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Bitcoin for Dummies: A Comprehensive Guide to Understanding Bitcoin.

The year is 2023, and everyone has heard of cryptocurrency, or at least the leading coin, Bitcoin. 

But how much do they really know? 

Bitcoin may seem like a lot to take in for many people. But, learning through a Bitcoin for beginners guide like this, you realize it’s not that complicated.

If you’re reading this, then you must be part of the enlightened minority who want to REALLY understand Bitcoin. It’s wise to see what the buzz is about rather than depend on unreliable information. To this, I say, well done! Big ups to you for seeking the light. 

By the time you’re done reading this article, you’d have fully grasped the concept of Bitcoin and more. You even get the license to call yourself a Crypto OG at the end of this post. 

Let’s begin!

So, What is Bitcoin?

Bitcoin is a currency that exists only digitally. That is to say, there is no physical representation of this “money”. Cryptocurrency is founded on the major principles of decentralization, security, and transparency. 

Bitcoin, being the first and most popular cryptocurrency, is an embodiment of these principles. Bitcoin eliminates the need for middlemen or intermediaries such as banks. It also takes away power from central systems such as central banks worldwide. Bitcoin gives financial freedom; it allows people to control their money entirely. 

The ticker BTC represents the token used to perform all transactions on the Bitcoin system. So, if you don’t see it spelled out in full, don’t worry; BTC refers to the monetary value of Bitcoin. 

Bitcoin is the OG of all cryptocurrencies, and ever since its introduction in 2008 by the anonymous Satoshi Nakamoto, it has come a long way in leaps and bounds. 

The fascination many people have taken to Bitcoin is that it allows them to seamlessly and anonymously make transactions from one end of the earth to another – zero barriers. 

Brief History of Bitcoin

Bitcoin is the first successful cryptocurrency and has earned many fancy nicknames like ‘digital gold, father of crypto,’ etc., but it is not the first of its kind. 

Several attempts have been made to build cryptos with a resemblance to Bitcoin, but they ended up as failed projects. 

Many cryptocurrencies were built during the pre-Bitcoin years, from 1998 to 2007. They include; BitGold, B-money, DigiCash, etc. None of them was viable; they all seemed lacking until Bitcoin came to be. 

Satoshi Nakamoto published the “Bitcoin — A Peer-to-Peer Electronic Cash System” whitepaper in 2008. This publication set the precedence for the success of Bitcoin as we know it today. Even though most people know of Bitcoin, Satoshi Nakamoto remains a mystery.

In 2009, the Bitcoin software was made accessible to the public, and the mining of Bitcoin began. This continued until 2010 when Bitcoin became valuable for the first time. 

Remember that Bitcoin was only being mined and never traded; therefore, it had no monetary value. It wasn’t until someone decided to barter 10,000 BTC for two boxes of pizza that Bitcoin gained some value.

If this person had held on to their BTC for a few more years, they’d be a mega-millionaire now. But as they say, one man’s loss is another’s gain; in this case, the other man’s loss was just two pizza boxes!

When the concept of cryptocurrency became grounded, Bitcoin served as a template for other cryptos called ‘alternative coins (altcoins)”. There are now over 1,000 cryptocurrencies, but Bitcoin remains the leading crypto. 

How does Bitcoin work?

Bitcoin is built on blockchain technology, and the blockchain creates a connected system that supports peer-to-peer transactions, making it possible to store and exchange assets. 

How Bitcoin works.

A typical user would use the system to transact on an exchange cryptocurrency or through a wallet, while miners do the heavy-lifting tasks on the backend. So, Bitcoin, nicknamed “digital gold,” is not just for fancy; Bitcoin is actually mined, but not in the traditional way you might imagine.

Anyone can be a miner, but the catch is that they need powerful computers with high processors to process, store, and transmit transactions by solving complex mathematical puzzles to reach a consensus. This consensus validates every transaction to prevent malicious individuals from joining the Bitcoin system.

Not so easy now, is it? 

Miners don’t do this for charity; they are incentivized to complete transaction puzzles and receive mining rewards and are paid in Bitcoin. 

