Introduction to Bitcoin

Introduction to Bitcoin

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No other word like Bitcoin has dominated the headlines in 2018 quite like ‘cryptocurrency’ – it is the new preoccupation of financial analysts, institutions and investors around the world.

In the space of little more than 12 months, cryptocurrencies have shown the potential to make traditional banking obsolete.

 

It is almost 30 years since the use of cryptographically secured chains of blocks were developed to prevent the tampering of data. This data is formed of blocks, just like any other, but each block contains a cryptographic hash of its predecessor in the chain that cannot be altered without altering all subsequent links in the chain – hence the term ‘blockchain technology’.

 

Originally this was simply intended to provide indisputable timestamps for documents created or transmitted electronically. But in 2008 the first example of a cryptocurrency was unveiled using blockchain engineering: this was Bitcoin, which provided a robust and transparent, decentralized ledger for transactions on its network.

 

A decentralized ledger is a database that is consensually shared and synchronized across network spread across multiple locations; making cyber-attack more difficult. Any changes or additions made to the ledger are reflected and copied to all participants in a matter of seconds or minutes, making every transaction ‘witnessed’.

 

The coindesk.com pointed out significant benefits for owners of Bitcoin:

 

1. Being decentralized, no single owner or group directly controls the crypto, which is self-controlled.

2. Supply of bitcoins is limited. Cryptocurrencies follow a strict algorithm, which cannot be changed or modified: the maximum supply limit is 21 million coins based on the same algorithm.

3. Anonymous transactions. When sending/receiving crypto, all you need to provide is the address of your wallet, which is the only form of information required for trading.

4. Micro-transactions. At the time of composing this article, Bitcoin’s price was above $6000 dollars for a single coin, which can be divided into many «parts» as small as 0.00000001, which is also called «Satoshi».

 

How do you buy your first Bitcoin?

There are numerous different wallets available offering services to suit different needs. Having your own wallet is similar to having an online bank account.

 

There are both ‘offline’ and ‘online’ wallets. Blockchain technology allows you to store wealth offline without the need of Internet connection: on USB flash drive, mobile phone, computer or any other electronic device. This is the ‘offline’ wallet – the most protected way of storing your funds but also less accessible.

 

According to the industry ‘bible’ Cointelligence, the most popular and secured online wallet is blockchain.info, which has a simple registration process similar to any other website. You enter email, create a password, create a backup phrase, confirm registration, and here you are: ready to purchase your first Bitcoin!

 

There are various exchanges offering Bitcoins, but, according to Cointelligence, Coinbase is the most popular today.  You need to create an account and to register your debit/credit card for future acquisitions. Note, that this website will require a mobile number, which will verify your account.

 

After that you simply follow the instructions given to activate, maintain and add to your Bitcoin wallet. Congratulations: you have entered the most exciting market in the world.

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