We are betting that you have heard of bitcoin, even if you did not understand what it is about. We have put together this beginner’s guide to understanding Bitcoin so you can get started with a clear picture of what you are getting into.
Understanding Bitcoin: What is bitcoin?
We asked a leading Bitcoin expert, Tim Akinbo, how he would explain Bitcoin to a lay person. His reply:
I will describe bitcoin as magical internet money. No seriously, I would define bitcoin as a digital currency that (like cash) anyone can directly exchange with another without the influence of an institution like a bank or government.
Bitcoin is an electronic currency that operates without any centralized authority or banks. So, there is no one server or group of servers from which Bitcoins are created or managed. To borrow a terminology from Muhammadu Buhari, Bitcoin belongs to nobody and to everybody.
Bitcoin belongs to nobody and to everybody
This decentralized nature of bitcoin, plus the advanced cryptography involved in the creation and transmission makes it quite secure as a digital currency. Bitcoins have both a public key and a private key and each one has a cryptographically generated 64-digit address. Technical people will understand that. if you are not technical, it is enough to know that this is high-level digital security.
How To Start
To start off using bitcoins, you need to create your bitcoin wallet, which is a simple matter. We will get to how to choose a wallet later.
How To Get Bitcoins
After creating your wallet, you need to get bitcoins in it. There are basically four ways to get bitcoins:
- You can mine them – you know, like miners, expect this time electronically
- Receive bitcoins as payment for goods or services.
- Purchase bitcoins at a Bitcoin exchange.
- Receive them from someone you know.
Mining of bitcoins is an intensive task that requires serious computing power. All that advanced cryptography we mentioned earlier means that you have to put in a lot of work into mining bitcoins. It is not for the fainthearted and you probably should not get into it at this time. The overheads you will require simply will not be worth it.
So, if you are not mining bitcoin, the options left for you are all about transacting/trading them. Buy and sell, receive and give. We are not sure that anyone has been known to give out bitcoins though, especially now that the value has gone up through the roof.
Bitcoin Mobile Wallets
Once you have bitcoins, you can pay for goods and services using a bitcoin wallet on your smartphone. There are a number of bitcoin apps available for Android, Windows Phone, BlackBerry smartphones and iPhones. As with all other things that involve money, be sure to do your research before making a decision as to which you will use.
One of them is Bitcoin Wallet. Others include, but are not limited to: Breadwallet, Coinbase, Simple Bitcoin, and Electrum. Search for these and more in your smartphone’s app store.
There are tons of exchanges that allow individuals and corporations in various jurisdictions they cover to trade bitcoin and other cryptocurrencies. Some of these include Bitflyer (Japan), Bithumb (S. Korea), Golix (Zimbabwe) and international ones like Bitstamp and Kraken.
Here is a curated list of some of the most popular Bitcoin wallet mobile apps.
Can I make money with Bitcoin?
Yes; you can. People are already making money with Bitcoin. In the last few months, the value of bitcoin has gone up in amazing way. However, note the following:
- Bitcoin is very volatile. The same way its value has jumped up in recent times, its value has taken a dive before. If you are looking to make money with bitcoins, it is not a bad idea to treat it like a high-risk venture.
- Bitcoin transactions are irreversible. If you pay or send an amount to a wrong vendor, that money is gone. Remember that there is no regulatory body or centralized control.
- While bitcoin uses advanced cryptography, you need to take your security serious, as with any other digital transaction. For starters, be sure to use a very strong password.
- Lastly, do not forget that bitcoin is a currency, not an investment scheme. While its volatile nature allows you to make money off it – pretty much like stocks – that is not its primary purpose. This is very key in understanding bitcoin.
That’s it on this quick guide to understanding Bitcoin. Hopefully, you have a better grasp of what it is about now and can make informed decisions.