There are various consensus mechanisms, but Bitcoin uses the Proof-of-Work (PoW) Mechanism. This mechanism ensures the transaction is consistent with others completed in the past. PoW also ensures you don’t spend Bitcoin you don’t have or have already spent. 

Unlike fiat (national currencies), you can own a fraction of a whole Bitcoin, and its value will remain consistent. For instance, you cannot own $0.01, but you can own 0.01 BTC. So, now that Bitcoin has high monetary value, you can enter the market by buying the smallest Bitcoin share, called a Satoshi. A satoshi is equal to a hundredth millionth Bitcoin. 

To transact Bitcoin, you need a wallet. The difference between fiat and crypto wallets is that you get pseudo-anonymity with crypto wallets. So, instead of providing usernames, passwords, or personal information, you get a string of numbers and letters to generate an address. To ensure privacy, Bitcoin wallets allow you to generate a new address for every transaction. 

What is Bitcoin Used for?

Bitcoin can be used for transactions. Just as you would use fiat in exchange for goods and services, Bitcoin works in that exact way. Since the widespread adoption of Bitcoin, many top companies worldwide have started accepting Bitcoin as payment. 

Bitcoin can be used to pay for a wide range of items, from luxurious purchases like cars and gold to retail items like clothing and gift cards, to even online subscriptions, food, and groceries.

Bitcoin investors also make money by buying and selling Bitcoin. Due to the speculative and volatile crypto market, investors who buy during the bear season can sell during the bullish market for a high-profit margin. 

Many crypto enthusiasts use Bitcoin to lock in their assets. Just like gold used to be the ultimate loss-proof investment, Bitcoin is slowly but surely becoming its replacement. So, to secure assets from fiat devaluation, Bitcoin is also being used to lock away investments. 

Your Call: Is Bitcoin a Good Investment?

young man happily holding 1 bitcoin and a smartphone

Whatever side of the fence you stay on, there are people who will support your decision. However, as a Bitcoin beginner, it helps that you have a full understanding of Bitcoin to help you make an educated decision, which is why you’re here!

Cryptocurrency, in general, is speculative and can be tagged as a volatile market. Here, market trends affect the price of coins. So, the rule of thumb is to invest small portions into assets like Bitcoin.

The ball lies in your court, but here are some pros and cons to guide you in making a decision;

Pros of Bitcoin:

  1. You can protect yourself online: Transacting with Bitcoin allows you to maintain privacy. So, for anyone who’s uneasy about their personal information getting out, no worries here. Bitcoin will shield you from privacy invasion.
  2. Total Financial Control: If you’re skeptical about your money being in a controlled system, Bitcoin gives you a better alternative. The decentralized nature of Bitcoin lets you hold the reins over your finances. 
  3. Potential High-profit margin on investment: You may have seen cryptocurrency charts (and even though it confused you!), you must have seen some irregularities. Market prices change daily, and investors can gain massively as Bitcoin’s value pumps. 
  4. Efficient and cost-effective transactions: If you have ever tried to send money abroad, I’m sure you have experienced the horrors. The geographical barrier has been broken through seamless transactions with BTC. In addition, sending Bitcoin is cheaper and saves time as well. 

Cons of Bitcoin:

  1. Unstable price: This is a huge red flag for some prospective investors. The crypto market is highly volatile, and some people aren’t comfortable with its nature. For example, Bitcoin started 2022 strong at $47,000 per BTC, only to end up under $17,000 at the end of the year. 
  2. Security concerns; Bitcoin has a high-security system; however, this was tested a few times. Especially when Binance was hacked out of $40 million, and the company had to pay out of pocket. However, this increased many people’s resistance to venture into Bitcoin. 

Next Step: How do I start Bitcoin Investment as a Beginner?

By now, you’ve most likely decided that Bitcoin is a great investment. You have analyzed your investment strategy and how much you’re willing to invest in crypto. You’ve also considered the risks and gains involved and are now ready to go forward with your Bitcoin investment. 

Good for you! 

