What Is Bitcoin? A Beginner’s Guide to Cryptocurrency

For the last decade or so, Bitcoin has taken the world by storm, with countless high-profile companies investing in it and encouraging others to do so. For an outsider, it’s hard to understand the Bitcoin appeal, and more so, how it really works. If you’re wondering, “What is Bitcoin exactly? Why is it so popular?” We’re here to answer your questions in this article. Are you ready to dive in?

What Is Bitcoin and How Does It Work?

To put it in a few simple words, Bitcoin (B) is a cryptocurrency, which practically translates to virtual money. For example, think of it as transforming your cash bills to digital equivalents, which you can use to buy and sell stuff online.
However, Bitcoin isn’t your typical hundred-dollar bill. You can’t buy products from Amazon, for instance, with Bitcoin directly because the company doesn’t accept it as payment. Still, some shops and services are cool with Bitcoin, so that’s good to know!

How Bitcoin Works

For a second, it can be hard to grasp the mechanism behind Bitcoin transactions. What if people simply spend Bitcoins they don’t own or attempt to make copies of other individuals’ coins?
Well, the way that Bitcoin works is specially designed to prevent these scenarios from happening. See, each Bitcoin is similar to a computer file in origin, and it’s stored on a digital wallet app that people can get on their smartphones or computers.
Once you use your Bitcoin to buy something, the transaction is recorded on the blockchain. For those who aren’t familiar with the term, “blockchain” refers to a public list of transactions that anyone can access to confirm the authenticity of an exchange.
Because there’s a history of every Bitcoin transaction to ever occur, it’s not possible to duplicate transactions or spend Bitcoins that aren’t yours.

How Do People Get Bitcoin?

It’s fairly easy to own Bitcoin these days. Plus, as it became more popular, individuals and companies have come up with creative ways to acquire Bitcoin that don’t always depend on buying it with real money.
Here are a few tried-and-true ways to get Bitcoin you may want to give a shot:
  • Buy Bitcoin through bank transfers or credit card payments via cryptocurrency exchanges like Gemini, Kraken, and Coinbase
  • Use an online payment service to buy, sell, and hold Bitcoin (these apps include CashApp, Venmo, Paypal, etc.)
  • Get Bitcoin through Bitcoin ATMs, retail stores, or peer-to-peer transactions
  • Find Bitcoin on investment brokerage firms such as Robinhood

Why Is Bitcoin So Popular?

The reason behind Bitcoin’s popularity is that it has many advantages that real money sometimes lacks. In this section, we’ll help you understand more about the plus points of dealing and investing in Bitcoin.

No Banking Fees

This is probably the biggest aspect that attracts people to Bitcoin transactions. Unlike the case with bank transactions, paying for things with Bitcoin doesn’t incur any banking fees.
As a result, you won’t be required to pay maintenance fees, returned deposit fees, or get overdraft charges. The same applies to minimum balance fees, which are non-existent with Bitcoin transactions.

Portable Transactions

Another thing that makes Bitcoin a favorite of many is that it doesn’t require you to visit a certain location to be able to buy stuff with it. Of course, this isn’t the case for a bank account.
To use your Bitcoins, you’ll only have to connect your phone or computer to a stable internet network, and that’s it!
Therefore, you can get access to your virtual wallet anywhere; at home, the gym, the office, outside town, another state, etc.

Enhanced Security

Stealing Bitcoin is impossible, in most cases, because the only way someone would be able to control yours is through your crypto wallet. Of course, unlocking your wallet can only be done using the passcode that you’ve set up.
Therefore, theft attempts on individuals are usually fruitless.
Let’s not forget that every transaction is recorded for everyone to see. So, it’s difficult for a thief to copy Bitcoins or spend other people’s cryptocurrencies.
Still, we’re humans, so people may forget their wallet passwords or delete their Bitcoins accidentally altogether. In that case, they’ll sadly be gone for good.

What Are Some Concerns That Surround Bitcoins?

Just like everything in life, and especially in the digital universe, Bitcoins have some downsides that you must know about before taking a step in their general direction.
First off, Bitcoin prices are volatile, meaning that they can be extremely high for one day and unbelievably low for the next one. To get a hang of how to predict these sudden drops in price, you must have a lot of experience before you invest in Bitcoin.
Second of all, a newbie might be prone to hacks or phishing attempts, which a skilled investor has additional security systems to deal with. A beginner tends to be more vulnerable to these traps.
Last but not least, it’s important to remember that Bitcoin has only existed since 2008, so it’s a fairly new experience. In other words, it still hasn’t proven itself as a long-term investment.
The bottom line is, it’s not a bad idea to start investing in Bitcoin to test the waters. But, until it’s even more secure and stable, you shouldn’t completely depend on making money off it.

Conclusion

What is Bitcoin? How does it really work? How do you buy it anyway? These are only a few questions that immediately come to mind when you’re doing your research on this cryptocurrency. Hopefully, after taking a quick look at our article, you now have a better understanding of the nature of Bitcoin, its pros and cons, and the several ways you can get it.
It’s important to remember that, sure, investing in Bitcoin sounds promising, especially with public figures like Elon Musk supporting it. Still, for newcomers, it’s a world that you must approach with caution.