In the last few years, Bitcoin (BTC) was able to attract investors and traders from all over the world. However, not all of them know what is Bitcoin. Created in 2009, this cryptocurrency is now trying to revolutionize the monetary system and change the financial standards that have been in place for the last decades.
In this article, we are going to be sharing with you all you need to know about Bitcoin. We will go through what is Bitcoin, how it started, which are the ways you can acquire Bitcoin, how to store the BTC you own and many other things.
What is Bitcoin?
One of the well-known Bitcoin facts is that this is the largest cryptocurrency in the market and the first one to be created. There is currently no standard way to refer to Bitcoin. Regulatory agencies are still discussing whether Bitcoin is a commodity, a currency or something different.
Some people are using Bitcoin to speculate with its price; even if they do not know what is Bitcoin. Traders are usually looking at the charts to find swing-trades possibilities in this volatile market. Other users may be using Bitcoin because of political and philosophical reasons. Companies may be even using Bitcoin to make international transfers due to the way in which Bitcoin works.
One thing is clear: Bitcoin is the first form of money that does not depend on third parties and centralized authorities. Compared to traditional finance, you can use Bitcoin and send it to another part of the world without having to “ask for permission” to a bank or government. You simply send the funds. That’s all.
There will only be 21 million BTC ever. This is because of the way in which it was created. At the time of writing, there are more than 18,529,000 BTC mined. That means that more than 88% of the total BTC that will be created have already been released to the market, and this is what we call circulating supply.
Miners are those responsible for processing Bitcoin transactions. These miners can be individual users or large firms. Miners perform complicated calculus that allows them to find a block with transactions. And the Bitcoin mempool is what shows the pending transactions that are awaiting confirmation.
When they discover a block, they will then be rewarded with BTC. Currently, the reward for the miners is 6.25 BTC per block. One block is usually found every 10 minutes. Miners use hardware machines to process solve these complicated puzzles.
This is how a mining farm looks like:
Every four years, the Bitcoin network experiences a halving event. These halving events reduce the new issuance of BTC by half. Until now and since Bitcoin was created there have been three halving events. The first one reduced the new issuance of BTC to 25 per block. The second one reduced it to 12.5 BTC per block. The third one experienced in May reduced the BTC rewarded to miners to 6.25 BTC. After the next halving event, there will be just 3.125 BTC created per block.
How Bitcoin Started?
Bitcoin started in 2008 when the white paper of this virtual currency was published online by an anonymous person called Satoshi Nakamoto. Until today, there is no information about who Satoshi Nakamoto is or who it was. Despite that, there are many possible figures in the cryptocurrency market that have been associated with the creator of Bitcoin.
In 2009, the first Bitcoin block, also known as the genesis block, was created with a message in it saying the following phrase:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
This makes reference to the date in which the first block was mined and the situation that the world was experiencing at that time. The phrase is the title of The Times newspaper published on January 3rd, 2009. This is certainly important for the whole ecosystem and one of the main reasons why Bitcoin was created.
Bitcoin was started as a way to avoid centralized authorities from getting involved in the transactions made by individuals and companies all over the world. With Bitcoin, despite the fact that you are not anonymous, you can send and receive funds without the approval of third-parties.
Read: What is Bitcoin Cash
Bitcoin started in the middle of a financial crisis that involved banks, the real estate market, risky investments and people losing their jobs everywhere around the world. This was the largest crisis experienced by the world since 1930.
Thus, Bitcoin was also a negation to traditional finance and governments. Bitcoin has opened since then the doors to innovation in decentralized finance (DeFi) and decentralized organizations. Companies all over the world are now buying Bitcoin and even countries are indirectly using Bitcoin.
Nowadays, Bitcoin became a global currency that can be used for a wide range of things. Bitcoin does not know borders, governments, company or people, it just works as it should and as Satoshi Nakamoto imagined that it should work. As the number of Bitcoin users grows, it may be possible for it to reach even a larger number of people, firms and organizations.
How to Buy Bitcoin?
Now that you know what is Bitcoin, how it works, and how it was created, then we could move to how to buy Bitcoin. The answer to this question is very simple. There are many ways to buy Bitcoin. We are sure that you will find the method that best suits your needs.
