Everything you need to know about bitcoin!
We all have probably come across the term Bitcoin, It is a digital currency (crypto). It has the privilege of being the first one and also the fame of being the best-known cryptocurrency. People have heard the term "Bitcoin" than the word "crypto". It is a financial asset but let's understand every aspect of it to know if it is right for you!
What exactly is Bitcoin?
Bitcoin is a digital currency which you can buy, sell and exchange 💱 directly without having the bank as a middle man (entity). This payment method was devised by an anonymous person from Japan who goes by the name " Satoshi Nakamoto" who described its white paper as a payment system based on cryptography and not on trust.
Imagine a notebook 📓 in which once the data is entered it cannot be erased and the data present in the notebook could be accessible by anyone. We call this a public ledger that is a possible/by-product of a Blockchain. Each and every bitcoin transaction is stored on this public ledger so it is very difficult to fake or copy a Bitcoin. Bitcoin isn't backed by a single body such as a 🏦 (bank) it is a truly decentralized system. Its value is determined by the demand for it, in the sense, the value of the coin rises if it is more in demand and it decreases if it is less in demand.
It is similar to gold since even gold value is given by us the people! Bitcoin was once 8$ and now it reached an all-time high of over 6400$! This is the real power of a decentralized currency.
How does bitcoin work?
Bitcoin is built on Blockchain technology, which is a digital record. A Blockchain is a sequence of blocks connected with hashes just like its name suggests. It's a linked body of data and each block in the bitcoin Blockchain stores date of transaction, time of transactions, buyer, seller information, etc. It's in chronological order in the form of a chain( Blockchain).
Hence whenever a transaction occurs, anyone can view the details of the transaction. If any new bloc is added people can again see that as well! You might think that if everyone can see the Blockchain transaction isn't it risky? That's one of its strongest points, Here for any change to occur (new block to be added) it must be verified by bitcoin holders since it's open to all it can be easily verified.
There are unique codes that need to be verified by bitcoin holders where they are used to verify the right encryption pattern. These unique codes are 32-bit hash which is extremely hard to crack which makes it extremely unlikely to fraudulently produce it. In theory, it is possible to crack the code but we haven't reached that level of supercomputing technology yet!
How to buy Bitcoin?
Bitcoin can be exchanged for real $ in exchanges such as Binance, gate io, or Ku coin. Here you go to your wallet and transfer real $ and then trade it for stable coins such as usdt, USD,busd, etc. These transfers are possible only with p2p trading (peer-to-peer trading) where we directly transfer real money to a dealer's bank account and they release the stable coin, tokens (such as usdt,busd, etc,) to our wallet.
Once you receive the stable coins you can trade them for bitcoin or any other crypto available in that exchange!. Keep in mind exchanges charge a small fee for every trade over time (year) these fees can sum up to even 500$. I wouldn't recommend dumping all your savings into crypto because the crypto market is very volatile and not worth the risk. I would probably recommend 10-15% of your savings after you have thoroughly researched as many factors as you can.
Hot vs Cold wallet
A hot wallet is a cloud-based wallet that stores your crypto in cloud storage provided by the exchange itself. A cold wallet is a hardware-type storage device, it is not connected to the internet.
This blog is by no means a financial advice. Hope you learned something new from this blog! Let me know your thoughts on this topic in the comments :^)