The entry point into Bitcoin investment is very accessible, and you will find out how in the following steps:

How to Buy Bitcoin

There are many cryptocurrency exchanges where you can buy Bitcoin. Some are; Coinbase, Binance, Kraken, and Gemini. Most exchanges have easy sign-up processes, so the onboarding won’t hold you up. 

Tip: When creating an account, turn on your two-factor authentication and make sure that your password is complicated (with a mix of numbers, alphabets, and symbols).

There are also many ways for you to purchase Bitcoin. You can:

  • Use a debit/credit card to buy directly from your bank account (this does not work for Nigerians);
  • You can use the peer-to-peer option to buy Bitcoin in the app; or
  • You can have Bitcoin sent directly from another wallet to your wallet address. 

These are the most common ways to buy Bitcoin from exchanges. Most exchanges provide a step-by-step process to guide you.  

How to Safely Store Your Bitcoin

Your chosen crypto exchange app will have a wallet that works similarly to your physical wallet. That is, you can hold your crypto for as long as you want to, no problem.

However, you are not limited to that option because there are two storage options; hot and cold wallets. 

  • Hot wallets; your crypto exchange provides the usual online wallets. But you are advised not to hold large amounts of crypto in your hot wallet. Unless you actively use the wallet to trade crypto, use cold wallets to hold a large amount of Bitcoin.

This is because the private key generated to secure your wallet is not in your hands but in that of the exchange. So, if anything happens to the exchange, you risk losing your investment.

  • Cold wallets require technical know-how to set up, and it is a safer alternative to hot wallets. The wallet does not connect to the internet, which makes it more secure. The user needs to use their private keys to access cold wallets, which are often stored on USB drives. Certain websites generate these private keys, which are then locked in a safe.

Can I convert my Bitcoin to cash? Here’s How to sell your Bitcoin

Earlier in the post, we talked about how some people make money by selling their crypto for money. This is the juicy part! So, you may need to cash out urgently and want to sell your Bitcoin in exchange for some liquid cash. 

Remember that many scams are waiting to happen, so being extra watchful against falling prey to scam traders is a top priority. 

But you don’t have to start panicking whenever you need cash in exchange for your Bitcoin. Breet is an all-encompassing solution for your Bitcoin-to-fiat needs. It is simple to use with state-of-the-art security measures, 24/7 customer care channels, and of course, the most competitive exchange rates. But don’t just take my word for it: Check out the Breet platform to see how you can sell your Bitcoin (and other cryptocurrencies) with zero stress!

Frequently Asked Questions (FAQs) About Bitcoin 

Can I invest $1 in Bitcoin?

Yes! You can start with $1 and work your way up. It’s possible to own a fraction of the whole coin, so don’t worry. You can invest your $1 and grow your investment. 

Will Bitcoin go back up in 2023?

Crypto experts and market analysts believe that Bitcoin has yet to flatline. With the market looking up in 2023, there is hope for Bitcoin to become strong again, especially after the nasty fall from grace in 2022. Bitcoin can be on a steady upward trend without disruptions in the foreseeable future, but remember – volatile market! 

How long will it take to mine 1 Bitcoin?

It usually takes 10 minutes to mine 1 BTC. Although, this is mainly dependent on the hardware and software used. The ideal hardware and software is not always accessible, though. So, due to a lack of ideal tools, most users mine Bitcoin in 30 days. 

Can Bitcoin be converted to cash?

You can easily convert Bitcoin to cash using cryptocurrency exchanges like Coinbase, Binance, etc. Breet is also a great exchange to change Bitcoin into cash which can then be sent automatically to your local bank account. With great rates, high efficiency, and easy-breezy steps, your cash will be cooling in your account in minutes! 

Final thoughts: 

You made it! You’ve stepped into the light. Now, you understand the hype and underlying information that makes Bitcoin what it is. You can make informed decisions on buying, storing, and selling. Remember that Bitcoin is a speculative market, so protect yourself by investing wisely and doing your own research. Best of luck!

Also – you may be feeling like an OG now, but hol’ up! Your Crypto OG membership is still pending until you experience how effective Breet is for exchanging your Bitcoin for cash – so join the Gang today

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