If you are like us chances are you must have heard about Bitcoin & its steady demand in the market today.
But after hearing so much information about cryptocurrency in the market it’s obvious to get overwhelmed with this term & the clarity about this digital currency & its pros & cons.
We totally understand!
But no need to feel suffocated if finance or digital currency is a new milestone to hit for you.
You just chip away with the core ideas in the article below & find yourself not out of the game as you thought yourself to be.
What is bitcoin?
Bitcoin is the first decentralized digital cryptocurrency, which can be stored or accessed on your computer or phone & can be sent from person to person without any help of a bank or intermediary.
Bitcoin has no physical value but digital value depending on time & demand in the future.
When you buy a bitcoin, it means you buy a specific bitcoin address through which you do the transaction on another specific bitcoin address.
Its owners are anonymous as every bitcoin buyer is provided a unique encrypted key to avoid fraud activities & keep your information private & safe.
How do Bitcoin works?
Bitcoin is built on a giant distributed digital record called a blockchain. As the name implies, blockchain is a linked body of data, made up of multiple small units called blocks that contains a record about each & every:
Day & Time
Containing unique identity for each exchange. The entire entries are connected together in chronological order, creating a digital blockchain.
Once a block is added to the blockchain it becomes accessible to anyone who wishes to view it, acting as a public ledger of cryptocurrency transactions.
But this does not at all mean that your currency is not safe.
To make it secure your currency would be provided with a unique identity which only known by you.
While the idea sounds risky Because this blockchain technology it makes the whole process safer & authigenic as in order to translate block to be added to the bitcoin blockchain, it must be verified by a majority of all the other bitcoin holders,& the unique code must be recognized by the right encryption pattern.
What is Bitcoin mining?
A person (company or group) creates bitcoin by running a combination of advanced math & record-keeping algorithms on autorun.
To run the bitcoin algorithm, thousands of systems and computers are required at such a huge level & to maintain these thousands of computers third party is required.
But if the third party gets involved the whole thing will turn around the same centralized bank structure where all the control will go to the third party.
So, to avoid this, the concept of the bitcoin mining game was introduced.
In which people run algorithms by their computers and when the transaction is successful, you get bitcoin as a reward.
As this whole system is in the form of distributed and blockchain so the problem of :
- Power to any one insitute or entity or
- Getting hacked by someone
is solved here. The person who keeps the track of all these algorithms & transactions & creates these bitcoin algorithms is called “miners” & the whole process of creating digital currency i.e bitcoin is called “mining”.
How does Bitcoin mining work?
When a person “A” sends a bitcoin to person “B”, the network records that transaction, & all of the transactions created over that certain period of time, in a “block” through a special software controlled by “miner” registering the whole process in a giant ledger.
These blocks are collectively called blockchain “open accessible record of all the transactions that have ever been made”.
If the bitcoin miners continue to generate the bitcoin like this, then the whole thing will turn around & come back to the same :
- Inflation rate will increase due to constitute & unlimited bitcoin generation.
- Hacking is possible
- No prior record or authenticity of unique bitcoin
So to avoid this it is already confirmed that not more than 21 million bitcoins will be generated.
As bitcoin miners how many bitcoins will get as a reward will depend on how many people are mining bitcoins with computers?
In 2009-2010, you could generate 200 bitcoins in 2 to 3 days, but today if you want to generate one bitcoin, that will take you more than 150 years.
In the future, its existence totally depends on how people accept it in the future.
How to use bitcoin?
It is a type of secret money which you can use for buying or selling anything on the internet.
In the U.S. people use Bitcoin as an alternative investment. You can also use Bitcoin to make purchases or to sell, but there might be the chances that the number of vendors that accept or sell the cryptocurrency is still limited at your place.
Big companies that include Bitcoin include Microsoft, PayPal which are some of the examples working in bitcoin.
Might are the chances you may find some small retailers or certain websites or new companies take bitcoin, but you have to do some research to make sure they are the right & safe ones to purchase.
In other countries, people with stable incomes sometimes use cryptocurrency instead of their own currency.
You can also use a service that allows you to connect a debit card to your crypto account, which allows you to use the bitcoin the similar way you use your debit card.
What determines the value of bitcoin?
In every cryptocurrency, the total number of coins generation is already fixed & predefined.
And when anything is fixed & limited the cost of that thing always depends on the “demand” it generates.
For example: Let’s take the example of Monalisa painting: it’s only one & unique, now the price of that painting depends on its:
- Popularity among people
- Demand among people
- Uses among people
When the demand for the painting is high the price will rise when the demand will get low the price will get down.
Cryptocurrency prices also depend on :
- What the current news going on,
- What the companies are planning
- What the investors are planning
How to buy bitcoin?
