This guide will help you form a strong foundation on Bitcoin and its governing mechanism, Blockchain through simple, layman language. If you are enthusiastic about tech, it is imperative to know the Bitcoin basics.
Bitcoin Basics – Introduction
Bitcoin is almost always one of the hottest topics in the news. Even though its popularity has been rising multi-fold every day, many people do not know Bitcoin or its fundamental concepts. Well, that’s fair because the science behind it is quite modern.
Bitcoin Basics – How Bitcoin Works?
In the simplest of words – Bitcoin is a digital currency. It is used for the same purpose, that is, transactions as you use the conventional paper currency (also known as fiat currency).
The developer of Bitcoin is Satoshi Nakamoto (pseudonym) whose real identity is still not known. Back in 2009, Satoshi Nakamoto published some whitepapers which explained in detail the concept of Bitcoin.
The transaction fees of Bitcoins for online purchases are less than traditional fiat currency and it aims to be a more convenient, company, and fast mode of exchange. Further, Bitcoin is not handled by any government agency like your conventional currency, instead, it is decentralized.
But the caveat here is that Bitcoin is not just a coin that you give to someone in exchange for a product or service. There is a simple but fascinating mechanism that Bitcoin operates in the real world – Blockchain.
To know more about Bitcoin basics, you need to understand Blockchain as well.
Bitcoin Vs Bitcoin Cash
Bitcoin Cash originated from Bitcoin, or in more technical terms, Bitcoin Cash is a fork of Bitcoin. It is common for people to get confused between the two. Therefore, to know Bitcoin basics, knowing the difference is important.
Bitcoin as discussed earlier is the earliest cryptocurrency and the digital currency operates on the blockchain while being completely decentralized.
At the time of writing, Bitcoin is the most valuable cryptocurrency with a market cap of more than $1000 billion.
Before speaking about Bitcoin Cash, let’s understand what a fork is. A fork is when the original blockchain code is updated but only some computers in the blockchain accept the update.
While the original blockchain operates as it is, the updated blockchain splits off and operates as a new blockchain. The coins on the new blockchain become independent from the original blockchain. Thus, Bitcoin Cash is derived from Bitcoin itself.
Bitcoin Cash (abbreviated as BCH) was created (or forked) from the original Bitcoin blockchain code because the developers wanted to bring in some changes to the Bitcoin code.
However, due to disagreements among them, they decided to fork the cryptocurrency through a new version with some modifications.
- The transaction fees of BCH are less than Bitcoin. In rough terms, the fee is around $0.2 per transaction. Therefore, you will save more money if you transfer Bitcoin Cash. Bitcoin on the other hand roughly charges $1 per transaction although this varies with the value of the cryptocurrency.
- The transfer times of Bitcoin Cash are faster. Although Bitcoin transactions just take around 10 minutes to be verified, Bitcoin Cash is even faster!
- The transaction per second capability of Bitcoin Cash is higher. More people can transact with BCH at a given time than Bitcoin.
Bitcoin Basics – Bitcoin Value, Market Cap, Forecast 2021
The first half of 2021 has been particularly a roller coaster ride for Bitcoin investors. While the year started on a positive note with Bitcoin reaching an all-time high of close to INR 49 lakh per Bitcoin, some social media tweets and speculations brought down the currency to INR 26 lakh per Bitcoin within a couple of months.
Despite the crypto market crashing, experts have predicted Bitcoin values to touch new highs due to increasing interest and social media trends.
Companies and large institutions across the world have been increasingly accepting their payments in Bitcoin, which is also pushing the demand up. Note that these predictions are completely based on opinion and they may or may not happen in reality.
How Bitcoin Mining Works?
To know Bitcoin Basics, you need to understand mining which is the source of Bitcoins. Think of what conventional miners do – search and process new materials from the ground, rocks, etc.
In a similar analogy, that is what Bitcoin miners do, but through complex programming. They search and dig for new Bitcoins. Keep reading to know what Bitcoin mining is, in more technical terms.
Essentially, the Bitcoin miners solve a complex mathematical problem called a hash. This process of solving cannot be done manually and in fact, many high-performance computers fail.
