Introduction to Bitcoin - A Comprehensive Beginner Guide

14 - Feb - 2021

Cryptocurrency

somiariaz

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Hi folks, I hope you guys are doing great. In my previous post, I have discussed what cryptocurrency is. Before I go in detail about Bitcoin, let me tell you. Go and read the last article about cryptocurrency. As you should have information about cryptocurrency before jumping into bitcoin. Bitcoin has become a buzz word now. It’s been around 12 years since Bitcoin release. A person or group of people name Satoshi Nakamoto emerge bitcoins that host a digital currency bitcoin. The individuals who already knew about Bitcoin are curious about it that how is it going to leave an impact on our daily lives in the future. I am here to answer all of your questions and that will clear all your doubts and curiosity. So we are going to cover all these topics down below:

What is Bitcoin?
Understanding of Bitcoin in Depth.
How Does Bitcoin work?
What is Mining?
Useful Definition for Bitcoins wallet.
How can I store my Bitcoins?
Types of wallets.
How to Buy Bitcoins?
Pros of Bitcoin.
Cons of Bitcoin.
Conclusion.

Introduction to Bitcoin

Bitcoin is the official first cryptocurrency that had been released in 2009. It is basically a digital currency and only exists electronically.
Bitcoin becomes known in 2009 when the world economy was on the crisis. Those big banks were doing fraud with clients and manipulating the system.
So, basically Bitcoin founder actually wants to get rid of the third party and put the seller in charge. They want to make transaction safe and secure without any interest fees and corruption.
Bitcoin is a decentralized system, it means it doesn’t have any central hub or any insinuation like banks etc that controls the amount of Bitcoin.
Bitcoin has come too far in such a short time. Now globally different big companies are accepting Bitcoin as currency.

Understanding of Bitcoin in Depth

Bitcoin has a different importance for different persons. The Bitcoin process is organized and easy to understand. Bitcoin uses peer to peer technology for the transaction of Bitcoins. All of these transferred are tracked on “Blockchain” and known as the giant ledger. This giant ledger saves all the transaction of Bitcoin that ever made. The giant ledger records every transaction and whenever it made. 17 million bitcoins are currently in circulation. No one is yet controlling the supply of bitcoins, that’s means that supply is controlled by design. The total supply of bitcoins that will be ever created is 21 million bitcoins.

How Does Bitcoin work?

Before further getting into details about working of bitcoins, if you are not interested in the technical process then you can check my last article about cryptocurrency where you can find a simple example of bitcoin working. As I told before, Bitcoin is decentralized and work on a giant ledger also called a blockchain. Bitcoin is a secure process and uses a great verification method which minimizes the risk of hacking and fraud. Volunteers of bitcoin referred to as” miners” who constantly update and verify the blockchain as you all know that bitcoin is decentralized. When a specific amount of bitcoin transactions is verified then another block is added to the blockchain and that’s how the business continues as usual. May you have heard the term “mining” many times when reading about bitcoins. So I will explain to you briefly today about mining.

Introduction to Mining?

As you all know now that in bitcoin there is no central hub for verifying the transaction of bitcoins. So all the people on the networks are verified each transaction. The people who are verifying transaction are miners and all of this process will be called Mining. Mining is a process that keeps the bitcoins secure by adding the new transaction or updating it and keeping them in the ledger. Let me explain the process simpler so you will understand. Now you must be thinking how could a person sit 24 hours for this single process and verify and update all the procedure. Actually, there is not any human being who is doing this process but hardware are used to perform Bitcoin mining. And these hardware called miners. Miners are presented with math problems and the first one who will solve this problem will add a new transaction (or block) in the ledger. All of these calculations are stand on Proof of Work. There is a reward system involved in the process of Bitcoins. The one miner who will solve first will get a reward. The reward got changes over time with the update of Bitcoin programming. The most successful process uses in bitcoin is ASICS–Application-Specific Integrated Circuits. ASICS are hardware systems similar to CPU but these are only designs for bitcoin mining. All of the mining processes take a lot of power and effort. The competition is higher in this bitcoin mining and that makes it difficult for new people to enter the race and get profit.

Bitcoin wallets

There are different applications you can use to store your bitcoins in the wallet. As you all know already this is a digital currency and you can’t keep it in your pocket. But first, let me introduce you some useful definition before going further in detail.

Exchange Platform

It is a platform where you can trade money to cryptocurrencies such as Bitcoin, Litecoin or Ethereum. You can also buy and sell one cryptocurrency to others.

Hard Wallet

It is an offline wallet that is not linked to any network.

Public Cryptographic Key

The Public Cryptographic Key is like your bank account number. The Public Cryptographic Key is the information you give someone to receive cryptos.

Private Cryptographic Key

It is key that will allow you to spend your bitcoins or any other cryptocurrency. You can't share it with anyone because if you did they can steal your bitcoins or transfer to their wallets.

Wallet platform

Wallet platform is like your bank account where all of your cryptocurrencies are kept.

How can I store my Bitcoins?

Now you can understand the bitcoin wallet terms easily. Let’s jump into it with further details. Bitcoin has secure transaction technique and it is difficult to hack the wallet and if you had ever heard that bitcoin being hacked. It does not mean that someone wallet got hacked but it would be probably the exchange platform. There are different wallet platforms and are extremely secure that make it impossible to hack.

Full Client

It is an email server that handles all the aspect of processes without relying on any third party. It allows you to control your whole transaction from beginning to end by yourself. But sadly this is not for beginners.

Hard Wallet

A hard wallet is like a USB that allows you to store cryptocurrencies key offline. Your cryptocurrency will be only live on your hard wallet and it is not possible to hack unless someone steals your hard wallet.

Web Client

A web client is opposite to Full client. It totally depends on the third party. The third party will help you to operate your all transaction.

Lightweight Client

This is an alone email client that helps you in connect to mail server to access all the email. It would store all your bitcoins but it also needs a third party server owned server to access the network and make the transaction.

Types of Bitcoin wallets

Wallet basically comes with five different main types. Each type has its own advantage and disadvantage.

Desktop
Mobile
Web
Hardware
Paper

How to Buy Bitcoins

It was difficult to buy bitcoin in the past because of the trouble of finding a trustworthy place to buy bitcoins. But now as the popularity of bitcoins, the demand for bitcoins got increased and many new companies have decided to help in easily purchasing Bitcoins. Now day’s bitcoins exchanges are receiving huge investments. Coinbase is a good platform to buy and sell your bitcoins. Its got launched in 2012 and providing users with an easier way to buy bitcoins. It is the easiest ways for newcomers who want to buy bitcoins. Gemini is another great place to buy bitcoins. It was founded in 2015 by Tyler and Cameron.

Pros of Bitcoin

Payment can be made to anyone and at any time instantly
Does not require any third party for the transaction
Data of Bitcoin can’t be manipulated by any person, bank, or government
Processing fees of bitcoins are low
Transaction of Bitcoin can’t be reversed

Cons of Bitcoin

Bitcoin Exchange hacks
Mining Scams
Lack of adoption by business
The strength of bitcoin lies in its networking effects.
Transactions are slow and you have to wait almost ten minutes for your network to approve

Conclusion

Everything in this world comes with advantage and disadvantage. Now it is up to you how you will use it in your life. Bitcoin is free from third party interference and manipulations. It is a transparent system where you are aware that what is happening with your money. Bitcoin is going to grow stronger when most of the people will be aware of its efficiency. NOW it is time for your respond. What do you think about bitcoins? Comment down below for any further query and suggestions.