A Complete Guide To Bitcoin – The Biggest Cryptocurrency
Bitcoin is a digital currency that eliminates the need for central authorities such as banks or governments. It removes the need for third-party involvement in financial transactions. Bitcoin has since become the most well-known cryptocurrency in the world. Today, it is trusted by millions of crypto users who buy, sell, swap or invest in Bitcoins.
Bitcoin is the world’s first cryptocurrency that has revolutionised the world’s financial system. Since its appearance in 2009, Bitcoin has been enjoying growing acceptance in the mainstream digital economy and is hailed to be the world’s next big currency. As a virtual currency, it is designed to operate as digital cash that is not governed by any central authority.
The following sections will answer all your questions about Bitcoin.
Table of contents
What Is Bitcoin?
Bitcoin (BTC) is a digital asset that uses peer-to-peer technology to facilitate payments on a decentralised network. It operates without any central control or the oversight of governmental institutions. Thus, anyone in the world can send a bitcoin to another without the involvement of an intermediary.
Who Created Bitcoin?
The history of Bitcoin is a mystery of its own because the identity of Bitcoin’s creator is still unknown. The first Bitcoin was mined on January 3 2009, by a person or a group of people who used the pseudonym ‘’Satoshi Nakamoto”.
Several months ago, Nakamoto published a white paper called “Bitcoin: A Peer-to-Peer Electronic Cash System”, through which he introduced the readers to the world of cryptocurrency. The paper outlined how Nakamoto had created a peer-to-peer protocol that was cryptographically secure.
13 years later, it is still unclear who exactly Nakamoto was, and no one really knows the origin of the cryptocurrency.
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What Is the Purpose of Bitcoin?
Bitcoin is a form of digital money that was created to send and receive money over the internet without the need for central authorities. It is based on the blockchain network that operates on a cryptographic protocol. The goal behind creating Bitcoin was to create a currency that is free of geographical boundaries or the regulations imposed by financial institutions all over the world.
How Does Bitcoin Work?
Bitcoin works on the principle of cryptography which involves using hidden codes to secure information. The Bitcoin network is powered by a blockchain, which is a decentralised and distributed public digital ledger of transactions organised into encrypted “blocks” of data and ‘chained’ together. To prevent tampering, the blockchain remains immutable and irreversible.
The technology creates a permanent record of each transaction in chronological order that is distributed across the entire network of systems on the blockchain. The transactions are validated by using the Proof-of-Work consensus mechanism that lets the members of the network mine Bihttps://navi.com/blog/guide-on-bitcoin/tcoins and confirm new transactions as well.
The PoW mechanism prevents previous blocks from getting modified while validating new subsequent blocks. This highlights the central function of the Bitcoin network – transferring tokens from one crypto user to another without the need for any intermediary.
What Is Bitcoin Mining?
Bitcoin mining is the process of creating and adding new blocks on the blockchain network for rewards in the form of Bitcoins. It is also the method by which the Bitcoin network verifies transactions which is a critical component of the blockchain’s development and maintenance.
To mine Bitcoin, a crypto miner uses a computer to solve complex mathematical puzzles to validate blocks of transactions which are then updated on the blockchain ledger. Solving such problems requires advanced computer systems and access to huge volumes of uninterrupted electricity. Once transactions are validated on the network, miners are rewarded a certain amount of Bitcoin per block, which is released into circulation.
How to Get Bitcoin?
Here are some of the ways you can get Bitcoins:
- Earn Bitcoins: There are multiple online games and puzzles that offer Bitcoins as rewards to the players. You can play traditional casino games, sports matches, etc., to win and earn Bitcoins as a payout.
- Buy Bitcoin from the website: You can buy Bitcoin directly from the Bitcoin.com website by simply visiting the page and placing a buy order. However, please note that you are expected to create a Bitcoin wallet before investing in Bitcoins. Once you buy the desired number of Bitcoins, provide the address of your wallet, and the purchased number of tokens will be securely stored in your crypto wallet.
- Buy Bitcoins from crypto exchanges: Here are the four steps you can follow to purchase Bitcoin tokens:
Step 1: Choose your preferred crypto broker or exchange platform. Consider opting for one that offers an easy-to-understand interface and high security.
Step 2: Create an account on the crypto exchange by furnishing the required details. Verify your details to activate your account.
Step 3: Deposit cash into the account’s wallet to buy crypto coins. You can do so by using internet banking, UPI payments, debit or credit cards, etc.
Step 4: Once your account is funded, you need to place your cryptocurrency order. Select Bitcoin or BTC and input the number of coins that you wish to purchase.
