Understanding Blockchain and How Bitcoin Works
What is a blockchain?
Blockchain technology is an immutable database that is managed by a network of computers that could be centralized or decentralized.
One of the main principles of a blockchain is that it uses blocks that contain data and that are bound to each other by using cryptographic techniques.
In decentralized networks such as the one that powers Bitcoin (BTC), there is no central authority that controls the information that is shared on this network.
In open networks, the information is accessible to everyone, it is democratized and interested users can participate, making the whole blockchain more decentralized.
Many companies are currently using this technology in order to send and receive information, keep track of important data or store files.
When & why was Bitcoin created?
Bitcoin is the largest cryptocurrency in the world and it has been growing for over ten years.
After the 2008 financial crisis, a person or group of people with the pseudonymous Satoshi Nakamoto decided to create a new financial system that completely eliminated intermediaries.
Considering banks generated a world financial crisis that affected millions of individuals around the world, Satoshi Nakamoto considered it was time to move towards a trustless system.
Since that moment, Bitcoin expanded all over the world allowing users not only to transact money but also to send and receive funds.
If you want to know more, check out this infographic with 27 most important and interesting facts about Bitcoin.
Transactions – What are the fees & what means transactions are ‘immutable’?
Every single time that a Bitcoin user decides to send BTC to another it will have to pay a small fee.
This fee is calculated based on what users decide paying and what miners agree to accept. In general, Bitcoin transactions can be sent for just a few cents if the network is not congested.
This is very positive for individuals that want to make small payments or send funds across borders.
The fees that each transaction includes are used to pay miners for the work they do when they confirm and process the transactions of the network.
Although transaction fees are not the main revenue miners have, they are expected to play an important role in the future.
Bitcoin has immutable transactions considering that its ledger cannot be changed, or at least it is very difficult to do so.
Each block that is processed by the network contains important information about the transactions that users made.
Miners control the transactions that are processed and avoid malicious entities to perform a double-spending or a 51% attack.
Right now, in 2020, you can use BTC to pay for stuff at Overstock.com or even to play at CryptoCasinos.
What is a Cryptocurrency wallet? – the best ways to store your Bitcoin
What is a crypto wallet?
A cryptocurrency wallet is a device or software that is used by Bitcoin users to store their funds. Each wallet has a private key and a public address to which other individuals can send BTC.
The private key should only be known by the owner of the wallet and the information shouldn’t be shared with others.
If you lose your wallet, the private key would allow you to recover the funds. At the same time, if you own these private keys you are the real owner of these cryptocurrencies.
Types of cryptocurrency wallets
There are different types of cryptocurrency wallets.
Each of them has different characteristics and features. Some of them are faster and easier to use while others are safer.
Desktop wallets are software applications that can be downloaded to a computer and that would allow users to handle their cryptocurrencies there.
These are safe wallets as long as the user protects the computer against attacks and malicious software.
These wallets are certainly good for newcomers because they are easy to use and have friendly interfaces.
Mobile wallets are also easy to use and also easy to carry. For example, if you want to spend Bitcoin in a shop, these wallets would certainly be very useful.
However, mobile wallets are not as safe as desktop wallets and can be easily vulnerated. They are not the safest in the market.
Nevertheless, this does not mean that you will be hacked or that you will lose your funds. These are good wallets for newcomers and individuals that are starting to use Bitcoin and other cryptocurrencies.
Paper wallets are safer ways of holding cryptocurrencies. Considering they are not connected to the internet they cannot be hacked.
These wallets allow users to store larger amounts of Bitcoin and other cryptocurrencies without being worried about losing their funds. These wallets can be printed and include a private key and a public address that would allow you to send the funds to this wallet.
It is always advised to store these wallets in a safety box or in another safe place at your home or where you consider nobody else than you can have access to it.
Another way to safely store cryptocurrencies is by using a hardware wallet. These wallets are the safest in the market. They are not connected to the internet and they cannot be hacked by third parties.
If a user holds large amounts of cryptocurrencies, hardware wallets are the safest way to store them. At the same time, they are easy to use.
Nonetheless, novice users are recommended to start using a traditional mobile wallet and move to a hardware wallet after gaining some experience.
The negative side of hardware and paper wallets is that they are not so user-friendly if an individual wants to purchase a coffee at a store or if they need to process daily transactions.
What are the best places to buy Bitcoin?
What is a cryptocurrency exchange?
A cryptocurrency exchange is a platform in which users are able to buy, sell and hold cryptocurrencies.
This is one of the most straightforward ways to acquire cryptocurrencies. Indeed, Bitcoin users will find that these exchanges have low fees and would allow them to easily sell or buy the cryptocurrency they desire.
The best places to buy Bitcoin
There are different exchange platforms in the market that would allow users to have access to Bitcoin and other cryptos.
One of them is Binance. This cryptocurrency exchange is one of the largest and most liquid platforms in the world.
It includes a large number of trading pairs and it helps users to build up their crypto portfolio in a fast way. Indeed, the platform is also one of the most user-friendly in the market.
Individuals in the United States would have to use the Binance.US platform that was specifically designed for U.S. citizens.
Although there are other exchanges that offer similar solutions, Binance is one of the best options after years operating in the space.
How can you buy Bitcoin from Binance?
The main question you may have is, how can I buy Bitcoin from Binance?
The answer is very simple.
It is possible to purchase Bitcoin using a credit, a debit card or making a bank transfer. Binance will process the transaction and the funds should be added to your Binance account in just a few minutes.
Bank transfers could take longer to be processed, meaning the funds could take a longer time to be credited in the user’s account.
If you already own cryptocurrencies, you can send them to Binance and buy through this exchange other virtual currencies.