Think of Bitcoin as a foreign currency like the Euro or the Yen. Bitcoin is digital money, also known as cryptocurrency. Bitcoin is like the 92 percent of existing money in the entire world today; it's just numbers on the computer, like the numbers you see when you do online banking, but with one major exception: Nobody governs cryptocurrencies; they are decentralized. In other words, they are not controlled by one entity such as banks. Today, you can shop with Bitcoins or send Bitcoins to anyone, anytime, anywhere in the world who has a Bitcoin address.
Bitcoin works peer-to-peer, there are no middle-men, and you are in FULL control.
Bitcoin and cryptocurrencies utilize the blockchain technology, over which every single transaction in the history is recorded and distributed on a secure public ledger. Copies of the ledger can be stored on computers like mine and yours, and used to verify if a transaction is valid, and that whoever spent a bitcoin had a bitcoin to spend. So if you send Bitcoin to a friend, that transaction will be recorded on the public ledger, except your names will never be shown, all cryptocurrency addresses are anonymous. You can explore the blockchain at https://www.blockchain.com/explore
Bitcoin price fluctuates a lot. As of this writing, the current price of a full bitcoin is around $10,000 US dollars. But don’t worry, you can still buy a fraction of a Bitcoin. For example you can buy around 0.0050 Bitcoins for $50 today.
In early 2011, Bitcoins were worth less than a dollar. Bitcoin’s all time high was around $20,000 US Dollars in December 2017, but what drives Bitcoin’s price? Read more below.
The price is driven by many factors, one of the majors being supply and demand, adoption, miner rewards and halving. And if you think you missed the train, think again. Bitcoin and all cryptocurrencies are still in their infancy, thousands of developers are still working to improve the core technology, and building software that utilize its potentials. Blockchain and cryptocurrencies are the future.
No! Many people do not know that Bitcoin can be bought in fractions. Just like the Dollar or Euro, which have cents. Bitcoin actually has even smaller fractions, currently the smallest fraction is named after its creator Satoshi, which is equivalent to a hundredth of a millionth Bitcoin (BTC),
or 0.00000001 BTC.
You can buy fractions of a Bitcoin for as low as $1 worth.
Bitcoins are stored in digital wallets, think of wallets as your bank account. Wallets are free, you can have as many as you like. Wallets are used to send and receive Bitcoins.
Wallets have public and private keys which are comprised of a unique set of numbers and letters. Private keys are like the pin number of your bank account, so they must be kept safe from prying eyes. Public keys on the other hand, are made to be shared with others to receive Bitcoins; think of it as the numbers on your bank cheques.
It is extremely important to be in control of your private keys. In reality, coins actually never leave the blockchain network; it’s your wallet’s private key that certifies you as the owner of those coins. Basically, if you do not own the private keys, you do not own the coins.
To be 100% safe, do not show your private keys to anyone, do not send your private keys over an email, or store it on Dropbox or a similar service on the Internet.
There are different types of wallets, Hot Wallets which are software that sit on your computer or mobile device, and Cold Wallets which are either USB devices or paper wallets where your coins are kept offline.
Every cryptocurrency has its own hot wallet. Hot wallets are a free and convenient way for spending and receiving payments, but because your computer is always connected to the internet, it’s not recommended to keep large amounts in them.
To put it simply. Think of a hot wallet as your physical wallet that you use to store some cash for spending.
Hardware Wallets are a lot safer to keep significant amounts, they are offline, therfore unreachable by hackers, and in case of a robbery, they are protected with a pin number. And If you’re worried that the hardware might get lost or damaged, you have a secret backup code to retrieve your coins.
Think of the hardware wallet as your vault, where you store a significant amount of crypto.
Digital wallets (hot wallets) are software that sit on your desktop or mobile device. These user friendly applications give you the option to easily send and receive Bitcoins. To send a Bitcoin to someone, you need their Bitcoin wallet’s public key or address. Alternatively, to receive Bitcoins you must provide the other party your Bitcoin address.
