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Bitcoin Fundamentals – The Beginners Guide


September 15, 2020 | 

JOHN K MWANIKI |  1 Comments| 



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Bitcoin is the earliest and most successful cryptocurrency. It is a form of decentralized money that relies on no single entity. It has its value tied on no product that makes it dependent on the market forces only. 

The success of Bitcoin has made it a coin of interest. This guide has all the basics you need to know about the coin. It will explain how the coin works and how to acquire it. It was also cover safety and anonymity. In the end, it has information about the future of the coin. 

How to Acquire Bitcoin

The most basic way to gain Bitcoin is through Bitcoin exchanges. One can buy or sell it like any other product from an exchange. Even though the coin currently seems out of reach for many, it still buyable in smaller units. 

Buying, however, is the secondary acquiring means. The main method is through mining. 

Bitcoin mining is a lucrative venture earning miners rewards. It involves solving complex mathematical puzzles. The one who solves the puzzle first gains the reward.

At first, mining was easy. Anyone could mine from the comfort of their CPUs. The stakes soon went up to require GPUs. They came with high processing powers. 

The mining, afterward, became an elite affair. It currently requires special mining hardware that are costly to purchase and operate. These machines are also power intensive. 

Mining, for now, is a reserve for companies with the special, powerful tools. 

Mining is also essential for the security of the blockchain. Every miner validates a node hence eliminates the possibility of fraudulent transactions. 

Bitcoin Safety 

Any valuable product calls for safety standards. Transactions involving Bitcoin are safe. The blockchain technology works in nodes. 

Every transaction has a unique code that cannot be replicated in any other usage. 

The only concern about Bitcoin safety is storage. The currency has no physical storage. Instead, it has an online representation of the blockchain. The amount one owns is a representation of their part on the blockchain. 

The storage only keeps access keys. The system provides for both private and public keys. The public keys are used as an address when sending the coins, while the private keys are access codes. The Bitcoin wallets provide for keys storage.

There are both online and offline keys. The online keys are accessible as long as you have internet access. They, however, come with security risks as they are susceptible to hacking.

The physical wallets are USB-like devices that store keys. These devices are highly secure but expensive to purchase. 

Bitcoin and Anonymity 

Anonymity is one of the selling points for the crypto world. It comes with several advantages, just as it has its fair share of disadvantages. 

One of the earlier concerns about Bitcoin has been its role in financial crimes. Several entities accused the coin of being a conduit for illegal financial transactions. They claimed it aided money laundering and other crimes due to its anonymous nature. Users could easily mask their addresses during transactions.

The anonymity of the currency is becoming more limited as the coin becomes mainstream. It is currently traded in several regulated exchanges. These exchanges require detailed user information. 

Bitcoin is facing the prospects of working as any other fiat currency. It is gaining traction as a payment method. This comes with additional regulations. 

The system also records all the transactions on the blockchain.

The reduced anonymity in Bitcoin has seen the rise of other privacy coins in recent times. Still, they are not yet a threat to Bitcoin. 

Bitcoin Halving 

Bitcoin halving is one of the most important events for the coin. It is when the coin reduces the rewards for miners by half. 

Halving is a value management mechanism. A reduction of mining rewards sees most miners lose the need to join, thus reducing supply. A reduction in supply with a sustained demand increases the value of the asset.

Bitcoin halving happens every four years. The first one was in 2012 with the latest one in May 2020. All the halving has all been proceeded by an acute increase in Bitcoin's value. 

Even though halving is necessary for Bitcoin, the only concern comes when there are no more coins to mine. Bitcoin has a limited supply of 2 million coins. These coins can all be mined by 2140. While this is a long time away, there is still calls for concern.

Miners are essential to Bitcoin's blockchain. They not only help in Bitcoin acquisition but also security. The coin becomes vulnerable when they don't participate anymore due to a lack of rewards.

Transaction fees seem the most viable alternative reward system. The cost of transactions using Bitcoin is low. With time, however, it might have to rise to cater to the miners' remuneration.

The future of Bitcoin 

While the coin's current performance is excellent, everyone wants to know the future of the coin. The need for the future has seen the role of market forecasting become integral. 

The future of the currency looks assured. Some of the price analysts forecast the coin to hit some of the top prices of $200k. These predictions are based on the sustained demand of blockchain technology. 

Bitcoin is also likely to become more mainstream. Most businesses are already accepting it as a mode of payment. The governments are also introducing bitcoin enabled systems like in the tax operations. Even better, there are prospects of Bitcoin price stability in the long run. 

Bottom Line

The right classification of Bitcoin is still off. While some consider it a currency, others believe it is a store of value. Still, others believe it is an asset of value or a payment network. All these show how much the platform is of significance. 

No matter what you consider it, Bitcoin is a valuable investment. Its value will rise as the population looks for viable investments. Use this guide as a starting point for Bitcoin.

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batholomew brown
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