However, in India buying, selling cryptocurrency is the legal however government of India hasn’t passed any law about cryptocurrency in India yet.
Yes but you can’t use cryptocurrency as a legal tender, what I mean is you can’t buy or sell anything in the exchange of cryptocurrency.
To buy cryptocurrency like Bitcoin you need to have:
- Crypto currency exchange account
- Personal ideantifucation document
- Secure internet connection &
- Payment method
Is necessary. To buy cryptocurrency you need to follow these steps:
- Choose the crypto currency exchange:
When you signup on any cryptocurrency exchange you can buy, sell or hold cryptocurrency. You can find multiple cryptocurrency exchanges like coin dcx, . you choose the best cryptocurrency exchange according to your research which is secure, & authentic just like: CoinDcx, and get started.
- Connect your exchange with your payment option
After selecting the best exchange you need personal documents to link with it like a pan card, Aadhar card, etc. once your identity gets confirmed you can connect your payment with your bank account, debit card/credit card.
- Place order
After the above steps did you can also buy or sell other cryptocurrencies
- keep your cryptocurrency in safe storage
When it comes to selling & buying crypto how can we forget to talk about its safety?
It’s always suggested to keep your cryptocurrency in a cryptocurrency wallet where they are safer. You might find terms like:
- Hot wallet or
- Cold wallet
while storing your crypto into a cryptocurrency wallet.Where…
Hot wallet means online wallets like a computer, tablets or mobile-like devices. These wallets are basically safe & good for small transactions.
Cold wallet: means paper or hardware wallets, since they are not connected to the internet there is a lower chance of risk.
The most secure way to store cryptocurrency is a paper wallet which can be generated by a particular website, of which you can produce a private key & take a printout on paper.
These are basically for long-term investment.
Bitcoin can be also bought, sell or exchange from bitcoin ATM or Peer-to-Peer exchanges
How to invest in bitcoin?
Like shares, you can buy, sell or hold bitcoin. People have different thoughts about bitcoin where:
- Some buy and hold bitcoin for long term, while
- Some buy with the aim of selling it according to their bet or looking at the price inflammation, whereas
- Some see it as an asset for future returns
The majority of people that buy & hold it for the long term are investors. Where another consumer can also invest in bitcoin mutual funds by buying shares from the safe authorized bitcoin producing body or can choose the option of trading.
Should you buy bitcoin?
Everything going digital & in few coming higher the chance of the world fully occupied with digital transactions, working & lifestyle. Cryptocurrency is one of the essences of the digital world.
But going blind on everything until it’s completely generalized or authorized is a bit difficult.
In general, many investors support their clients to work in cryptocurrency but that too until they experse their desire or interest.
The biggest concern is its speculative nature which is total can’t be monitored by us.
But if used wisely after research, in the short term investments are always be safer if someone wants to try the real taste of cryptocurrency until they are not keenly confident about it end results.
Advantages & Disadvantages of buying Bitcoin?
Cryptocurrency has its own mark on this digital evolving industry and among the investors or consumers who love to invest in digitalization. So here are some advantages & disadvantages you might want to know:
Advantages of Buying Bitcoin?
- It is Decentralised: No country, no power is controlling this. This can be controlled by everyone.
- No Government Control: due to government disputes or any other reason their money is not getting affected.
- It is safe: The major assurance of it safety is Blockchain technology which is very reliable
Disadvantages of Buying Bitcoin?
- No Government and Authority: When there is no government body or authority this directly means you have no one to.
- Unethical Uses: Because it is a secret currency there might be the chances people use it for unethical transaction or work.
- Not Eco-Friendly: to maintain the giant ledger across the globe it requires more electricity & resources.
Some frequently asked questions
We think the above information is enough to make you understand the whole process from the core but in case you are still left with the questions then here are some frequently asked questions that you might want to know:
- Are bitcoin safe?
Yes, Bitcoin is safe as the cryptography behind bitcoin is based on the SHA-256 algorithm designed by the US National security agency. Hacking this for any illegal intent or purpose is impossible to achieve. Even if this has been hacked by any chance then attackers can only hack the website and not the bitcoin network.
- Can bitcoin be converted into cash?
Yes, Bitcoin can be converted into cash just like any other asset but the transaction should be taken care of between peer-to-peer or over any bitcoin exchange platform. There are numerous cryptocurrency exchanges online where you can do this.
- What is the purpose of Bitcoin?
Bitcoin was created as a way of doing money transactions on the internet with the digital currency created. The digital currency was purposed to provide an alternative way of payment system that is decentralized and can’t be regulated by anyone.
- Who invented Bitcoin?
Bitcoin was invented in 2009 by a person named Satoshi Nakamoto who after cultivating the technology & system of cryptocurrency got vanished in 2011. His stated goal was to create a unique digital cash system that is completely decentralized.