The Most Simple Guide for Understanding Bitcoins

The Most Simple Guide for Understanding Bitcoins

If you are reading this blog , it means you have already heard some good stories about the rise of bitcoins lately . This blog will clear most of the basic concepts for you in least complicated way, the reason of writing this blog is when I heard about bitcoins back in 2010 , it was worth 900 INR and I dint took it seriously and now  1 bitcoin is worth more than 3 lakh INR a month, its my duty to share the info as much as I can

 What is BTC or bitcoins

  • First ever cryptocurrency /digital currency
  • Decentralized Virtual Currency/Digital currency
  • Uses cryptography rules to control the amount of currency available hence limited in number

Difference Between Bitcoin and bitcoins

  • Bitcoin is with Capital letter “B” refers to decentralized  P2P network
  • Bitcoin is  a protocol for transferring value
  • Bitcoins is with lower letter “b” refers to the virtual currency  that exists on Bitcoin Network

Trust Factor in Bitcoin

  • Open Source Protocol
  • Can be audited by anyone
  • Trust originates from pool of protocol supporters who are confirming transactions called “miners”.

How price is determined for Bitcoin

  • Like commodities it depends upon its availability , its demand and supply
  • Rise in bitcoin prices suggest that more people are willing to buy bitcoins then to sell and vice versa

Why to use bitcoins

  • Transactions are practically free.
  • It’s accepted globally.
  • Its instant, no need to wait till settlement.

Risks with bitcoins

  • Its value risk, bitcoins are volatile in value, it can change its value upto 50% up or down per day.
  • Storage , if you use unsafe computer or can easily be socially engineered than you may end up losing all bitcoins assets
  • Since bitcoins are irreversible, any counterparty If not honest can cheat with tangible and intangible product or service.

What are bitcoin Wallets?

  • It’s a software that resides on computing devices, web or hardware .
  • It allows you to store your bitcoins
  • It allows you to work with Bitcoin network to send and receive the money.
  • You own your bitcoins by keeping safe your private key. Private key is a digital signature  that no one can forge or fake
  • Since you are the only one who owns the password , there is no reset or recovery  possible so one need to secure private key and password at all times, you have total control and hence you are responsible
  • Software wallets on your smartphone or computers  are connected with internet so can be compromised
  • If you don’t want to get into the hassle of keeping your private key or password safe you can keep your bitcoins  on  web based bitcoin exchanges , the only issue with bitcoin exchanges are the they will keep  a certain commission on each transaction  and unlike banks they are least responsible in the event of hacking or internet heist so No insurance
  • Hardware based bitcoin wallets are safest , as these are not connected with internet  , but you need to keep them safe physically.

What is a blockchain

  • Bitcoin is a protocol for transferring value over the internet , it involves a Network of computers  around the world  verifying transactions in a shared public ledger
  • Bitcoin miners use an obscene amount of computing power to verify and secure the transactions.
  • Bitcoin miners solve special mathematical problems  to add and record transactions  to bitcoin publicly shared ledger  , it is called “blockchain”

Stay updated with this , we will soon share another blog which will tell you about the process of mining , tools that you would require, from where you should buy it from  and where exactly you can spend the bitcoins.

Please also read about Ethereum

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