Bitcoin is popular cryptocurrency and it was also the first decentralized crypto in the world.
Due to its popularity, it’s also one of the most expensive cryptos to invest in.
But if you’re still asking yourself what is Bitcoin?- then you’re in the right place.
We’ve put together a simple guide to Bitcoin so you can learn how it works and why it’s become so big.
Most importantly we’ll also show you how you can also trade and invest in Bitcoin for yourself. Everything you need to know is here in this guide. Let’s get started!
What is Bitcoin
Bitcoin, which is also written as BTC, was the first cryptocurrency to emerge. It was created in 2008 by an anonymous man who said his name was Satoshi Nakamoto. Their identity still remains unknown today.
The idea was first published online in a document by Nakamoto, this document can also be called a ‘white paper’. This document suggested a way to launch a new currency system- called Bitcoin.
Bitcoin would be a new decentralized currency system as well as a form of digital money.
This white paper created shockwaves all over the world because this was a completely new idea and concept. Mainly because digital money was a brand-new concept for many. Plus Bitcoin as a digital currency would be fully decentralized, so not controlled by any Governments or banks.
However by January 2009, the BTC project was no longer just an idea. In fact on the 3rd of January the first Bitcoin was mined and the network came into existence.
Since then Bitcoin users can buy, send and receive Bitcoins. Users also have full control of their cryptocurrency, due to decentralization-there’s no bank interference at all.
Instead every BTC transaction is recorded on a virtual ledger which is known as the ‘blockchain’. We will explain this concept more in a moment, but the blockchain is accessible to everyone-it’s not controlled by one person or entity.
Since Bitcoins launch, the cryptocurrency has grown in popularity and has inspired the creation of other rival cryptos such as Ethereum and Litecoin. The fact that it remains so popular has helped to keep it in the number 1 spot in terms of market cap.
It also remains one of the most valuable coins, with a peak price being recorded in late 2017 of nearly $20,000.
Due to the cryptocurrency’s popularity. More and more businesses are now accepting BTC as a form of payment method.
What is the Bitcoin value and how it works
Now let’s take a closer look at how Bitcoin works exactly. Terms like blockchain and decentralization can sound complicated, but really they are simple concepts.
Let’s start with an example of how they are used when you buy a Bitcoin. For example, let’s say that you buy 1 BTC (Bitcoin). You are the complete owner of that BTC crypto. However, because cryptocurrency is a digital currency, the Bitcoin doesn’t physically exist– it’s only a digital ‘coin’.
Even when we talk about digital ‘coins’ you must remember that this is just a term. Because there are no real coins, there’re just rows of digital sale records and balances instead. So when you buy and ‘own’ any BTC, you don’t own coin but you just have the access to the Blockchain ledger.
That’s why if you wish to buy or sell your BTC, you need to complete the transaction digitally on the Bitcoin blockchain. The blockchain acts like a ledger which records every transaction.
What makes the blockchain different to a traditional bank ledger though, is that a bank’s ledger is centralised. This means that the ledger is not transparent because the bank has control of the ledger and the information is saved on the bank’s computer.
With Bitcoin though, the Blockchain ‘ledger’ is decentralised because no one has full control of it. It also means that anyone can view the transactions that take places on the blockchain, including you. This accessibility and that fact that not one person controls the blockchain is why Bitcoin is the first decentralized cryptocurrency.
Because the Blockchain is transparent, you can at anytime view the blockchain to see which transactions are happening. The one thing that you cannot see is who is responsible for each transaction.
This means that on the Blockchain you’ll be able to see the transaction details including the date and amount of Bitcoins sent, but you’ll not be able to see who is transferring to whom. Instead you just see a specific BTC ‘address’ which gets recorded in the ledger.
By not revealing user’s names, Bitcoin helps to keep the system decentralized and free from Government or outside interference. For instance, no bank or authority has the power to freeze you Bitcoin account. You have complete control of your digital money.
Out of all the cryptocurrencies on the market, Bitcoin remains the most valuable. Looking at numbers from CoinMarketCap, BTC remains the 1st most popular cryptocurrency in the world. This position has not changed in the decade since Bitcoins release onto the market.