The easiest and fastest way to buy Bitcoin is by using a cryptocurrency exchange. These are platforms that connect buyers and sellers through advanced matching systems. Exchanges work in a similar way to brokers all over the world and on the internet.
You can deposit fiat currency in these exchanges (not in all of them) and start exchanging them for Bitcoin and also other cryptocurrencies. All the coins that are not Bitcoin are considered “altcoins.”
Some exchanges do not require you to deposit fiat currencies to buy Bitcoin. For example, you can use debit or credit cards to directly get Bitcoin in these platforms.
Other ways to buy Bitcoin include P2P platforms that connect you directly with Bitcoin buyers and sellers or Bitcoin ATMs. It is worth mentioning that some platforms such as PayPal, Revolut or Robinhood are also allowing users to buy and sell Bitcoin and other altcoins.
Each of these solutions that you have to buy Bitcoin would offer you different fees. Thus, you can compare which are the most affordable ways to get access to Bitcoin.
It does not matter which method you use to buy Bitcoin. What matters is the way in which you store your funds. This takes us to our next topic: how to store Bitcoin.
How to Store Bitcoin?
Storing Bitcoin is one of the most important topics in the cryptocurrency market. A popular phrase that crypto investors have is “not your keys, not your Bitcoins.” This is why we will explain to you which are the most useful and safe ways to store Bitcoin and other virtual currencies. If you want to know what is Bitcoin, then you should have a clear idea of how to store it.
If you have acquired Bitcoin through a centralized exchange, for example, Binance or Coinbase, then the funds will be stored in the platform. The same will happen if you buy Bitcoin using PayPal, Revolut or Robinhood. These options can be very good to get fast, direct and cheap access to virtual currencies, but they would not allow you to keep the coins under your control.
Private keys in the cryptocurrency market are one of the key elements you should understand. When holding virtual currencies, the only way to prove ownership of the coins is by having the private keys of a cryptocurrency public address. The public address will be used to deposit funds, the private keys associated with this public address will prove ownership.
If you hold your coins in an exchange, the platform will be the custodian of your coins. Thus, you do not have your private keys. Hence, you are not in full control of your funds. The platform can freeze and use your funds as desired.
Custodian wallets are the first category of cryptocurrency wallets that exist in the market. Here you are not in full control of your funds, even when you are able to send and receive transactions.
Non-custodial wallets are the second category of wallets. These wallets can then be divided between hot and cold wallets. Hot wallets are those that are connected to the internet, for example, the wallet that you can download as an application to your smartphone or the wallet you can download to your desktop computer.
Cold wallets are those solutions that are not connected to the internet but allow you to hold and transfer virtual currencies. Paper and hardware wallets are the most popular categories. Hardware wallets include the Ledger Nano X and Ledger Nano S, among others. These hardware wallets became very useful in recent years as a large number of investors continue acquiring digital assets as an investment for the long term.
Now that you know what is Bitcoin and that you bought this cryptocurrency, the best thing you can do is to transfer them to your hardware or software wallet and keep them safe. Remember to always keep the seedphrase these wallets will generate safe considering this would help you recover your funds if you lose access to your wallet.
If you have more doubts about how cryptocurrency wallets work, don’t hesitate to check our article on how to set up a Bitcoin wallet.
Bitcoin in the Cryptocurrency Market: Crashes and Bull Markets
There are many reasons why Bitcoin has captured the attention of a large number of users. One of the reasons is related to its price performance. The price of BTC has reached incredible levels in recent years and analysts believe that Bitcoin could continue growing and reaching new highs in the future.
If you want to know what is Bitcoin, then you should also remember the price chart of this virtual currency. When Bitcoin started in 2009, there was not even a price for Bitcoin. This asset was not even valued because there were no platforms that could allow investors or traders to buy and sell it.
As the first transaction using Bitcoin was performed in 2010, the first price information for BTC was registered. This allowed companies to start offering trading services for users that wanted to buy and sell Bitcoin.
The price of the virtual currency started growing and expanding. This allowed the virtual currency to reach $1,000 for the first time at the end of 2013, the beginning of 2014. However, this was not enough for Bitcoin to sustain in these levels. This is why, during the next three years it was impossible for Bitcoin to reach $1k again.
From $1k it moved down to almost $220 after the hack that affected the largest cryptocurrency exchange called Mt. Gox. This exchange was handling over 70% of the Bitcoin trading volume and it was attacked, creating the largest loss of cryptocurrencies in history.
