What is Bitcoin?
If you’re here, then you’ve heard of Bitcoin. It has been one of the most frequent headlines in the past year or so – as a get-rich-quick scheme, the end of finance, the birth of a truly international currency, as the end of the world, or as technology that improved the world. But what is Bitcoin?
In short, Bitcoin is the first decentralized money system used for online transactions, but it will probably be useful to dig deeper.
We all generally know what “money” is and what it is used for. The most significant problem observed in the use of money before Bitcoin is related to its centralization and control by one organization – the centralized banking system. Bitcoin was invented in 2008/2009 by an unknown creator who goes by the pseudonym “Satoshi Nakamoto” to bring decentralization of money on a global scale. The idea is that currency can be traded across international lines without hassle or fees, systems of checks and balances will be distributed around the world (not just on the books of private corporations or governments), and money will become more democratic and equally accessible to all.
How did bitcoin begin?
The concept of Bitcoin and cryptocurrency in general was created in 2009 by an unknown researcher called Satoshi. The reason for his invention was to solve the problem of centralizing the use of money, which relied on banks and computers, a problem that did not satisfy many computer scientists. Decentralization has been unsuccessfully attempted since the late 1990s, so when Satoshi published a paper proposing a solution in 2008, it was widely welcomed. Today, Bitcoin has become a common currency for Internet users and has given rise to thousands of “altcoins” (cryptocurrencies that are not Bitcoin).
How is bitcoin made?
Bitcoin is produced through a process called mining. Just as paper money is produced by printing and gold is mined from the ground, Bitcoins are created by “mining”. Mining involves solving complex mathematical problems about blocks using computers and adding them to a public ledger. When it started, mining only required a simple CPU (like in your home computer), but the level of complexity has increased significantly and now you need specialized hardware, including a high-end graphics processing unit (GPU), to mine Bitcoin.
How do I invest?
First, you must open an account on the trading platform and create a wallet; you can find some examples by doing a Google search for “bitcoin trading platform” – they usually have names that include “coins” or “market”. After joining one of these platforms, you click on assets and then on crypto to select your desired currency. Each platform has many indicators that are very important and you should make sure of them before investing.
Just buy and hold
Although mining is the most reliable and, in some ways, the easiest way to earn bitcoins, it involves too much hassle, and the cost of electricity and specialized computer equipment puts it out of reach for most of us. To avoid all this, make it easy for yourself, directly enter the amount you want to withdraw from your bank and click buy, then sit back and watch your investment grow as the price changes. This is called an exchange and takes place on many of the exchange platforms available today with the ability to trade between many different fiat currencies (USD, AUD, GBP, etc.) and different cryptocurrencies (Bitcoin, Ethereum, Litecoin, etc.).
If you are familiar with stocks, bonds or Forex, you will easily understand crypto trading. There are bitcoin brokers like e-social trading, FXTM markets.com and many others that you can choose from. The platforms provide you with Bitcoin-Fiat or Fiat-Bitcoin currency pairs, for example BTC-USD means trading Bitcoin for US Dollars. Track price changes to find the perfect pair as prices change; platforms provide price among other indicators to give you the right trading advice.
Bitcoin as a stock
There are also organizations that allow you to buy shares of companies that invest in bitcoins – these companies trade back and forth, and you just put money into them and wait for monthly payments. These companies simply pool the digital money of various investors and invest on their behalf.
Why should you invest in Bitcoin?
As you can see, investing in Bitcoin requires you to have a basic knowledge of the currency as explained above. Like all investments, there is risk involved! Whether to invest or not is entirely up to the individual. However, if I were to give advice, I would advise against investing in Bitcoin for the reason that Bitcoin continues to grow – although there has been one significant up-and-down period, it is very likely that cryptocurrencies in general will continue to grow in value by over the next 10 years. Bitcoin is the biggest and most well-known of all cryptocurrencies today, so it’s a good place to start and the safest bet right now. Despite the short-term volatility, I suspect you will find that trading Bitcoin is more profitable than most other businesses.