Bitcoin is a rising star in the digital landscape today, despite only being created in 2008 many people all over the world now use it. Bitcoin grew in popularity so quickly that many people simply missed the opportunity to learn about it.
Getting access to Bitcoin is actually very easy but it wouldn’t do you much good if you don’t know or how it works. Thankfully we can help you there with our introductory guide to Bitcoin!
So What Is Bitcoin?
Bitcoin is a virtual currency, described on its website as an “open source P2P money” by downloading a Bitcoin wallet onto your computer you have access to trading and holding Bitcoin.
Unusually the creator behind Bitcoin is not exactly known, although people have come forward claiming to be the creator.
What is known is that a person or persons using the name Satoshi Nakamoto was behind the creation of Bitcoin. Whether this is a single person or a group of programmers is still a mystery and one which for now is unlikely to be solved.
Despite information being published about Bitcoin in 2008 it actually didn’t become available till early 2009 on January the 3rd. Bitcoin is open source software and is the first decentralized digital currency available.
How Does Bitcoin Work?
While the mystery behind Bitcoin and its creation is interesting, you’re probably more concerned about how you can use it, aren’t you? Thankfully Bitcoin is actually very simple and easy to use and you don’t need to be overly tech savvy either.
Once you’ve downloaded your Bitcoin wallet, you will be able to buy Bitcoins using real money, these can be purchased through a separate company or other Bitcoin users could sell their Bitcoins to you.
Buyers can also place orders for Bitcoins from other users and trade them with each other, this is very similar to how trading stocks works.
Buying or trading Bitcoins is known as a Blockchain, these blocks are an essential part of how Bitcoin works. Before each payment or trade is verified the block will verify the details to the peer to peer network for validation.
This way users can ensure they aren’t scammed and it helps Bitcoin users trust the Bitcoin platform. So that’s basically how Bitcoin works, you can make payments and trades almost instantly and transactions and accounts are not tied to your real identity giving you a level of anonymity not available elsewhere.
Buying With Bitcoin
The one thing everyone wants to know about Bitcoin is what they can buy with it and how exactly they go about it. Now Bitcoin isn’t excepted everywhere and it’s highly likely you won’t be able to go down to your local supermarket and use them to buy your weekly shopping.
At least not just yet, but Bitcoin is being added as a payment method to more and more outlets so who knows in the future it might be possible. Bitcoin, however, does have a big online presence and a number of websites utilize it as a payment method.
The online travel agents Expedia, for example, accept Bitcoin and Shopify online stores can also accept it as a payment method. Statistics vary but easily over 100,000 outlets of various kinds do accept Bitcoin as a payment method.
When it comes to using them to purchase something the system is a little more unusual. To purchase something with Bitcoins you send your private key to the outlet, they would then scan the key and decode it.
During all this, the transaction would be broadcast to other network participants and then once the mining process is completed (usually within 10 minutes) the transaction is completed.
Breaking Down The Jargon
Ok, there’s probably a few terms you didn’t quite understand there, don’t worry we’ll go through them now. Bitcoin is surprisingly simple but that doesn’t mean there is a learning curve to it, understanding how everything works isn’t 100% necessary but while you’re learning the basics it’s best to stick to smaller transactions.
Let’s take a look at some of the terms you need to know about.
Mining: Mining is the process which completes a transaction, it basically adds transaction details to a block. Effectively it is a record-keeping ledger, however, it is completed by other people and they will receive payment once the mining is completed.
Transaction Fees: Transaction fees aren’t compulsory in Bitcoin however if you offer a transaction fee you will attract more miners which means your transaction will be processed faster.
Private Key: A private key is needed in order to spend Bitcoins, it is connected to your Bitcoin address and to your virtual wallet. Therefore, you can have multiple private keys and some Bitcoin users would even suggest that you do. Your private key is a series of 256 numbers which are auto-generated.
Addresses: A Bitcoin address is what you need to give someone if they are paying you in Bitcoins. This isn’t the same as your email or home addresses it is limited just to Bitcoin and each transaction, every time you are paid in Bitcoin you’ll use a different address.
That’s some of the main key terms you need to know about. When it comes to Bitcoin the best way to learn is to just jump in and use the platform yourself. However, remember to start off with small transactions at first till you’re confident.
Are There Dangers?
Nothing is without risk and Bitcoin does have some dangers that new users need to be aware of. Hacking and scams are two of the most common dangers Bitcoin users face and they are not always easy to identify or prevent.
Cyber theft is a crime that has been on the rise for some time and as the popularity of Bitcoin rises more dangers are likely to reveal themselves. However, that doesn’t mean you should be put off from using Bitcoin there’s an element of risk with all things and the benefits of Bitcoin are too good to ignore.