What is Bitcoin?
If you've been following tech news, you likely heard of Bitcoin even without knowing what it is. Bitcoin is the original cryptocurrency. It is theoretically untraceable and not tied to any real-world financial institution. Even though the currency has been associated with illicit activity, it can be a valuable tool.
How Bitcoin Works
Bitcoin uses blockchain technology to create a permanent and unchanging record of transactions. Participating computers perform computations to solve cryptographic puzzles or calculations to get new Bitcoins, or digital vouchers representing the currency. This process is called mining.
Only 21 million coins can ever be in circulation. This scarcity is an intentional property of the currency, specifically to prevent an artificial influx that would devalue it. As more Bitcoins come into circulation, people can exchange them for goods and services.
Users on the network receive a private key for their login and a public “wallet” key which they provide to the intended recipient of the Bitcoins. The block chain is visible to everyone on the Bitcoin server, but there is no personal identifying information.
Bitcoin transactions can theoretically take place instantaneously and with no fees from financial institutions attached. These advantages make it a viable method of money transfer for people without bank accounts or IDs.
Bitcoin also has seen an investing boom, similar to the foreign exchange, or forex, market. People can buy and sell Bitcoin for currencies of their choice to merchants all over the world.
Getting Started with Bitcoin
If you’re interested in starting with Bitcoin, you’ll first need a Bitcoin wallet. This is a client program used for storing your private reserve of Bitcoins and is linked to a 30-character alphanumeric string.
After downloading a wallet program, you’ll then need to get some Bitcoins. You can do this by buying them from an exchange as an initial start. Usually, they’ll be referred to as “satoshis” after the creator of Bitcoin, Satoshi Nakamoto.
You can also go to a marketplace like Purse where you can exchange your services for Bitcoins. Makes sure your information is secure and be wary of scams. Read reviews or ask questions on forums to determine the legitimacy of a provider.
Bitcoin is completely anonymous. The only identifying information you leave is the record of your wallet address. However, malicious users could take that address and link it to your IP address, finding your computer and location that way.
It’s best to change your wallet’s address periodically, or even after every transaction. This way, no patterns can be detected.
Of course, never reveal your private key. This key, when used properly, would take billions of years for a computer to figure out on its own.
Finally, think carefully before conducting a transaction. Once you make a transfer with Bitcoin, it is utterly irreversible except by a consensus of the whole network. Know that in the past, Bitcoin has been associated with illicit activity, so err on the side of caution when doing business.
If you’re interested in getting into the world of cryptocurrency, Bitcoin is the place to start, because it was the first cryptocurrency that appeared on the Internet. It is relatively simple to use, offers complete anonymity, and can be a lucrative investment if you’re careful.