Bitcoin: What is it?

When people got sick of the biggest and most corrupted middlemen in history, aka banks, an individual of a group of individuals going by the nickname Satoshi Nakamoto decided to invent something that would eliminate the need for that middleman and its fees and enforce anonymity at the same time. They wanted to give people full control over their funds. That was the beginning of the cryptocurrency era with the rise of the Bitcoin or BTC.

In short, Bitcoin is a transaction medium in which users exchange coins through cryptography, which includes encrypting and decrypting a set of data in a universal database. How is that? You simply refer the sender to your signature which is a code formed by a string of 16 distinct symbols that they decode with their smartphone, tablet or PC to send you the required amount of BTC.

How Does Bitcoin Work?

Every transaction is coded and decoded through what’s called the Blockchain, where every finished transaction is added as a block and broadcasted to an international peer-to-peer network where every exchange is open for validation and easily accessible by all users to prevent double spending and stealing.

So, if you’re trying to purchase something from another entity, you’ll have to send them a public key which contains your source transaction of the coins, amount, and their wallet address while they receive and decode that set of data with their smartphone or computer. At the same time, that public address gets broadcasted to different entities in the same ledger to confirm and validate the transaction. Once that’s done, the other party receives the agreed amount.

You should note that Bitcoin’s price is ever-changing every second, so you may notice a difference in the amount when it’s converted to BTC.

Characteristics of a Bitcoin Transaction

A Bitcoin transaction, or a cryptocurrency one in general, has some specific features that make it unique compared to standard check, wire or cash transactions

Pseudonymous:

While regular transactions happen between two known accounts/individuals, BTC ones happen between addresses, which are random chains of 30 characters that cannot be linked to the real-world identities of the two participating parties. Why is it pseudonymous? Because people still have to go through exchanges to transform their BTC to fiat.

Irreversible:

Normal transactions can be refunded and revered either willingly by the receiver or by force through banks and law enforcement agencies at the most extreme case. As for BTC transactions, they are totally irreversible. Literally no one can get your money back. Once you click the send button, you’re kissing your money goodbye so make sure you’re sending it to a trustworthy party.

Secure

When it comes to security, Bitcoin is the king. Why is that? Because you cannot send coins from an address unless you have its private key. So as long as yours is secured, there’s nothing to worry about as your data is secure thanks to cryptography.

Fast

Whether you’re living in the US or with polar bears, you can make BTC payments anywhere in the world thanks to how the blockchain works. Forget days-long wire transactions; fast payments are finally here.

Decentralized

Bitcoin is unregulated. What does that mean? It means that you don’t need anybody’s permission to use it. Just create a wallet, and you’re good to go, no matter where you’re from, how old you are or what color is your skin. Forget fees, intermediaries, and regulations and enjoy better payments and transactions with Bitcoin.

From where can you get Bitcoin?

You can use Exchanges

Exchanges are websites where you can buy BTC and other cryptocurrencies with fiat like USD and EUR. Coinbase (USA) and Coinspot (Australia) are among the well-established sites in this industry. When I lived in Australia I always used Coinspot, since moving to the US I use Coinbase. You can see a review of Coinspot here.

You can mine BTC

Mining used to be so profitable in the past, but it isn’t mush so currently as it requires enormous resources if you want significant profits. In simple words, miners are people or hardware that watch over bitcoin transactions and confirm them, thus building new blocks in the blockchain. So basically, they ensure smooth operations in exchange for BTC as payment.

A Bitcoin Mining Operation

You can get paid in BTC

Many websites offer BTC payments these days in exchange for your services or products, which is the case for Purse.

You can buy BTC with cash

If you want full anonymity while purchasing BTC, you can have it by buying your coins with cash from people. The go-to website for such exchanges is LocalBitcoins.

As mentioned above, and due to Bitcoin’s characteristics, it’s the perfect medium for scams, so beware when you’re trying to exchange it and make sure you’re doing it through a trustworthy source.

Where can you store Bitcoin?

Just like fiat, you need a wallet to store your BTC. There are five types of portfolios for cryptocurrencies: Online, desktop, mobile, paper, and hardware.