A Dummies Guide To Understanding Bitcoin

0
377
Bitcoin

If you are new to Bitcoin, or maybe never even heard of the word before, then you’ve come to the right place.  I’ve put together a dummies guide to Bitcoin. I’ll cover what Bitcoin is, where it originated, who is using them, and where to store them.  I’ll also go over common Bitcoin questions.  I hope that this helps you to learn more about this growing form of currency.

What Is Bitcoin?

Bitcoin

Bitcoin is a new and growing form of digital currency.  It uses a consensus in a large peer-to-peer network to verify transactions.  There is no central authority or person who controls Bitcoin.  In some ways, it is similar to Paypal, except that there is no middle man to verify each transaction.  The payments are non-reversible.  Transaction fees are very low.  Accounts can’t be frozen.

How Many People Actually Use Bitcoin?

Bitcoin

 

According to research conducted by Cambridge University, between 2.9 million and 5.8 million people were using a cryptocurrency wallet, as of 2017.  Most of them were using Bitcoin.  In 2013, there were approximately 300,000 to 1.3 million users, so as you can see the number of Bitcoin users has grown these past few years significantly.

What Is A Bitcoin Wallet?

Bitcoin

A Bitcoin Wallet is similar to a bank account.  A Bitcoin Wallet allows you to receive Bitcoins, store them, and then send them to other Bitcoin users.  There are basically two types of Bitcoin Wallets, a hot wallet, and a hardware wallet.

  1.  A Hot Wallet – with this type of Bitcoin Wallet, you install it on your mobile device or computer.  You are in control over your Bitcoins.  Because the devices are connected to the internet, they are less secure.
  2. A Hardware Wallet – This type of wallet is much more secure than an online wallet.  It maintains high levels of security by protecting your coins offline.  This keeps your currency out of reach of thieves and hackers.

Wallets For Beginners

Bitcoin

Here are some good wallets that are easy to use and understand making them perfect for newbies to Bitcoin.

  1. Electrum – a software wallet that lets you set up a strong level of security very fast. A phrase is given to you during the installation steps. This will allow you to recover all of your currency if your computer crashes.  Your wallet is encrypted by default.  This helps protect your coins against hackers.  Electrum is available for Windows, Linux, and OSX.
  2. Coinbase –  a web wallet with a simple design and several easy to use and useful features, Coinbase, is perfect for newbies. With Coinbase, you can send and receive Bitcoin through emails.  You can also buy and sell Bitcoin directly from Coinbase.  Coinbase is a nice place to buy Bitcoin and learn how it all works.  Once people get the hang of how Bitcoin works, most switch to a different wallet. Coinbase is not the best place for long-term storage.
  3. Bitcoin Wallet for Android – an easy to use software wallet that lets you maintain complete control over your currency, is Bitcoin Wallet for Android.  Bitcoin Wallet for Android also works well with QR codes and NFC.  This makes transferring coins to someone else’s phone easier than writing a check.

Bitcoin Questions

Bitcoin

Who Invented This?  Satoshi Nakamoto invented Bitcoin in 2008.

Why use Bitcoin?  Bitcoin gives an alternative to the current mainstream financial currency.

How Does This Work?  Bitcoin allows spending to happen with transparency through a publicly available ledger known as the blockchain.

Is It Safe To Use? A Bitcoin transaction uses both a public key (known to all) and a private key (known only to each individual user).  You must know the private key to spend Bitcoin.

Will This Form Of Currency Last?  Some say Bitcoin is here to stay and that it has revolutionized currency.  Others say it will fade out and something new will take over. Time will tell.

If Bitcoin is just digital, why do I see photographs of gold looking coins with a B on them?  Many people like to see a symbol with an abstract idea.  The gold colored coins that you see in photographs are novelty items that the media uses to represent Bitcoin.

How much is a Bitcoin worth?  The worth of Bitcoin keeps on rising.  As of this writing, just one Bitcoin is worth $9,948.00.

Can I own just a fraction of a Bitcoin?  Yes, you can own a fraction of a Bitcoin.  Bitcoins can be divided into a fraction of the value of 1 Bitcoin.

What backs or supports it? A software system called a blockchain runs Bitcoin.  Blockchain can be described as an immutable digital ledger.  It is in thousands of computers, all over the world, maintained by a mix of regular people and computer experts, known as miners.

Let’s Sum It Up

Bitcoin

I hope that this article helped you learn a bit about Bitcoin and how it works.  Let’s sum up what we’ve learned.  Bitcoin is a growing form of digital currency that utilizes users to verify transactions in a peer-to-peer networking system.  Satoshi Nakamoto invented this new form of currency in 2008.

A digital wallet stores Bitcoin.  The wallet allows you to receive coins, store them, and then send them to other Bitcoin users.  Three easy to use wallets for beginners are Electrum, Coinbase, and Bitcoin Wallet for Android.  Will Bitcoin last? We will have to wait and see for now. I hope that this short article helps you to understand more about Bitcoin.

 For more information, check out our top picks for investing apps for 2018. 

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.