Bitcoin and cryptocurrency are words that over the past two years, have crept slowly but steadily into our vocabulary.
While the whole concept of Cryptocurrency (Crypto for short) and Bitcoin (otherwise BTC) isn’t new to some reading this,to other people, it is a new concept. This article, therefore aims to break down the information about bitcoin into easy to understand terms.
What is Bitcoin?
Bitcoin is a form of cryptocurrency. Cryptocurrency isn’t some physical form of coin or currency you can keep in your wallet. Rather, cryptocurrency, and by extension, Bitcoin is basically a line of code (as in programming) with value; which can be purchased and sold for money.
Created by Satoshi Nakamoto in early 2009, Bitcoin was created out of the desire and thought of having a decentralized currency — money that no authority, company, or individual had control over and owners of the currency could not be traced or identified.
Like physical currency where you keep your money in your pockets, purse or a wallet, a “Bitcoin Wallet” is a special program that allows you store your Bitcoin and also, transfer to other users, a merchant or customer that accepts Bitcoin as a form of payment; picture it as removing a couple of Naira or dollar note from your purse to give to another person.
Transfer of Bitcoin is safe, reliable and remain completely anonymous as it is a form of digital money that uses encryption to secure transactions. This same encryption guides the creation of new units.
How do I mine (create) Bitcoin?
Well, it would surprise you to know that mining Bitcoin is free. However, the resources and the know-how you need to possess to mine the virtual currency might cost you. Before moving to the mining of the currency, there are some facts that need to be stated forehand:
- Only 12.5 Bitcoin can be mined / created every 10 minutes.
- There are finite Bitcoin — there can only be 21 million Bitcoin in existence.
- The creator, Satoshi Nakamoto, is believed to own 1 million of Bitcoin
- In July 2017, the total amount of Bitcoin in circulation were believed to be about 16.4 million.
- By 2041, the 21 million cap on Bitcoin quantity is estimated to be reached.
The above being said. Mining Bitcoin is a complex, capital and energy-intensive process as it requires sophisticated hardware, constant power (electricity) and internet. Presently, there are thousands of miners actively mining Bitcoin and all they do is to compete solve a complex mathematical puzzle within the space of 10 minutes.
The fastest miner to successfully solve the puzzle gets rewarded with 12.5 Bitcoin (currently worth over 100,000 USD). Miners make money by selling newly generated coin to interested buyers.
How do I Buy or Sell Bitcoin?
Generally, to buy or sell Bitcoin, you have to have a wallet and be registered on platforms where Bitcoin are bought and sold. These Bitcoin sales and purchase websites are known as Bitcoin Exchanges.
The volume of Bitcoin you intend to buy or sell determines the type of buyer you are. And the type of buyer you are determines the type of Exchange you use. Exchanges like Gemini and GDAX deal with buyers and sellers of large volume of Bitcoin.
It is noteworthy to state that security and trust is a big factor to consider when choosing Exchange platforms to trade your Bitcoin. Back in 2016, Bitcoin worth millions of dollars we’re stolen when Bitfinex, a Bitcoin Exchange platform was hacked.
So be careful on which Exchange you use and how you use them. You don’t want your coins stolen, do you? It is also advised to choose Bitcoin retail exchange platforms (like Poloinex) that verify customers during trade.
Depending on the Exchange, you can choose to trade your Bitcoin for cash, or other cryptocurrencies.
How do I store my Bitcoin?
As mentioned earlier, a Bitcoin Wallet is like a virtual purse where you store your Bitcoin…and there are different types of them:
1. Hardware Wallet
This is a physical wallet; a device specifically made for Bitcoin transactions. It connects to the internet before a transaction can be carried out and unlike other wallets, it is the most secure as it is almost impossible to hack. It may however get easily stolen..or damaged.
2. Online and Mobile Wallets
These are typically online wallets that can be accessed on the internet and mobile gadgets anywhere you are. It is free, easy to set up, and convenient but less secure.
There are several online wallet providers but safety remains an issue since your wallet key are saved on their database; they could be hacked. Some trusted online and mobile wallets include Coinbase and Blockchain.
3. Software Wallet
This is a wallet which, just like any other software, you install on your computer. This wallet allots more control and security over your wallet but you have to ensure your computer is safeguarded against hackers and prying eyes and insured against impromptu damage by backing it up. The official Bitcoin Wallet can be downloaded on the official Bitcoin website here.
4. Paper Wallet
This is often used for long-term storage of Bitcoin. Paper Wallets are basically a piece of paper on which the private and public keys of your bitcoin address are printed. Platforms like BitcoinPaperWallet and WalletGenerator offer Paper wallets.
Crypto-currency is a great alternative to fiat and other traditional currencies. With ease of access, speed of transactions, anonymity and cost-effectiveness among other advantages, it is indeed very appealing.
How do I get Bitcoin? you might ask. Well, for the purpose of explaining its acquisition, I’d compare Bitcoin to Oil. Bitcoin is like a commodity (a currency in the real sense of it) that you can acquire by; Buying it, or Mining (Creating) it.
The above are summarized bits on the most popular cryptocurrency, Bitcoin: its history, some facts, creating it, buying it, selling it, and storing it.
What do you think about Bitcoin? Have you ever traded it before? Bought or sold it before? Got any question? Ask in the comments box.