What is Bitcoin?
Bitcoin, launched in 2009, was the first of a new kind of asset called cryptocurrency - it is a type of money that is completely virtual. What does that mean? It is a decentralized form of digital cash that eliminates the need for traditional intermediaries like banks and governments to make financial transactions. If there is no third party to make the transaction, how do we trade with bitcoin? We use a decentralized ledger system, known as a blockchain. Blockchain is a collection of blocks, in each block, there is a collection of transactions.
How does Bitcoin work?
Bitcoin is the world’s first completely open payment network which anyone with an internet connection can participate in. Bitcoin was designed to be used on the internet and doesn’t depend on banks or private companies to process transactions. Every single transaction is recorded on the blockchain.
Blockchain is a system of recording information in a way that makes it difficult or impossible to change or hack the system. Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger.
Blocks are files where data pertaining to the Bitcoin network is permanently recorded. Thus, a block is like a page of a ledger or record book. Each time a block is ‘completed’, it gives way to the next block in the blockchain. A block is thus a permanent store of records that, once written, cannot be altered or removed.
Is Bitcoin trading secure?
Data that makes up the signature can just be read and copied by any computer, so how do you prevent forgeries?
Public key infrastructure (PKI) is used to manage identity and security on internet communications. The core technology enabling PKI is public-key cryptography, an encryption mechanism that relies upon the usage of two related keys, a public key (pk) and a private key (“secret key”, sk). These two keys are used together to encrypt and decrypt a message.
What one key does -> The other will validate
The Public one encrypts -> The Private one decrypts
The Private signs digitally -> The Public one verifies the signature
The Private one authenticates -> The Public one verifies the authentication
Where to store my Bitcoins?
Each Bitcoin is a computer file stored in a digital wallet on a computer or smartphone. People can send Bitcoins to your digital wallet, and you can send Bitcoins to other people.
A digital wallet (or e-wallet) is a software-based system that securely stores users' payment information and passwords for numerous payment methods and websites. Bitcoins can be stored in two kinds of digital wallets:
- Hot wallet: Digital currency is stored in the cloud on a trusted exchange or provider, and accessed through a computer browser, desktop, or smartphone app. Basically, a hot wallet is connected to the internet while a cold wallet is not. But you need a hot wallet to download bitcoins into a portable cold wallet.
- Cold wallet: An encrypted portable device much like a thumb drive that allows you to download and carry your bitcoins.
Benefits of paying with Bitcoin.
- User Autonomy
- Peer-to-Peer Focus
- Elimination of Banking Fees
What to do after buying Bitcoin?
You can hold on to your Bitcoin with the expectation of it increasing in value, you can also store your BTC safely on your account or in your crypto wallet.
You can trade Bitcoin for other cryptocurrencies.
You can send it to anyone and anywhere with their Bitcoin address.