What is Bitcoin: All you need to know

Bitcoin is a digital currency created in 2009 by Satoshi Nakamoto, a still unknown pseudonym. Bitcoin is a cryptocurrency, which means that it uses cryptography to guarantee the security and integrity of payments. What makes Bitcoin special is that there is only a limited number of it: 21 million. As of April 1, 2022, there are already over 19 million Bitcoins in circulation. This means that only 2 million = approx. 10% will be added in the next 120 years.

1. Introduction to Bitcoin 

Bitcoin is a cryptocurrency and payment system first proposed in 2008 and launched 2009 by an anonymous person or group of people under the name of Satoshi Nakamoto. What makes Bitcoin special is that there will only ever be a maximum of 21 million.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other (crypto)currencies, products and services. In recent years, more and more companies such as PayPal, Starbucks and many more have accepted Bitcoin as a means of payment. Bitcoin is often referred to as the first cryptocurrency, although similar systems existed before (Bitgold).

2. How does Bitcoin work?

Bitcoin is a (payment) network based on a protocol known as the blockchain. The blockchain consists of individual blocks that are created chronologically. These blocks contain information about individual transactions. Bitcoin is designed to work without an intermediary, i.e., without a bank or company, to carry out and confirm a transaction.

When person A wants to send bitcoin to person B, this transaction is recorded together with transactions from other participants in a list, a block, and published on the network.

Nodes (miners) now have the task of verifying the transactions.

Once this is done, the block is added to the end of the blockchain.

The transaction is now irrevocably recorded in the blockchain and Person B gets access to the Bitcoin sent by A.

3. How to mine Bitcoins

Mining brings new Bitcoin into circulation. Miners are rewarded with Bitcoin when they verify transactions and record them in the blockchain.
Bitcoin mining is performed with special computers. These computers are designed to calculate solutions to difficult mathematical problems. Miners are rewarded with a certain number of Bitcoins per solved block. The amount of Bitcoin distributed to miners halves every 4 years. Therefore, it will take about 120 years until the last Bitcoin has been mined.

How to setup BTC-Mining:

  • Choose a mining pool:
    a mining pool is a group of miners who work together to solve a block and share the rewards. It’s a good idea to join a mining pool because you have a better chance of getting a reward, it’s somewhat similar to playing the lottery. You don’t get the jackpot alone, but you get smaller amounts more regularly.
  • Download the mining software:
    Once you have joined a mining pool, you need to download the mining software. This will allow you to connect your mining hardware to the pool, start mining, and send the proceeds back to your account.
  • Configure your mining software:
    Most mining software programs need to be configured before you can start mining. At the very least, you will need to enter the username and password of your mining pool.
  • Start Mining:
    Once you have everything set up, you can start mining! Just click on “Start Mining” and your mining software will get to work.

4. Where can I buy Bitcoins, and how do I store them 

Bitcoin can be purchased on various exchanges such as Coinbase and Binance and stored in a Bitcoin wallet. Wallets can be either software-based or hardware-based. Software wallets reside on your computer or cell phone, while hardware wallets are physical devices that store your Bitcoins.

Steps to store BTC:

  • Create a Bitcoin wallet: You’ll need a Bitcoin wallet to store your Bitcoins. There are many different wallets to choose from, we have a good summary of different software and hardware wallets here
  • Get a Bitcoin address: Your wallet will give you a Bitcoin address, which you can use to receive payments and donations. 
  • Buy Bitcoins: You can buy Bitcoins on a variety of exchanges, such as Binance and Coinbase.

5. Are BTC Safe

Are Bitcoins safe? This question is asked by many people who are considering investing in Bitcoin and there is no simple answer. Bitcoin is a digital currency that is not regulated by any government or financial institution. This makes it a target for hackers and cybercriminals. However, Bitcoins can also be very safe if you take the right precautions.

Here are 10 useful tips to keep your Bitcoins safe:

  1. Use a strong password.
  2. Keep your Bitcoin wallet secured with a strong password.
  3. Do not share your Bitcoin wallet ID or password with anyone.
  4. Install a malware blocker on your computer.
  5. Keep your computer up to date with the latest security patches.
  6. Be careful when clicking on links or opening attachments in emails.
  7. Make sure you are using a reputable Bitcoin wallet provider.
  8. Back up your Bitcoin wallet regularly.
  9. Do not store large amounts of Bitcoins in one place.
  10. Keep an eye on the news and be aware of any new security threats.

6. What are the risks associated with Bitcoin 

Bitcoin is a new and risky investment. There are several risks associated with investing in Bitcoins, Such as:

  • Risky investment:
    Bitcoin is a new and unproven technology. There is no guarantee that it will be successful or that you will make a profit.
  • Volatility:
    The price of Bitcoins can be very volatile. The value of your investment could go up or down quickly.
  • Risk of loss:
    Bitcoins are digital and can be stolen or lost if your computer is hacked or if you lose your Bitcoin wallet.
  • Risk of fraud:
    There are several scams involving Bitcoin. Be careful when dealing with any online service or merchant that accepts Bitcoins.

Conclusion

BTC is a unique new technology that should not be underestimated. A balanced portfolio should definitely include a part in Bitcoin or other cryptocurrencies. But Bitcoin is also not without risk. Volatility is still very high and scammers are around the corner. However, there are ways to protect your investment. By following our tips, you can make sure your Bitcoins are safe and secure. Have you already invested in Bitcoins? What’s your experience so far? Let us know in the comments below.

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