Bitcoin has been all over the news and you can’t talk to anyone about stocks without talking about cryptocurrency. But, what is Bitcoin?
Bitcoin is a cryptocurrency that was created in 2009 by an anonymous founder known as Satoshi Nakamoto. It is used as a modern-day currency stored in a digital wallet and is mostly accepted as currency in an online capacity.
More and more companies accept bitcoin as payment nowadays, recently including Tesla. So, it might benefit you to learn what is bitcoin, where to buy it, and how to use it.
This article will teach you everything you need to know about what is bitcoin. Read on to learn more.
Table of Contents
What Is Bitcoin?
As stated above, Bitcoin is a type of cryptocurrency. But what is cryptocurrency exactly?
Basically, cryptocurrency is like regular dollar currency. It can be exchanged for goods and services online. However, it is not a physical currency, it is more like a computer file that is worth money.
Bitcoin uses blockchain, which is a shared public ledger. This means that it will be able to verify transactions to different digital wallets and identify and ensure that the coins are owned by the spender.
The integrity of the blockchain is kept intact and secure using cryptography. Cryptography is a branch of mathematics that creates mathematical proofs that provide high levels of security. It is also how bitcoin mining works.
This basically means that the technology used in bitcoin and bitcoin wallets makes it very difficult to hack into. The cryptocurrency you put in your digital wallet will remain secure due to the blockchain.
It is not an actual coin, but a computer file. It can be stored in a digital wallet and can be used just like money in a bank account, except that you can trade it for an actual dollar amount or mine it to earn more.
Bitcoin is similar to casino chips in that each bitcoin is representative of an actual dollar amount. What that amount is, depends on how well bitcoin is doing in the stock market.
Bitcoin also has a consensus mechanism that gives it a cap. This means that there can only be a certain amount of bitcoin created. Currently, the cap of the creation of bitcoins is 21 million.
Bitcoin is not Dogecoin or Litecoin. They are completely different types of cryptocurrency and have different marketing strategies.
You can easily buy bitcoin on a number of different platforms. You can invest with free apps such as Robinhood or Acorns. The alternative option is to do bitcoin mining.
How To Use and Buy Bitcoin
Basically, in order to use and buy bitcoin, you will need a digital wallet or a bitcoin wallet. You’ll also need to sign up for a cryptocurrency exchange in order to buy and sell your cryptocurrency.
The exchanges in the United States include Coinbase, Kraken, Gemini, and Binance U.S. They basically provide services for trading, selling, and buying different types of cryptocurrency.
You will have to connect your bank account to one of these servers in order to buy bitcoin. You can’t just purchase bitcoin with cash like Casino chips. As it is a digital currency, it must be purchased digitally in a sense.
After purchasing, make sure to store your new cryptocurrency in a bitcoin wallet. You can choose from hot wallets or cold wallets.
You can also invest in bitcoin using free investor apps. Examples of these apps include Robinhood or Acorns. These also require you to connect your bank account in order to purchase bitcoin.
A bitcoin wallet or digital wallet is a safe place to store your cryptocurrency purchases. Once you buy bitcoin, you want to make sure it is secure in the bitcoin blockchain, and using a bitcoin wallet is the way to do that.
There are two different types of bitcoin wallets you can use. There is a hot wallet and a cold wallet.
A hot wallet is basically an online wallet. They run on internet-connected devices like phones or laptops.
They can make it super easy to exchange bitcoin on online platforms. However, they are a greater security risk.
The only reason they are a greater security risk is that because it is an online wallet, all your passwords or passkeys are stored in one place. This makes it more susceptible to a hack.
The user of the hot wallet is not the owner of the private key or cryptography. This means that if there was a hack on the user of the wallet, everyone who “owns” a wallet on that account could have all of their funds lost.
If you use a hot wallet, it is better to keep a low amount of cryptocurrency in them or crypto that you are actively trading, so it’s in and out quickly.
A cold wallet is a digital wallet that is not connected to the internet. This gives it increased security for your bitcoin cash.
While it is still used on the internet, the user’s private key is not stored on the internet or internet-connected devices. Popular types of cold wallets are paper wallets or hardware wallets.
Hardware wallets store private keys on a separate USB device. This ensures your cryptocurrency can’t be hacked while the USB is not connected to internet devices.
Paper Wallets are exactly that: Paper. It is a piece of paper or digital note that stores all of the private keys needed to access bitcoin. It is completely offline, and can’t be hacked.
While cold wallets are typically the safest way to store bitcoin, they require more knowledge to set up.
Bitcoin Mining is basically a way to earn bitcoin without shelling out the money to purchase it. However, you need to understand how to verify transactions in a blockchain.
Bitcoin Mining is basically just auditing. They basically make sure that the same bitcoin hasn’t been used twice, or that double spending hasn’t occurred in transactions. It is to keep bitcoin users honest.
Basically, you can earn bitcoin by verifying 1MB of transactions in the blockchain. However, it’s not necessarily a guarantee that you will be compensated unless you are the first to get the right answer to a numeric problem.
In order to mine you need to have a high hash rate or Megahashes/ second (MH/s). Then you need to be the first miner to come up with a 64-digit hexadecimal number (a “hash”) that is less than or equal to the target hash.
It is mostly guesswork as you can’t exactly tell a bitcoin apart from another like you can with a counterfeit bill. As the price of bitcoin has gone up, the bitcoin you can earn as a miner has gone down to about 6.7 bitcoin per block.
This lead to the creation of Bitcoin Cash, which has more transactions per block. It allows miners to be able to come up with a hexadecimal a lot easier, however, it is not as high as a reward.
The price of bitcoin is constantly changing. Bitcoin pricing is influenced by the supply of bitcoin and the market’s demand for it, as well as other competing cryptocurrencies.
The current price of 1 bitcoin is $50,450 (2021). This isn’t exactly a price the average Joe can pay without spending their life savings.
There are still ways to buy bitcoin without breaking the bank. The way to do this is by buying partial bitcoin.
There are companies that will allow you to invest in bitcoin with however much you are willing to before you go and spend all of your money on cryptocurrency. You can easily do it with one of the exchanges mentioned earlier.
Exchanges like Coinbase, as an example, will allow you to purchase partial bitcoin. Now, what does this mean? It literally means you will own part of a bitcoin.
Bitcoin’s aren’t like cash. You can’t cut a dollar bill into pieces and expect it to be worth anything. Since bitcoins are a digital currency you can own up to 1/1000 of a bitcoin.
However, due to its fluctuating price, a percentage of a bitcoin could easily become a whole bitcoin or the current rate of $50,450 or more. A small investment today could make you money tomorrow.
So, you might have heard the terms bitcoin and bitcoin cash and thought they were the same thing. You would be incorrect.
Bitcoin Cash is actually a separate cryptocurrency from bitcoin created in 2017. However, it was created as a fork to bitcoin.
While Bitcoin Cash and Bitcoin share many technical similarities
Basically, Bitcoin Cash has a bigger block size, allowing more transactions in a single block. It is also cheaper than bitcoin sitting at around $750 per crypto.
However, even though the block size is bigger for transactions, the blocks mined are much smaller than bitcoin. This is why it is a lower reward for miners.
Go Buy Bitcoin
So now you know the answer to what is bitcoin. So what are you waiting for? Go get an exchange, attach your bank account and buy bitcoin. For more informative articles like this keep reading at techycumb.com.
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