a transaction block must be confirmed by the majority of Bitcoin holders, and the unique codes used to identify users’ wallets and transactions must follow the correct encryption pattern.

Because these codes are lengthy, random numbers, counterfeiting them is extremely difficult. The amount of statistical unpredictability in the blockchain verification codes, which are required for every transaction, substantially decreases the possibility of a fraudulent Bitcoin transaction being made by anybody.

What is Bitcoin Mining?

The process of adding new transactions to the Bitcoin blockchain is known as bitcoin mining. Bitcoin miners utilize a method known as proof of work, in which computers compete to solve mathematical problems that validate transactions. The Bitcoin code pays miners with fresh Bitcoins to encourage them to keep racing to solve the riddles and maintain the entire system. Mining Bitcoin used to be possible for the common individual, but that is no longer the case. The Bitcoin code is constructed in such a way that solving its riddles becomes increasingly difficult over time, necessitating more and more computational resources. Today, Bitcoin mining requires powerful computers known as ASIC’s(Application-specific integrated circuit) and profitability is often dependent on access to massive amounts of cheap electricity.

Bitcoin mining is considerably less profitable than it once was, making it even more difficult to recoup growing computational and electricity expenses. Every 210,000 blocks or roughly 4 calendar years, the reward of new coins to miners is cut in half, these events have been commonly referred to as “Halvings”. By 2140, it’s expected that all Bitcoins will have been released into circulation, leaving miners with little choice except to rely on transaction fees.

How is Bitcoin Used?

Bitcoin is commonly used as an alternative investment in the United States, helping to diversify a portfolio away from equities and bonds. You may also use Bitcoin to make purchases, and the number of merchants accepting cryptocurrencies such as Bitcoin are rising quickly. You may also utilize a service that allows you to link your crypto account to a debit card, allowing you to use Bitcoin in the same manner you would a credit card. This usually entails a financial institution changing your Bitcoin into dollars in real time. Many people in countries with unstable fiat currencies often use Bitcoin as both a medium of exchange and a hedge against excessive inflation. In the United States, using Bitcoin as a currency does have tax implications that people should be weary of.

How to Acquire Bitcoin?

The majority of Bitcoin is purchased through exchanges such as Coinbase. You may buy, trade, and hold cryptocurrencies on exchanges, and creating an account is similar to opening a brokerage account in that you must authenticate your identity and offer a funding source, such as a bank account or debit card.

Coinbase, Kraken, Binance, and Gemini are all major exchanges. Robinhood, Venmo, Paypal, and CashApp are all additional options for purchasing Bitcoin.

You’ll need a digital wallet to keep your Bitcoin regardless of where you acquire it. This is referred to as a hot wallet or a cold wallet. An exchange or a provider stores a hot wallet (also known as an online wallet) in the cloud. Exodus, Electrum, and Mycelium are examples of online wallet providers. A cold wallet, often referred to as a hardware wallet, is a Bitcoin storage device that is not connected to the Internet. Trezor and Ledger are two of the most popular hardware wallets.

Another way of acquiring Bitcoin is via websites and services called Faucets and/or through cashback websites like Lolli (see our Lolli review here).  These sites are services that distribute small amounts of BTC or other cryptocurrencies in exchange for completing tasks such as viewing advertisements or taking surveys.  The original Bitcoin faucet used to provide users 5 BTC every hour!  With the exponential rise of Bitcoin, the faucets payout rates have significantly dropped but you can still earn a few bucks and it’s a low cost (only time) way to learn how to use and earn Bitcoin.  For a list of Bitcoin or other cryptocurrency faucets and how they work, view our main page or visit this link.

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