Before you invest, Here’s what you must know about Bitcoin.
Most people have heard the term “Bitcoin” so much but still wonder what it exactly is…
So, Bitcoin is basically a digital currency which is a type of cryptocurrency which was made in January 2009. Actually, there are no physical bitcoins; it is managed by a network of blockchains kept on a public ledger hence making it transparent to all.
All bitcoin transactions are verified by a massive amount of computing power. Bitcoins are not issued or backed by any banks or governments, nor are individual bitcoins valuable as a commodity.
Bitcoin is yet to be accepted as a legal form of transaction by many governments, yet it is trendy in big tech giants, and its value has touched the skies already.
Bitcoin has seen an insane bullish move in 2020. As you can see from the graph, the price has increased by many folds. So let us see how bitcoin actually works.
How bitcoin works?
The bitcoin system is a collection of computers (also referred to as “nodes” or “miners”) that all run bitcoin’s code and store its blockchain. To understand blockchain, we can think of it as a collection of blocks.
Each block is a collection of many transactions. Since all the computers running the blockchain has the same list of blocks and transactions, anyone can transparently see these new blocks being filled with new bitcoin transactions. Hence, no one can cheat the system.
Anyone, whether they run a bitcoin “node” or not, can see these transactions occurring live. If someone plans to hack the bitcoin system, then he needs to operate 51% of the computing power that makes up bitcoin. Bitcoin has around 12,000 nodes as of May 2021, and this number is growing, making such an attack quite unlikely.
Balances of bitcoin tokens are kept using public and private “keys,” which are long strings of numbers and letters linked through the mathematical encryption algorithm used to create them. The public key (comparable to a bank account number) serves as the address published to the world and others may send bitcoins.
The private key (comparable to an ATM PIN) is meant to be a guarded secret and only used to authorize Bitcoin transmissions. Bitcoin keys should not be confused with a bitcoin wallet, a physical or digital device that facilitates bitcoin trading and allows users to track ownership of coins. The term wallet is a bit misleading, as bitcoin’s decentralized nature means that it is never stored in a wallet but rather decentrally on a blockchain.
Invest in Bitcoin
Investing in bitcoin is as easy as purchasing groceries on amazon; with apps like coinbase and coinswitch, the task has been made very simple. To invest in bitcoin, you must create an account here and complete your KYC and link your bank account for payments. Once verified you can purchase bitcoin very easily.
Risks in Investing:
Bitcoin has been giving high returns to its investors but with high returns comes great risk as well.
- Since Bitcoin is not regulated by Government, hence it can move in a highly volatile manner, which on one hand can make you super-rich but can also sweep away your savings. So make sure you invest the amount that you are ready to lose. This mindset will help you evade fro daily fluctuations and holding it for the long term.
- Security is at risk when most individuals who own and use bitcoin have not acquired their tokens through mining operations. Rather, they buy and sell bitcoin and other digital currencies on several popular online markets, known as bitcoin exchanges. Hackers can target these markets and can gain access to tons of accounts and wallets.
- The chance of fraud is also prevalent when fraudsters and scammers may attempt to sell false bitcoins. So please invest in apps which have a good reputation.