If you have heard of the word ‘Bitcoin’, read the numerous headlines it has been making on the Internet and in the newspapers, and looking to understand more about this craze that has taken the crypto world by storm, without worrying about not understanding the technicalities behind it, here is a detailed step by step guide on learning more about this digital currency.
What is Bitcoin?
Bitcoin, in simplest of terms, is a cryptocurrency. Also termed as digital or virtual money, it is basically a digital asset one would use as a means of exchange for reliable and secure transactions and purchases over the Internet. It isn’t hard cash, and is not available to one in the form of our usual paper money. It is produced by an energy consuming process known as mining. Our day to day transactions are governed by central authorities like banks and financial institutions. This means that all transactions are operated by a single government authority or a centralized bank. Bitcoin was introduced to eliminate this principle and was thus released as an unregulated cryptocurrency and a worldwide payment system. This is why it is called a decentralized form of cryptocurrency since there is no single point of control anywhere in the network.
This decentralized digital currency works on a system of peer to peer network, where transactions take place directly between the two parties involved. No third party intervention is required to settle the transactions. What makes this currency so popular is its limited number. During its inception in 2009, exactly 21 million Bitcoins were made available. This makes every coin more valuable.
Built on a technology called Blockchain, information about every transaction settled in the Bitcoin community is logged into blocks which join together in a linear fashion to form a blockchain. This complete information is always readily available to every user thus making it a secure and clear platform eliminating all chances of fraud. All the coins one obtained through mining or transactions are stored in a digital wallet secured by a private key.
Why should one bother about Bitcoins? How to get Bitcoins?
Before divulging into the technicalities of how to get Bitcoins and what to do with them, it is important to know about why one should even try learning about them.
- Bitcoins, as mentioned earlier, are decentralized which means that all transactions and purchases between two users of the Bitcoin community are settled without any government authority or central bank meddling in between, providing the users a plethora of benefits. This means that no processing charges, transaction charges, service charges or such fees would be levied upon either party for the successful completion of a transaction. No reserve systems can intervene in between to hike interest rates. You pay for exactly the worth of the service or product.
- Since the distributed ledger technology provided by blockchains makes available all information to every user in the Bitcoin community, there is little to no chance of a scam or fraud and this makes the platform open, clear and secure.
- Traditionally, the value of our money is governed by a shared set of rules for exchanging values. However, Bitcoin is programmable money, with no inherent value, and its value is determined directly by the payer and payee. Once they decide upon the terms of the contract or transaction, they are codified.
- Although all information is accessible via an open ledger, none of your personal information is available to anyone on the network. This means that you are not required to identify yourself. A private key is used to secure your coins and private information. This provide new levels of privacy and cyber security.
- A remarkable feature of Bitcoin transactions are their irreversible nature. This means that any transaction once initiated cannot be revoked or reversed. This eliminated fraudulent activities such as double spending.
- Unlike our usual credit settlements which take the bank at least a few weeks or one whole month to settle, Bitcoin transactions are settled within 10 minutes thus saving you a lot of time.
Should you still invest in them?
Through 2017, the value of Bitcoin underwent a whopping 1800% increase finally settling at the $19,000 mark by mid-December. Such remarkable developments all through the year made 2017 the Year of Bitcoins. Anyone owning Bitcoins is the owner of nothing less than a small fortune. Any financial investment is inherently unstable and risky, however the nature of Bitcoin values is even more volatile. Over the years, its value has still settled gradually but is still subject to rapid fluctuations. This volatile nature makes it a good opportunity to make money for anyone looking to make short term investments.
Other than incurring the benefits already discussed above, anyone looking to make investments in this dimensions needs to properly educate themselves about the working of this network. It would be foolish to blindly take the word of anyone else. It is vital to do your own research, evaluate the risk one is willing to take and then make a sound decision. One also needs to understand the process of mining and decide whether they wish to mine their own coins or simply buy them. Investing in this is a high risk game but with every high risk situations, there is always even more higher chances on massive benefits.
Once you have come to a sound decision, and are willing to go ahead with making an investment in Bitcoins, make wise decisions.
What is mining? How to get Bitcoins in 2018?