Some key reasons for its ongoing popularity is because investors realise that it’s a valuable to coin to invest in. This is mainly due to the fact that it’s significantly higher value compared to other cryptocurrencies. For example, at the time of writing this article one single BTC is worth $6,938, a lot more than other digital currencies in the market.
Bitcoin is the only crypto to be valued in thousands of US Dollars, whilst rival Ethereum is still priced in the hundreds of dollars region.
However, because the crypto market experiences a lot of volatility, the Bitcoin price has fluctuated since its existence. For instance, Bitcoin reached its peak price in late December 2017 when 1 single BTC was worth an incredible $20,089!
This event caught the world’s attention and was featured in many news articles. Many people outside the cryptocurrency world couldn’t understand how something digital could be so valuable.
Yet it’s important to remember that the amount of Bitcoins is not infinite and there is a limited supply. Supply and demand plus the increased use of blockchain technology has kept the price of BTC high.
Since the price peak of $20,089, the value of Bitcoin dropped in 2018. Again this was mainly due to price volatility in the crypto market which affected the prices of most digital currencies.
However, for 2019 the BTC price stabilised and in July 2019, 1 BTC was worth $12,407. As till the end of 2019 prices have again remained around the $6,000 to $7,000 range with no big value drops.
Why Invest in Bitcoin
There are many reasons why people have invested in Bitcoin. One main reason is because it’s the oldest and most valuable cryptocurrency, this has allowed the currency to gain a strong group of supporters and investment.
This support of Bitcoin has helped to support the digital currency’s growth across the years and into the future. In turn this likely to boost the value of the coin in the next years.
Besides that, major companies have also realised that Bitcoin is not going anywhere and have started to accept Bitcoins as a form of payment. Companies include Starbucks, Microsoft and Whole Foods. This development shows that BTC adoption is increasing in a major way, which can only be a good thing for the coins value and investment.
Many people start investing in Bitcoin by just buying the BTC coins. If you decide to purchase any BTC for yourself you’ll fully own the coins and you can do what you like with them. For example, you can hold onto them or sell/transfer them when you wish.
If you buy Bitcoins though, you need to be aware that if the price drops, you will lose money on your investment.
However, there is another option for investors to get involved with Bitcoin and that is Bitcoin Trading.
What is Bitcoin Trading
Bitcoin trading allows you to trade on the Bitcoin price movements, to start you’ll need an online broker platform that offers CFD trading. Trading can be ideal, especially if you don’t have the amount of money needed to buy a BTC outright.
CFD stands for Contract for Difference and these instruments mimic the real life movements of assets like Bitcoin or other cryptocurrencies. Online CFD trading is very popular, especially because you can make money even if the Bitcoin price goes down.
You just need to open a trade that is based on the BTC price movement. So you need to consider whether the price will go up or down. If your prediction is correct, then you will make a profit.
For example, let’s say that you open a trade, and you believe that the Bitcoin price will go down,
then you’ll need to set your trade to ‘sell’. If your trading action matches what’s happened in the market, then you make money.
The same steps apply to if you think that the BTC price will go up, then you just need to set your trade to ‘buy’ instead.
The main thing to remember when trading though is that you don’t actually own any BTC, instead you’re just trading on the value of it. Because the crypto market is pretty volatile, it could be worth investing in Bitcoin by becoming a trader, particularly as it’s so hard to predict the market.
How to Buy Bitcoin
If you’re thinking of investing in Bitcoin, it’s up to you whether you want to invest in it by directly buying the coins or by trading in Bitcoin. That’s entirely your decision of what suits you the best.
Should you decide to just buy and fully own Bitcoin, then you’ll need to go to a coin exchange to make your purchase. Some examples of key exchanges include Coinbase and Coinmama. Here it’s possible to directly buy your chosen amount of BTC using a credit card or via bank/wire transfer.
If you use these exchanges though it’s important that you have a secure digital wallet where you can store your purchased BTC. This is to protect your coins against hackers who might try to steal your Bitcoins.
Another good exchange option is eToroX. This exchange was launched last year by the online broker eToro. With eToroX it’s possible to buy Bitcoin directly on the platform and save the purchased coins in their secure eToroX wallet.
To get started you just need to sign up to the eToroX app and register yourself. For security reasons you’ll need to have your account verified which the customer support team will help you with. Verification is important so your identity can be authorised, this helps to protect against fraud.