Step 5: After you place the “Buy” order, the purchased amount of Bitcoins will be transferred to your crypto wallet. You may choose to use the exchange platform’s custodial wallet to store your purchased crypto coins. Or, you may provide the address of your existing online or offline wallet for more security.
How to Use Bitcoin?
Bitcoin has become an increasingly popular digital currency. Multiple online merchants are now accepting Bitcoin payments as several payment processing systems are now validating Bitcoin transactions.
You need your private key and address to access your Bitcoins. Different types of crypto wallets, which can be hardware-based or internet-based, allow you to easily and securely facilitate payments. To transfer Bitcoins while shopping online, you simply need to copy the Bitcoin address of the online merchant and paste it into the designated field on your crypto payment app.
Additionally, you can also trade Bitcoins on the crypto exchanges to get cash in return. They can take advantage of the rising prices of Bitcoin and generate lucrative returns by selling their crypto tokens just when Bitcoin prices hit an all-time high.
Regulation of Bitcoin in India
India’s stance on cryptocurrencies has considerably changed over the last few years. It all began in April 2018, when RBI banned entities from dealing with virtual currencies. However, the Supreme Court of India overruled the circular in March 2020, which put crypto users in a state of confusion.
Finally, on February 1 2022, Finance Minister Nirmala Sitharaman made two major announcements on cryptocurrencies:
- There will be a 30% tax levied on any income generated from crypto transactions.
- RBI will introduce a new digital currency.
No announcements were made regarding the legality of cryptocurrencies. So, technically, there is no ban imposed on the use of Bitcoins in India. However, the FM has also clarified that cryptocurrencies have not been legalised yet.
Risks of Investing in Bitcoin
Storing and dealing with Bitcoins is a risky business for crypto investors. Although it is one of the most popular forms of digital currency, there are still some risks associated with it that one should be aware of:
- Highly volatile: Just like any other cryptocurrency, Bitcoin’s value is incredibly volatile. Although it is a tradable asset, no assets secure the value of Bitcoin. It only has value because people are trading it. Bitcoin’s trading price faces constant fluctuations that can turn out to be drastic at times.
- Regulatory issues: Although Bitcoin is the world’s biggest cryptocurrency, it faces the risk of tighter regulation by global financial institutions. Most countries are debating the legality of the decentralised digital currency, with China imposing an outright ban on crypto trade.
- Scalability concerns: The Bitcoin network works on a Proof-of-Work mechanism to validate complex mathematical puzzles. However, one needs complex mining systems equipped with energy-intensive computers to solve the puzzles and add blocks to the chain. It’s a slow process which faces major scalability issues in terms of expenses and energy consumption.
- Dependent on a global payment network: Unlike traditional currencies, the Bitcoin cryptocurrency is based on a peer-to-peer global network that connects crypto systems from all around the world. There are chances that the global network might face technical glitches or malfunctioning electric grids that can take down the entire network.
- Security threats: One must store cryptocurrencies in crypto wallets that are secured by private keys. There are high chances of a security breach if hackers gain access to the wallets of a crypto exchange platform. Additionally, one might lose or forget the keys to his/her physical or offline wallets, which may incur huge losses.
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Final Word
Upon its introduction, Bitcoin became a revolutionary form of digital currency that no financial institutions or central authorities could govern. It was a currency that was made by the people, for the people. Today, it has grown to be one of the most successful digital assets in the world that is challenging the age-old norms of traditional currencies.
FAQs on Bitcoin
Ans: The Proof of Work (PoW) consensus mechanism is an algorithm that involves the members of a network solving complex mathematical puzzles in order to add new blocks to the Bitcoin blockchain. Crypto miners use the PoW protocol to validate transactions and get bitcoins as a reward.
Ans: The total Bitcoin supply has been locked at 21 million to avoid the pressures of inflation. As of June 2022, miners have created 19.07 million Bitcoins. This means that there are only 1.92 million Bitcoins left for mining.
Ans: A crypto wallet is a physical device or online service which stores the private keys or passwords for cryptocurrency transactions. It lets you store and retrieve your cryptocurrency coins by allowing you to send and receive crypto tokens easily.
Ans: Yes, you can buy or sell Bitcoins in India without having to worry about any legal repercussions. However, the Government has imposed a flat 30% tax on gains from crypto trading.
Ans: Yes, you can sell Bitcoin tokens by using a third-party crypto exchange broker. There are multiple crypto exchanges in India that will exchange your Bitcoins for cash at a given rate.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.
Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
