Bitcoin for Newbies: Beginner to Advanced Guide
Over the past few years, the word Bitcoin is seen trending in the news across various news portals and social media sites. Social media sites like Facebook, Twitter, and Quora were flooded with posts related to Bitcoin and other cryptocurrencies.
Several groups were created (both public and private) on chat services like WhatsApp, Telegram and Messenger. All of them acted as a medium to share information related to the most volatile cryptocurrencies like Bitcoin, Ethereum etc.
So What is Bitcoin? Is that a Bubble or is it the future? And why there is so much buzz happening around it across the globe?
Bitcoin is not any alien tech that was dropped by aliens on planet earth. It is a sophisticated technology that makes use of cryptography and peer-to-peer networking.
One can easily understand the concept of Bitcoin and its functioning. In this beginners guide to Bitcoin, you will learn all the basics of Bitcoin and all the concepts associated with it. It is essential to learn about Bitcoin if you want to invest in it and make some profits, let’s dive deeper and learn about “What is Bitcoin”.
There are several definitions to define Bitcoin, but we prefer to explain it in the most straightforward way with the help of examples and comparison so that a newbie can easily understand right in the first instance.
Introduction To Bitcoin?
To get a clear understanding about Bitcoin and other cryptocurrencies you need to first understand how our fiat currencies(USD, TUR, AUD, INR etc.) or paper currencies are organised and managed through banks and Governments. Also, you should learn about how financial transactions happen across the globe.
Let us consider an example:
You need to send money to your friend or family member who is residing in another country. To do that you have to approach your bank or services like PayPal, Payoneer or stripe and make use of their money transfer services.
To transfer money from your account to the other account you have to pay lots of fees which include
- Conversion Fees
- Bank service fee for managing and securing your transactions
- In case of payment gateways like Paypal and Stripe, they add payment gateway charges, transaction charges and taxes on these charges as well.
In reality, banks will just update your account digitally as everything is going digital these days. Your account balance gets deducted while the destination account gets credited. It is just updating numbers.
Money isn’t moved physically from one account to another. Everything is monitored on a ledger(bank records) and Banks monitor and secure this for you.
Even though it’s happening digitally, users like us have to pay our hard earned money towards these charges that range between 2-10% based on the bank and country.
So the question that bothers users Is there any solution to save customers like us from the greed of banks?
Unfortunately, there isn’t any solution a decade back, but now we have a solution to the problem of cross-border transactions(AKA remittances)
Any guesses regarding what it is?
Well, it’s Bitcoin.
Bitcoin: The one-stop solution
Bitcoin, unlike regular currencies(like US Dollar, INR, Euro and other paper currencies) isn’t regulated by any country. No country, person or an organisation maintains or regulate Bitcoin.
Bitcoin can be touted as the official currency of the Internet and is independent of any organisation be it a private or Government. It is completely governed and run by the vast community of users like you and me and all others who use it.
Moreover, it is a self-sustaining technology and is almost indestructible.
The most exciting thing about Bitcoin is, it makes cross-border transactions at a very low charges business that are spread across the globe can quickly transact huge amounts at a very low charge and in very less time when compared to traditional transactions that are done through banks.
Already several companies and businesses are saving a lot of money by adopting Bitcoin.
So by now you might have got a basic understanding about Bitcoin, if you are curious to know more about Bitcoin, the following resources will help you get a complete picture of Bitcoin right from scratch to advanced level you will learn
- What is Bitcoin?
- Bitcoin origins and history
- How Bitcoins work?
- How to buy Bitcoins?
- Bitcoin mining and more
So fasten your seatbelts and grab a pack of popcorn for a resourceful journey into the world of Bitcoin.
What is Bitcoin?
In simple terms, Bitcoin is a digital currency. Unlike fiat currencies that are physical, Bitcoins are virtual. They are digital assets or tokens that can be used to transact money using the Internet.
It is also the name of the earliest and the oldest cryptocurrency network.
Bitcoins are like nuggets of Gold. It is like sending Gold Coin through a computer network. Just like Gold is mined using huge industrial machines, Bitcoins are also created using specialised computer hardware, and this process is called Bitcoin mining.
The paper currencies we use in our day to day life are printed by Governments. But in case of Bitcoin, they are generated by users like us by solving various complicated computational problems. You can learn more about this at our How Bitcoin works section.
As mentioned earlier no one controls Bitcoin. It is a decentralised network that is maintained by the users who use it. It is quite similar to peer-to-peer sharing services like torrents.
This is also one of the main reason and has its share in Bitcoin’s popularity.
“We have elected to put our money and faith in a mathematical framework that is free of politics and human error.”
–Tyler Winklevoss, co-creator of Facebook.