When sending or receiving Bitcoins double and triple check that the address you're sending to is correct before proceeding, always copy and paste addresses in full, never ever type them. If you send Bitcoins to a wrong address they may be lost forever. Bitcoin transactions -unlike Paypal and credit card companies- are not reversible.
Bitcoin addresses are 26 to 35 alphanumeric characters, beginning with the number 1, 3 or bc1. These are public keys.
To send bitcoins, you need the bitcoin address (public key) of the other person. Once you have the full address, simply copy & paste it in the send to or pay to field and click Send.
To receive Bitcoins, the receive section will show your receiving address (your public key) along with a QR code in some cases, for ease of use. Give your Bitcoin address to the other party and sit tight, Bitcoin sometimes takes up to an hour to arrive depending on how busy is the network.
Although Bitcoin is the most popular and first digital currency to ever exist, some other major cryptocurrencies are Ethereum, Ripple and Litecoin to name a few. There are currently around 2000 other cryptocurrencies, different cryptocurrencies are created for different functionalities.
Bitcoin was the first cryptocurrency ever created back in January 2009, by an anonymous individual using the alias Satoshi Nakamoto, who disappeared since.
The bit more complicated way to buy Bitcoins would be using an online Exchange, where traders buy and sell Bitcoins and other cryptocurrencies.
There are many exchanges today where you can trade fiat for crypto, almost all of them will ask you to verify your identity by sending them your Passport, personal identification card (i.e driver’s license), a photo of yourself, your address and other personal information. Once you are verified, you will be able to wire transfer money to your account on the exchange, which also come with fees that banks usually charge.
Fees for a bank wire transfer normally ranges between $15 and $45 minimum per transfer. If the amount being transferred is too big, some banks charge a percentage. Wire transfers usually take around 5-7 business days to arrive.
When your account on the exchange is credited, you will able to trade your fiat money (dollars) for Bitcoins or any other cryptocurrency at the market price, plus a trading fee that the exchange carries.
Any coins that you trade over an exchange are kept in wallets that are assigned to you. Remember that those wallets are lent to you; their private keys will never be shared with you, therefore if the exchange is hacked, or if it suddenly disappears your coins and money will be lost.
We highly recommended that you do not keep any of your coins on online wallets. Exchange sites will give you the option to withdraw or deposit coins to and from your wallet that is under your control.
There are about 18 million Bitcoins in circulation today, and only 21 million Bitcoins will ever exist. Bitcoins are generated and given away as a reward to computers that help in validating transactions, these computers are called miners.
Miners help resolve each block and add it to the blockchain. The reward for mining each block started at 50 Bitcoins and has since “halved” twice. The current reward is 12.5 Bitcoins per block which is distributed over to miners.
The next halving is in May 2020. Historically, the Bitcoin price has significantly moved up a few months before every halving.
Miners are computers that facilitate transactions, and together with other miners in one pool resolve a block and add it to the blockchain. Miners, are then rewarded with coins and transaction fees for operating the network.
Yes, but they are a lot lower compared to traditional money transfer services. The transaction fee fluctuates based on the blockchain network activity. Busier network means higher fees. As of this writing the transaction fee to transfer any amount in Bitcoin is around $2.25. Other cryptocurrencies (sometimes referred to as AltCoins) have different transaction fees, some are even a lot lower, the lowest of all being Ripple (XRP).
There are two factors that determine transaction fees, network load and transaction size (in bytes). Bitcoin requires a minimum of six confirmations for a transaction to be completely validated by miners. Usually, the first confirmation arrives within ten minutes (time taken to mine a block). Normally, transactions are successfully processed in an hour.
Some wallets let you control the transaction fees, but if you send a transaction with very low fees attached to it, miners will not prefer picking that transaction because of its low incentive, in which case it could take several hours for the transaction to be confirmed.
The market cap of all cryptocurrencies at the time of this writing is $385 billion US dollars, $242 billion of which is in Bitcoins.