Through this solution, miners can get new Bitcoins and also verify the existing transactions on the Bitcoin, thereby making the whole network more secure and trustworthy.
One distinguishing feature of Bitcoin from the conventional currency is that the supply of Bitcoin is capped at 21 million.
There can only be as many Bitcoins ever. At the time of writing, there are around 18.5 million Bitcoins that have been mined and the remaining is estimated to be completed by the year 2140.
As a part to know more Bitcoin Basics, check out more about Bitcoin mining companies and popular miners to know in detail how Bitcoin is mined.
Also Read: Ethereum Coin Explained for Beginners
Bitcoin Basics – How To Buy Bitcoin?
They are stored in Bitcoin Wallets. They serve the same function as physical wallets except that they are computerized and electronic (although there are physical bitcoin wallets as well).
These bitcoin wallets store information related to the amount of Bitcoin you have, the transactions, the public, and the private key. To begin with Bitcoin basics, you need to have a bitcoin wallet of your own.
The Bitcoins are received from and sent to other Bitcoin wallets through the public key. The public key serves the same function as a bank account number.
Bitcoin wallets can either be applications that run on a desktop or a mobile, and there are also hardware Bitcoin wallets available although they are used less commonly as of now.
However, before you choose the right platform to trade with, go through the reviews and use the platform to get a feel for the Bitcoin basics and other cryptocurrencies.
Bitcoin Basics – Is Bitcoin Good Or Bad?
It all depends on your viewpoint on currency, the convenience levels you like, and the purpose of using the currency. Knowing Bitcoin basics is also judging if the coin is good for you or not.
Good Side Of Bitcoin
- Privacy and Anonymity
These transactions, although are on the public blockchain, are completely anonymous and private. On the blockchain, one can only see the Bitcoin address from which the payment has been sent to or received.
- Faster and Boundary-Less Payments
Since there are no government entities involved, Bitcoins can be transferred to anyone in the world without the intermediaries such as forex exchanges, government regulations, payment limits, etc.
- No Secret Information Involved
If you are using credit or debit cards, there is always some risk in giving up the card number, CVV when you enter them on any website. Bitcoin, on the other hand, does not ask you for any secret information for any transaction.
Bitcoin has two keys – the public key and the private key. The public key is visible to everyone and you share the public key with people whom you want to receive payment. The private key must never be disclosed.
While sending a bitcoin, you sign on the transaction using a combination of the private and the public key bound by a mathematical function.
This way, the private key information is never disclosed in the public.
Bad Side Of Bitcoin
- Lack of Governing Rules
Many countries around the world are not yet clear on the rules for using Bitcoins in that region. Bitcoin in India has still not become mainstream due to unclear government regulations.
Some countries have even banned certain cryptocurrency exchanges in the name of security and threat to conventional fiat currencies. Governments are yet to develop strong regulations that allow Bitcoin transactions to foster within the country.
- High Volatility
If you are thinking of investing in Bitcoin, this becomes a huge factor. Historically, the Bitcoin value has been notorious for increasing multiple folds within a few hours and again sliding down within a few days.
As of now, Bitcoin is one of the riskiest forms of investment due to its fluctuating price Bitcoin in India.
The price of Bitcoin in India at the time of writing is approx. INR 25 Lakh per coin. Follow Bitcoin’s latest news to know about the volatility.
- You Must Never Lose It
The biggest nightmare for Bitcoin owners is if they lose their wallets. There is no way to regain your Bitcoins back from the wallet if you forget the access code. If you have a backup phrase code, you can retrieve your access code though.
This is unlike the conventional credit or debit card, where you can request the bank to block it and then provide a new one.
Conclusion – Bitcoin Basics
Bitcoin basics is a vast concept and there are a lot of technicalities involved while learning and operating about Bitcoins.
However, they are highly fascinating and if you want to change the way you store and spend money, Bitcoin is the next obvious option.
Read more about Bitcoin’s latest news to know more Bitcoin basics and the ongoing development in cryptocurrency.
Check out popular Bitcoin in India exchanges around you to get started with purchasing your first Bitcoin (or a portion of it).