Bitcoin transactions are anonymous. The buyers, sellers, senders and receivers are never revealed, only the wallet ID is recorded in a public log. The transactions are private, and there is no point in tracing it back to the user level. This feature of Bitcoin has made it extremely popular across the deep web and Black markets.
A little History of Bitcoin:
It is still a mystery about the real inventor of Bitcoin. But according to legends and sources, the concept of Bitcoin was first proposed by “Satoshi Nakamoto” who started working on the concept back in 2007.
On October 31, 2008, Satoshi Nakamoto published a white paper on Bitcoin through a cryptography mailing list. It explains the Bitcoin currency and its functionality.
Later on January 3, 2009, the first Bitcoin block, The Genesis Block was mined. The first Bitcoin currency transaction happened on January 12, 2009, and it happened between Satoshi and Hal Finney, a developer and cryptographic activist.
Now that you learnt about Bitcoin and history. It’s time to learn How Bitcoins work. Don’t worry, at Fosscoin; we will explain you everything you need to know about Bitcoin and its underlying technology.
How do Bitcoins work?
Bitcoins are simply virtual currencies. You can’t feel them physically, and all the photographs and illustrations you see are just for illustration purposes.
Bitcoins are digital tokens; they don’t need banks or mints to move or store them. They can be transferred electronically from one wallet to another wallet.
So then How do they work, Who manages all these Bitcoin transactions? These must be the questions that will bother every beginner who wishes to explore the crypto stuff.
All that we can say is that is it is a sophisticated and Advanced technology that has huge potential and can address various future needs.
Anyways, behind the curtains, Bitcoin works on a technology known as Blockchain technology.
The blockchain technology is invented by the person or group under the pseudonym Satoshi Nakamoto, the same person who created Bitcoin.
The blockchain is nothing but just a public ledger or an open database. It records all the transactions on the network and secures them using complicated cryptography Algorithms.
All the details of the transactions, initiated by users are added into blockchains. Later these transactions are verified by users called Miners.
There isn’t any centralised server that manages all this Bitcoin uses a decentralised network. Which means that the data is distributed and preserved on every computer that is part of this Bitcoin network. According to some reports it is estimated that there were nearly 9500 such computers at the end of 2017. And this is the reason why no government can regulate or control Bitcoin. The users are the one who controls and manage.
You can learn more about Blockchain with the help of following videos. This gives you a visual understanding of Blockchain Technology.
How to Earn Bitcoins?
There are multiple ways to own Bitcoins. But before you do so, you need to have a Bitcoin wallet to store/receive Bitcoins.
What is a Bitcoin wallet?
Just like we store our money in banks and wallets Bitcoins are stored in digital accounts called “Bitcoin wallets.”
To make transactions(Buy, Sell, Send or Receive) you need to have a unique wallet address. This wallet address is used to identify all the transactions under your name. Your details are never revealed. These wallet addresses make your transactions anonymous.
You can quickly get a Bitcoin wallet address by installing a Bitcoin wallet on your smartphone or computer. This will automatically generate a unique wallet address. You can use this wallet address to store/receive Bitcoins.
Apart from this, you can also get a wallet and wallet address easily by signing up for cryptocurrency exchanges like CoinBase, Binance etc.
Once you get a Bitcoin wallet, you can easily buy Bitcoins from exchanges using fiat currencies. Apart from buying Bitcoins, you can also get Bitcoins by mining them using powerful computer Hardware.
What is Bitcoin Mining:
One has to note that, Bitcoin has a limited supply. There are only 21 millions of Bitcoins in total and that is fixed. There are no chances of increasing to beyond that number.
So far 16.5 million Bitcoins have been mined, and the last Bitcoin will be mined by the year 2140.
To mine Bitcoins, one has to solve complex mathematical cryptography problems that require intensive computational power. Upon solving these problems, the users are rewarded with Bitcoins(that means new Bitcoins are generated).these users who solve these problems are called miners.
Also, these miners will take care of the record keeping. For example, if you send a bitcoin to someone else, the transaction is recorded on the Bitcoin network. All such transactions at particular time frame are recorded in a block.
Now some powerful computers process these transactions on a huge open digital ledger. All these blocks together are represented as blockchain.
For doing all these works, the users who own this powerful hardware are rewarded with Bitcoins. At the basic level, this is represented as Bitcoin mining. You can learn more about Bitcoin mining from here.
In this way, one can own Bitcoins and store them in wallets.
If Crypto Succeeds, it’s not because it Empowers better people. It’s because it Empowers better Solutions and Institutions.
For now, this is all about Bitcoins and in the upcoming article, we will share some more information about buying Bitcoins, terminology associated with Bitcoin trading etc. which are very important to learn.
Meanwhile, if you have any queries regarding Bitcoin, you can share them through comments.
Also if you find this beginner friendly Bitcoin guide useful, feel free to share this with your community and on your Social media profiles.