Understanding the basics of Bitcoin

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By now, most of us would have likely heard about Bitcoin and how it’s changed the lives of investors around the world. Hence you may be tempted to get in on the entire crypto game – something which is well and good.

However, before jumping in with both feet, there are a few things that you should know about trading cryptocurrencies.

Let’s start with the basics – what are cryptocurrencies?

What exactly are cryptocurrencies?

To put it simply, cryptocurrencies are a form of intangible digital currencies that do not have a physical presence. Bitcoin or BTC is the most popular form of cryptocurrency on the market. Being the oldest crypto, Bitcoin at the point of writing is also the most expensive crypto of all time.

For simplicity sake, we will be referring to the most popular forms of cryptocurrency in this article.

Bitcoin has seen an explosion in popularity over the last decade with institutional investors and even governments taking an interest in the new technology.

The cryptocurrency industry is entirely unregulated and cryptos such as Bitcoin are not released by any single authority. Instead, Bitcoin is obtained through mining i.e. the validation of blockchain transactions using a high-powered computer.

Because of this, cryptocurrencies are largely unaffected by changes in government policy or geopolitics. Additionally, trading in Bitcoins offers buyers and sellers a form of pseudo anonymity – a trait which has made the currency extremely popular with users on the deep web.

Bitcoins were first created by the mysterious Satoshi Nakamoto – an elusive computer programmer who has kept his/her/their identity a secret. Nakamoto has released numerous articles alluding to Bitcoin and its purpose as a currency that is unaffected by inflation.

Now that you’ve gained an understanding of cryptocurrencies, let’s take a look at what you’ll need to store it.

What are crypto wallets?

E-wallets. Hot wallets. Cold wallets. There are a ton of different types of crypto wallets and it may be overwhelming at first.

Basically, crypto wallets allow you to store a variety of cryptocurrencies that range from Bitcoin to Ripple to Ethereum, Crypto wallets can be divided into either hot or cold wallets which have their respective pros and cons.

Hot wallets are online wallets offered by service providers that can be accessed from anywhere at any time. They offer great flexibility but are known to have issues with security – thus making them suitable for storing only limited quantities of cryptocurrency.

Cold wallets on the other hand, store your crypto keys on a device such as a USB stick or hard drive. While less mobile, they are significantly more secure and can be locked away in a safe for better security.

How do you get Bitcoin?

As you know, Bitcoin can be obtained via crypto mining. Given how complex the blockchain has come over the years, it is no longer feasible for an individual to start up his/her own mining operation.

In order to be remotely profitable, the miner would need an unlimited supply of cheap electricity, hundreds of thousands in expensive mining equipment, and plenty of space.

A more affordable method of getting Bitcoin would be through buying the cryptocurrency online via an exchange. True to their namesake, exchanges accept fiat currencies in exchange for cryptocurrencies such as Bitcoin.

Signing on with a crypto exchange will allow you to buy or sell the cryptocurrency of your choice. A word of caution before you get started: the unregulated nature of the crypto industry means that you should only ever work with trusted exchanges.

All too often, less than exemplary crypto exchanges have collapsed or went under, taking all of their client’s crypto holdings with them and leaving the victims with no legal recourse.

Cryptocurrency trading is both exciting and extremely high-paced. Entire fortunes can be made or lost within just a few seconds when trading crypto.