Digital currencies or cryptocurrencies have taken the world by storm in recent years, and with good reason. Popular currencies such as bitcoin can be extremely profitable, but understanding bitcoin can be a little bit of a tricky endeavor (especially if you don’t have any similar experience).
Thankfully, this guide can act as the ideal introduction to bitcoin, helping you to master the art of cryptocurrency trading in no time at all. So, if you’re interested in finding out more, then simply read on.
What Is Bitcoin?
Bitcoin is described straight from the source as “the first and most widely recognized cryptocurrency”. It exists to allow a peer-to-peer exchange of value within the digital world, using a decentralized protocol, cryptography, and a mechanism to achieve global consensus on the state of a regularly updated public transaction ledger known as a blockchain.
In basic terms, bitcoin is a form of digital money that is not part of the usual laws and limitations of cash. You can trade bitcoin to any user in any country, without being tracked and traced, or held to any regulations, tax or otherwise.
Bitcoin has grown dramatically in popularity since its anonymous release in 2009, and it’s now become a household name in the world of cryptocurrency. In fact, in June of 2021, El Salvador became the very first country to actually mandate Bitcoin as a legal tender.
Why Is Bitcoin Valuable?
Bitcoin is used for storing money externally from the world of fiat (non-digital) currencies, and because bitcoin is totally independent of the state one operates in, it flows globally and isn’t limited to one country or region.
Moving funds across borders couldn’t be easier, as no government body is able to regulate bitcoin, so a lack of borders means a lack of limits. The fact that bitcoin transactions are instantaneous, don’t have to pass through different financial institutions, and subsequently aren’t held back by government scrutiny are all reasons that suggest exactly why Bitcoin is valuable.
However, in addition to these factors, it is difficult to mine. It takes a huge amount of power and technology to mine bitcoin, and the value of bitcoin is constantly rising. The current value of one bitcoin is more than $30,000 – a dramatic increase compared with its original value when it first hit the market.
This is why people choose to invest in bitcoin, as it’s generally thought that the value will just continue to rise, and therefore so would your investment. There’s a huge amount of interest surrounding bitcoin with entire markets dedicated to its payment system, so it doesn’t seem that the value is going to drop anytime soon.
But, it’s still a very volatile market that could crash at any time for any reason, so always bear this in mind when considering the true value of your bitcoin.
It’s unlikely that the dollar could drop so dramatically in a matter of seconds as cryptocurrencies can, so this is a risk that bitcoin investors have to take if they want to be able to reap any rewards. You can also earn interest on your bitcoin, similar to money in a savings account.
What Can Bitcoin Be Used For?
Bitcoin can be used for a number of different transactions, but it is especially useful for transactions that aim to exist outside of the traditional financial system. This doesn’t mean that bitcoin is exclusively used for illicit operations, as many respected and well-known businesses and individuals use bitcoin for a number of transactions.
People and organizations use Bitcoin to perform international payments which need to be settled faster, with greater security, and with lower fees compared with more traditional legacy settlement pathways. In essence, you can use bitcoin for nearly any transaction, depending on whether the recipient has an active bitcoin wallet.
It’s important to note that bitcoin isn’t limited to big-money business use, as it’s trickling down to the base level more regularly than you might imagine. In some cases, restaurants and stores are beginning to offer bitcoin as a payment option. However, you will need to invest in your own bitcoin and create your own wallet to use such services.
How Do You Start Trading Bitcoin?
If you want to utilize all the applications of Bitcoin and take full advantage of all its unique features, then you will have to open your own private wallet whose keys are under your personal control.
The cryptocurrency world often refers to the phrase ‘not your keys, not your bitcoin’, meaning if you don’t have access to the private keys to your Bitcoin, then it’s more than likely someone else does.
Opening your own private wallet is very easy, but you need to make sure that you choose the most suitable wallet for whatever you plan on doing with your bitcoin.
There are web wallets, which aren’t particularly secure, mobile wallets, desktop wallets, hardware wallets, and steal and paper wallets. These are divided into hot and cold wallets.
Hot wallets are used for any bitcoin that needs to be accessed from a remote location through the web (mobile, desktop, etc). Cold wallets are external from the web, which therefore limits remote access by most devices and subsequently increases security.
Once you’ve chosen the most suitable wallet, you need to acquire some bitcoin. There are a number of different ways this can be done, including buying, trading, mining, or even accepting it as a form of payment for any goods or services that you sell.
The more bitcoin you are able to accrue, the greater the value of your wallet. You can trade your bitcoin in for fiat currency options at any time, and this is a good way to make money – whenever you see that bitcoin is up, you can cash in and generate a profit on your investment.
You can also trade bitcoin for other forms of cryptocurrency, or even NFTs (non-fungible tokens) that also grow in value. Bitcoin is a complex industry, and it can be both risky and rewarding in equal measures!