As mentioned earlier, you can either buy your coins via secure Bitcoin transactions online or you could mine them for yourself. The process of mining requires investment into a lot of heavy mining equipments and access to a lot of electricity and bandwidth since the Bitcoin network is notorious for consuming truckloads of energy. Built upon a technology called Blockchain, a network of nodes work together to ensure the integrity of transactions achieved by acquiring consensus. These nodes race to solve a heavy mathematical puzzle using the trial and error method. The first computer to successfully solve the puzzle is known to “mine” the Bitcoins. However, it is advised to always mine your coins on a large scale. People aiming at a smaller scale should always go for buying their coins instead of mining them.
Once you have mined your coins, or brought your Bitcoins over the network, digital wallets resembling online bank accounts are used to hold your Bitcoins. Your credentials are required to access your digital wallet and no one can take money out of your wallet unless and until you authorize such a transaction or make the payment yourself.
How to get started?
Once you have educated yourself and decided to go for investing in Bitcoins by buying them, search about platforms where you can buy them. However, before buying your Bitcoins you need to decide on where you would be storing them since it is very important to keep your Bitcoins in a secure place protected by a private key to prevent it from getting stolen. Technically it is your private key that you use to sign purchases and transactions which is required to be stored in a safe and secure place and not your coins per say.
Where to get your coin wallets?
A paper or hardware wallet is one of the most secure option. It is essentially a document containing a public address, used to receive Bitcoins and a private key to secure yourself over the network. Often printed as a QR code, one can easily scan them and simply add keys to your software wallet and then make a transaction. One can make use the services of Bit Address or Bit Coin Paper Wallet to generate their own paper wallets.
Another option for users is a mobile Bitcoin wallet. This is simply an app on your smartphone which stores your private and public keys, helping you to directly make payments via your phone. Several apps are available for both android and ios devices. Airbitz, Blockchain, Freewallet, Jaxx, My Celium Wallet are a few reliable options available. The downside of this choice is that you could lose your private keys if someone simply gains access to your mobile device.
Web based mobile wallets are an alternative. Several web based platforms like Coinbase, Circle, Blockchain, Strongcoin, Xapo provide such services. However, the major threat posed to your security when storing your keys by this method is that the organisations providing these services might gain access, thus not just securing your private key but also controlling your money.
One could chose to secure their coins any which way however one of the method which has still not brought up any threat to the user is a hardware wallet. Immune to viruses, these wallets can be securely used interactively. Ledger Nano S, TREZOR, KeepKey, Ledger HW.1 are a few secure options available.
Where to buy your coins?
There are over 1800 ATMs spread across 58 countries from where you can buy your Bitcoins. All you have to do is insert cash into the machine and scan your mobile wallet QR code. Alternatively, you could also be given a paper receipt with codes and instructions on how to proceed further. Coin ATM Radar can be used to find your nearest Bitcoin ATM.
Gift cards could be used to buy Bitcoins too. Simply purchase a retailer’s gift card, log into a Bitcoin exchange site where gift cards are accepted and complete the transaction as desired. A few sellers that accept these gift cards are Paxful and Local Bitcoins.
However, whether you are looking for a large scale trader like investment or a one time simple solution for your Bitcoin transactions, exchanges are your best possible bet and also the safest option. This means that you have an exceptional range of choices to make your trade. Bitflyer, Bitstamp, Coinsquare, Coinbase, Kraken, Cex.io, Shapeshift, Poloniex, Coinmama are few of your best options. They are highly secure and provide quick transactions and great customer satisfaction.
A few tips
It is vital to educate yourself with each and every step before you make it during your Bitcoin journey. It might help you reap great benefits but a minor mistake or negligence could lead you to lose your invested money too. Always keep your coins secure in a coin wallet of your choice. Never divulge your private key to anyone no matter what. Understand the legality that comes with your investment. There are still countries where Bitcoin transactions are not legal and aren’t a legal form of payment.
There are however several stores both online and offline where one can purchase commodities using Bitcoins. A huge number of cafes, restaurants, pizzerias, jewellery stores, hotels, supermarkets, have started accepting Bitcoins. Not just this, large international companies like Microsoft and Dell has recognised it too. Be very careful about your activities online and when in doubt always make a wise educated decision.