What is Bitcoin: A Guide to Buying & Selling Bitcoins Cryptocurrency
Bitcoin is an online-only digital currency or cryptocurrency. It is entirely electronic and does not exist in physical form. Think of it as electronic cash. Bitcoin was first released in 2009 by Satoshi Nakamoto, though the real identity of this person or group remains a true mystery. There are several people that claim to be the original Satoshi Nakamoto, but nobody has been able or willing to prove it. Bitcoin has the noteworthy distinction of being the world’s first cryptocurrency.
Anyone with or without internet access can use Bitcoin, and just about anywhere in the world. Bitcoin transactions are peer-to-peer and decentralised — direct from one party to another, without the need for an intermediary. Transactions are tracked and checked by the blockchain to ensure accuracy. The blockchain also controls and monitors how many Bitcoins are made available. It’s believed that the maximum total number of Bitcoins possible is around 21 million. Currently, there are approximately 17.6 million Bitcoins in circulation.
What is Cryptocurrency?
Cryptocurrency is an online ‘token’; a type of currency that only exists in digital form. Like traditional currency, cryptocurrency values can go up and down, and they can be used to pay for goods and services. However, instead of exchanging physical banknotes and coins, unique digital keys are used to transfer cryptocurrency value between individuals.
Cryptocurrency uses high-grade cryptography for security, as well as an anti-counterfeiting measure, and to prevent fraudulent transactions. Cryptocurrency transactions operate on a decentralised system of checks and balances called the blockchain.
What is the Blockchain?
Think of it like a giant immutable, decentralised ledger that contains a record of all Bitcoin transactions. Every block in the chain comprises encrypted details of each block that precedes it. The first block in the chain is known as the genesis block, which was the first to ever mined. The genesis block is sometimes referred to as ‘Block #0’.
A worldwide collection of computers running the Bitcoin software, also known as nodes or miners, continuously communicate to validate transactions and broadcast the info to other nodes to update the blockchain ledger.
Every node has its copy of the blockchain, and each node verifies the information it receives independently, thereby eliminating the need to rely on intermediaries. When enough transactions have successfully been verified, they form a new block. The new block joins the blockchain and information then gets distributed to all the other nodes. By using this method, the blockchain can track every transaction, and determine if and when a Bitcoin is used in order to ensure that it can’t be spent more than once.
How Do You Buy, Sell, and Store Bitcoin?
To buy Bitcoin with Paypal, Alipay, Wechat pay, Bank Transfer, and other methods, you can use multiple ways such as a Peer to Peer exchange and receive the cryptocurrency on a software Bitcoin wallet. To sell Bitcoin you can also use a Peer to Peer exchange as well or an authorised centralised exchange that operates in your country. You can also store use other types of digital wallets, such as hardware wallets which can be bought online, or even paper wallets which have the public address and password of your wallet. A software wallet lives on your computer’s hard drive, while a hardware wallet must be carried around. A hardware wallet needs to be connected to a computer in order to complete a transaction. These are considered more secure than traditional software or hot wallets.
Cold wallets and paper wallets are considered to be the most secure as they store coins offline. A paper wallet can only be used to deposit coins, but after every transaction or ‘sweep’, you’ll need a new paper wallet. Cold wallets can be used to deposit and withdraw coins.
Regardless of the type of wallet, every single wallet has its own unique address and generates a private key. The wallet address and private key are what you send to other buyers and sellers in order to trade Bitcoin. To make a payment, you can log in to your Bitcoin wallet to access your private key. This action tells the blockchain that you own it, and it signals the network your intent to make a transaction. The merchant then sends you their Bitcoin wallet address or QR code, and you enter the amount of Bitcoin you wish to send to add the trade to the blockchain. The blockchain network validates the deal and then the merchant receives payment to their wallet.
When using your wallet, you can view your transaction history, much like you probably do with your online commercial banking.
What Can You Use Bitcoin For?
You can use Bitcoin to buy goods and services from any individual or store that accepts it as a payment method, or as a speculative investment. Bitcoin is not yet as widely recognised and accepted as the more traditional forms of payment, but it’s gaining popularity all the time. You’ll likely be very surprised by the vast number of vendors that already accept Bitcoin as a form of payment.
Bitcoin Fun Facts:
Did you know the first known commercial Bitcoin transaction took place with Papa John’s pizzeria? A Programmer named Laszlo Hanyecz purchased two pizzas for 10,000 Bitcoin. At today’s rates that would be almost US $52,000,000! Hopefully, the pizzas were great!
Satoshi Nakamoto in Japan: In the quest of finding out who’s the creator of Bitcoin, Satoshi Nakamoto, people tracked down several pseudonyms. The media rapidly started to speculate that Satoshi Nakamoto was actually Dorian Nakamoto, a Japanese engineer, but the real truth has yet to be confirmed.
Originally published at https://overblock.io on May 16, 2019.
