- 1 What is Bitcoin & History
- 2 Why invest in Bitcoin long-term or short-term & how to get Bitcoin
- 3 Bitcoin mining
- 4 Bitcoin forks
- 5 Bitcoin faucets
- 6 Bitcoin news
- 7 Bitcoin wallets
- 8 Bitcoin FAQs
What is Bitcoin & History
Bitcoin is a peer-to-peer electronic cash system. Put simply, Bitcoin is the world’s original digital money, however it shares many similarities with gold. The most striking resemblance is that it is a tangible asset that can be used as a short or long-term investment vehicle. Bitcoin can also increasingly be used to pay for goods and services, with a growing number of countries worldwide starting to adopt it as legal tender.
What does Bitcoin aim to achieve? How does it work?
In its purest form, Bitcoin was designed to be decentralised currency, operating without the oversight of a central bank or overarching administrator. Bitcoin’s consensus network was also designed to create a common, shared public ledger that was immune to human error and manipulation from cyber-criminals.
The first step for any new Bitcoin user is to find a good Bitcoin wallet. Secondly, the wallet needs to be funded; this can be done by buying Bitcoin or by receiving Bitcoin from another Bitcoin wallet.
Bitcoin payments are called transactions. A transaction is a transfer of value between Bitcoin wallets that gets registered on the public ledger in the Bitcoin blockchain. The balances of Bitcoin wallets update automatically after every transaction.
Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing mathematical proof they have derived from the owner of the Bitcoin wallet. The signature also prevents the transaction from being altered by a cyber-criminal once it has been issued.
Why invest in Bitcoin long-term or short-term & how to get Bitcoin
Bitcoin is one of the most volatile assets you can trade in 2019. It has been known for Bitcoin’s price to rise or fall by as much as 10% within a single hour. Given its lack of global regulation and the fact that it isn’t yet backed by an influential government, Bitcoin remains something of a ‘bubble’. No-one really knows what the future holds for Bitcoin, but there is still every chance that it will be the mainstream currency of the future.
Similar cryptocurrencies to Bitcoin
Founded in 2011, Litecoin was one of the first altcoins to follow the success of Bitcoin. It has long been referred to as ‘digital silver’, with Bitcoin known as ‘digital gold’. It was the brainchild of MIT graduate Charlie Lee and also uses a proof-of-work algorithm for processing transactions and mining blocks. However, Litecoin was designed to have a quicker generation rate for new blocks, resulting in swifter, more efficient transaction confirmations.
One of the newest open-source cryptocurrencies, Zcash was launched in 2016. The most common analogy Zcash likes to use to compare and contrast it with Bitcoin is that “if Bitcoin is HTTP for money, Zcash should be known as HTTPS”. Zcash founders have focused heavily on providing additional security and privacy for transactions made on the Zcash blockchain, protecting a transaction’s sender, recipient and its amount.
Dash is another alternative to Bitcoin, promising even greater anonymity. The Dash ecosystem operates on a decentralised mastercode network, ensuring all transactions are virtually untraceable.
Exchanges and brokers that offer Bitcoin
As noted in our eToro review, you can start trading Bitcoin and the other cryptocurrencies that make up the top 11 digital assets in 2019. If you sign up to eToro, you’ll quickly realise it is a CFD trading broker, which means that traders speculate on the price of Bitcoin rather than physically buying and selling Bitcoin.
Our 24option review labels it one of the most well-known CFD brokers in the industry. Sign up to 24option and you’ll have access to trading the underlying price of Bitcoin, as well as Bitcoin Cash, Ethereum, Litecoin and several more.
If you prefer to physically buy Bitcoin, there’s no better and simpler Bitcoin exchange than Coinbase. Our Coinbase review reveals that it also doubles up as a Bitcoin wallet, allowing easy access to your Bitcoins on your smartphone or desktop as a Coinbase member.
How volatile is the price of Bitcoin?The price of Bitcoin has been notoriously volatile since its 2009 inception, with more upswings than downswings. But in the last 12 months, Bitcoin has experienced the mother of all downswings. Since 2015, the daily volatility rate of Bitcoin has been around 5%. That’s a huge figure when you consider some Bitcoin traders are making 5% daily returns on their investments. However, there are also investors making 5% daily losses on their investments.
There is no denying that the price of Bitcoin is also sensitive to news releases. News stories or press releases regarding government or bank views on Bitcoin and the cryptocurrency industry as a whole can lead to a downward spike; as can news of security breaches or cyber-attacks on Bitcoin exchanges or wallets.
What can you use Bitcoin for other than investing?
Although many owners and investors of Bitcoin prefer to hold on to their cryptocurrency as an asset, a growing number of people are enjoying spending it. Let’s take a look at some of the most popular use cases for Bitcoin as a legitimate payment method:
- Household consumables
- Fashion accessories and merchandise
- Computer software (Microsoft accepts Bitcoin payments)
- E-commerce products (via Shopify)
- Travel services i.e. flights, hotels and rental cars (via CheapAir.com)
- Food and takeaways
- Coffee (via CryptoCoffee)
- Wine and other alcohol
- And much more
Bitcoin forksA Bitcoin fork is what happens when a blockchain diverges into two potential paths forward. As Bitcoin is based on open-source software, which anyone can contribute to, permanent changes to the rules of the Bitcoin blockchain can only occur on the consensus of a majority within the Bitcoin community; if consensus is not achievable, the blockchain splits, or forks.
For example, the Bitcoin symbol BTC represents the original Bitcoin. However, as Bitcoin miners disagreed on the way forward in terms of increasing the size of blocks on the Bitcoin blockchain from 1MB to 8MB – to increase the number of transactions that can be processed in a single block and scale up the network – the Bitcoin blockchain forked, creating a second Bitcoin cryptocurrency, known as Bitcoin Cash (BCH).
There has since been a further Bitcoin fork, creating another cryptocurrency known as Bitcoin Gold (BTG). It differs to the original BTC in that it offers replay protection and displays unique address formats for users. Its proof-of-work algorithm is also Equihash rather than SHA-256.
Put simply, Bitcoin faucets are a kind of reward system for Bitcoin owners. They are usually created in the form of a website or app, dispensing ‘rewards’ in the form of satoshis when you complete tasks or captcha forms, as requested by the faucet. Remember, a satoshi is worth one-hundred-millionth of a Bitcoin, so it is hardly megabucks. Nevertheless, it’s free Bitcoin for doing very little, so why wouldn’t you do it?!
Don’t forget – if you are keen to keep up-to-date with the latest Bitcoin trends and news updates, visit our Bitcoin news section for articles on analysis and predictions about the future for Bitcoin.
Featured image source: Pixabay