This is a beginner’s guide to Bitcoin in 2021 which means that if you’re reading this, that ₦14 million Bitcoin price is looking soft and you want to get in on the action. You’re curious about Bitcoin and haven’t found answers to some of your questions.
Or, you may just be fascinated with the technology and may want to know if it’s time to get on-board.
Whichever side of the dice you’re on, this guide to Bitcoin will lay the groundwork for you and enable you to understand Bitcoin a lot better.
What is Bitcoin?
Bitcoin is a type of cryptocurrency. This is the simplest way to describe it. But just like you’d need to start from the back of an orange to get to the inner part, we’ll need to begin from the word “cryptocurrency” in this guide to Bitcoin.
A cryptocurrency is a digital type of money for exchanging and storing value. It’s like the dollar or naira if they didn’t have physical bank notes. It secures information using cryptographic technology. Hence the “crypto” in its name.
How Does Bitcoin Have Value?
Imagine you buy an old 1970 Ford from your neighbour for ₦500,000 because it’s taking up space in his compound. you see the same car 4 months later while browsing a car site. But now, it’s worth almost ₦30 million because it is a vintage car. Where did all that extra value come from?
One word – belief.
People believe it’s worth that much and are willing to pay the ₦30 million.
It’s the same way with Bitcoin.
Bitcoin is such a wonder today because people have attached value to it. And the wonderful thing about value is that it compounds easily. The more people believe in Bitcoin, the more value it has.
Who Created Bitcoin?
An anonymous person or group known only as Satoshi Nakamoto created Bitcoin. Till date, whether Nakamoto is a group of people or just one person is still unknown.
Nakamoto was active in the Bitcoin process from October 2008 to December 2010. Then they disappeared just as mysteriously as they had appeared in the beginning.
Up until this point, you may have thought that Bitcoin was the first attempt at cryptocurrency. But it wasn’t.
How are New Bitcoins Created?
Think about how the central bank creates your local currency. They print new currency and can create as much as they want to. The Bitcoin system system creates through a process called Bitcoin mining.
Bitcoin mining is difficult. It involves loads of electrical and computing power.
In this process, Bitcoin miners solve a difficult mathematical puzzle, just to verify and help you record your transactions on a central Bitcoin database called a blockchain. The database allocates a Bitcoin reward to these miners, known as a block reward. Miners can now sell this Bitcoin reward for dollars or other currency and that’s how new Bitcoins enter circulation.
Currently, miners produce 1 Bitcoin every 10 minutes. The current reward for every successfully mined block is 6.25 BTC.
How to Buy Bitcoin
You can buy Bitcoin with your local currency on a cryptocurrency exchange.
Quidax is a perfect example of a cryptocurrency exchange because you can buy, sell, send, receive, and store Bitcoin and a couple of other cryptocurrencies. These include Ethereum, Litecoin, Tether, Ripple, Dash, and Tron and XRP.
Think of a cryptocurrency exchange as a bank for cryptocurrencies except they run a different model from the traditional banking system.
The 4 most common cryptocurrency exchange models are the over-the-counter, peer-to-peer, instant buy/sell and order book exchange. Of the four, the instant buy/sell is the easiest to use.
Is a Cryptocurrency Exchange Secure?
Security is a big topic in the cryptocurrency space. When you choose what exchange to carry out cryptocurrency transactions on, this should be your primary focus.
You also need to make sure that the exchange is reputable and big on security.
What’s the relationship between Blockchain and Bitcoin?
Because this is a beginner’s guide to Bitcoin, we’ll only be taking a surface look at blockchain technology. But, you can click here to learn more about this technology.
Blockchain technology is the technology behind Bitcoin.
Blockchain is a distributed ledger database that’s immutable. This means that nobody can tamper with information miners record on the blockchain. There are several copies of it around the world.
People record and process Bitcoin transactions on the blockchain. Many people argue that the blockchain is the greatest part of Satoshi’s creation, as its impact extends beyond finance.
The Future of Bitcoin
To understand the future, we need to take a look at the past. Let’s take a quick look at Bitcoin’s journey thus far.
Bitcoin has become one of the most valuable digital currencies in the world. In spite of a few hurdles, it’s still standing strong. Several signs still point to the fact that this phenomenal technology will keep growing even stronger.
One such sign is that not every Bitcoin has been released into circulation yet. Every day, about 900 new Bitcoins are created. This will continue to happen until there are 21 million Bitcoins circulating. This will probably happen around 2024 and will lead to a new type of Bitcoin scarcity.
Institutional investors like Square and Paypal are also entering into the space. These investors could act as the bridge between Bitcoin the rest of the world that is not yet exposed to cryptocurrencies.