In February 2017, Bitcoin surpassed $1k once again. This was a strong catalyst for Bitcoin that reached $20,000 in December 2017. This was the all-time high registered by Bitcoin. It went from below $1k in early 2017 to almost $20k in less than 12 months.
This massive expansion in the price of Bitcoin allowed a large number of investors to become millionaires if they were able to buy BTC in the previous years. Since then, the expansion of the crypto market allowed users to become more active in the crypto market.
The Bear Market of 2018
Nevertheless, after reaching $20,000 in December 2017, Bitcoin entered a bear market that lasted until March 2019 when Bitcoin was able to surpass $4,000 after several months below that level.
Bitcoin reached its lowest price in more than a year when it went below $3,200 for a short period of time in December 2018. During two and a half months, Bitcoin was traded between $3,200 and $4,000 until it surpassed that level in March 2019.
People that have lived the extensive bear markets in the last decades have a clear idea of what is Bitcoin and the price movements that it can experience.
2019 and 2020
Bitcoin was able to experience a very positive trend during the first half of 2019. The largest cryptocurrency surged to $13,750, the highest price since Bitcoin skyrocketed in 2017. However, once the price of Bitcoin reached this price level, it started another bear market that ended with the COVID-19 crash in March 2020, pushing Bitcoin into the $3,800 territory for just a few hours.
Nowadays, we are seeing Bitcoin moving towards $14,000, the highest price since early 2018, which shows the market is bullish about the future of the cryptocurrency. The main question remains whether it will be possible for BTC to surpass its previous all-time high and continue moving higher in the next months and years.
In the future, it may be possible for Bitcoin to surpass its previous all-time high and move towards unprecedented levels. This would be something that would allow Bitcoin to reach a larger number of users and increase its use cases.
Central banks all over the world and larger companies could pay closer attention to BTC and how the virtual assets works. Furthermore, it may be also possible to leverage the positive things of Bitcoin to bring more benefits to society.
In the next section, we are going to be sharing with you some pros and cons we consider should be taken into consideration by organizations, entities, governments and individuals in every region of the world.
New investors will definitely enter the market asking what is Bitcoin and trying to understand this virtual currency. This is why, having a clear pros and cons would help them get the information they are looking for.
Interesting: What is a Bitcoin Investment Calculator
Bitcoin: Pros and Cons
There are different pros and cons we need to take into consideration when we want to know what is Bitcoin. Although we have extensively covered the positive aspects of Bitcoin, there are some negative points that can be mentioned as well:
- Bitcoin is the first peer-to-peer cash system
- Bitcoin eliminates third-parties between individuals and companies that want to transfer money
- Bitcoin is the most valuable cryptocurrency
- Bitcoin works as a store of value and also as a means of payment
- Bitcoin works with pseudonymous
- It can provide great investment opportunities
- It has a fixed supply
- It could be considered digital gold
- It is independent of central authorities or companies
- It is very secure
- It can be used to provide liquidity between two different assets
- Bitcoin is a global currency
- Bitcoin does not know borders
- It may consume large amounts of energy (miners)
- It is not easy to understand for beginners
- It has a volatile price making it difficult to use it as a unit of account
- Users can get scammed if they do not properly know how to handle cryptocurrencies
Of course, there are other issues to take into consideration rather than just the points that we have mentioned in these pros and cons section.
Final Words – What is Bitcoin?
We definitely hope that you are now able to have a clear answer to what is Bitcoin. We have been through how the market works and how Bitcoin was created. Furthermore, we have shared with you how this virtual currency has been fluctuating in price over the last few years.
Many analysts and investors consider that there will be a large number of companies in the future that will be embracing and supporting Bitcoin. For example, MicroStrategy and Square are two of the companies that have openly invested in Bitcoin and could continue to do so in the future.
Bitcoin as also been used by central banks in order to keep the value of their currency stable, which is showing us that the limit amount of BTC could be certainly a positive thing compared to traditional fiat currencies that have no limit on their printing.
Nowadays, there are many ways of acquiring Bitcoin, this is why it depends on those that want to have access to it that would so so before it is too late. If you have friends that want to know what is Bitcoin, then this guide is going to be right for them.