Once these steps are complete you’ll be able to log into the eToroX wallet and start making your purchase.
If you want to invest in Bitcoin by trading instead, then you’ll need to find an online broker to open an account with. Let’s take a closer look some of these broker platforms now:
To get started with trading you’ll need a regulated online broker to open an account with. There are many options out there, but what’s important is that you only use a fully regulated broker.
Regulation means that a broker is authorised to operate as a broker service and is licenced by an official regulation authority. These authorities make sure that brokers also follow strict financial rules that are put in place to protect your and other traders against fraud.
The brokers listed here are fully regulated so you can be reassured that they’re fully secure to open a trading account with. It’s also worth mentioning that the brokers featured all offer a free demo account too. This is a great tool to use if you wish to test the broker’s platform before trading with a real ‘live’ account.
Let’s take a quick look at some of the best brokers:
Invest Bitcoin in eToro
With millions of users all across the world, eToro is a giant among the online brokers. They are also famous for offering social trading. That’s because their trading platform is designed to help new traders learn to trade from other successful members.
Another unique social tool includes the CopyTrader tool which lets you automatically copy the trades of others as well as an active social newsfeed.
It’s possible to start trading BTC as a CFD with them. You just need to sign-up for an account and follow the steps to have your account verified. The customer support team will be happy to help you with this. Once this is complete you’ll be able to start trading BTC.
Just make sure you are logged in to your account and search for BTC or Bitcoin in the asset search bar which is located at the top of the page.
Once your search is complete the Bitcoin page will appear. From here you can see the latest newsfeed comments on Bitcoin from other eToro traders, as well as charts showing price history. To open and place a trade, just click on the ‘Trade’ button that’s in blue.
From here the trading window will open and you can set up the amount you wish to trade. (You can also set up the stop loss and stop limits.) When that is done you must decide whether you want to place your trade to buy or sell, based on what you believe will happen to the Bitcoin price.
When all these steps are completed the trade will open for you.
Invest Bitcoin in IQ Option
IQ Option is another leading platform who is fully regulated and available to many users throughout the world. However, they are very well known for offering one of the lowest minimum deposits on the market, to start trading with IQ Option you just need to deposit from $10!
This is a great amount if you’re looking to invest in Bitcoin with a smaller amount of capital. The broker also offers a well-designed and simple to use platform, which is also available as a trading app. The trading app can be downloaded for free from the Apple and Google Play stores.
You’ll need to register for a trading account with IQ Option to become a member, and because it’s a requirement of regulation the broker will also need to verify your account.
To find Bitcoin on IQ Option, you can easily search through the cryptocurrency options from the platform menu. Just search for and choose Bitcoin or BTC.
When you have found the Bitcoin asset the trading window will appear with the full Bitcoin market overview. From here you’ll see the ‘buy’ and ‘sell’ buttons.
Decide which one you’d like to choose and click on the selected button. The next steps will prompt you to set up the details of your trades. When you’re finished with everything and happy with your selection, just confirm the order.
What is Bitcoin Mining?
Bitcoin mining is crucial to keeping the Bitcoin system up and running, as well as making sure that the blockchain functions correctly.
The process has been given the name mining, because the action helps to ‘mine’ new Bitcoins from the blockchain system. And due to how the blockchain operates, mining is really a by-product of the blockchain transaction approval process.
Bitcoin mining is done by miners who run very powerful computers which require a lot of energy and electricity to function. The main job of the miner to compete against other miners on the network in solving equations generated by the blockchain.
Let’s break this down in a simpler way:
A new Bitcoin transaction has been recorded on the Bitcoin ledger, which we know as the blockchain. To update the blockchain a random equation is created by the system.
Miners then need to compete against each other to solve this equation using their computer system. The more powerful a miner’s computer is, the more answers/guesses it’ll suggest each second.
If you manage to get the correct answer you’ll earn Bitcoins as a reward, you’ll also be able to update the next transactions on the blockchain.
The amount of Bitcoins that a miner receives as an award is 12.5 at the moment. However, the rewards will be reduced by half in 2020 to 6.25. This is called a ‘halving’ and is a scheduled event to help maintain and limit the supply of Bitcoins.
It’ll be interesting to see if the event next year will affect the amount of Bitcoin miners. However,
the fact that so much power and equipment is needed to become a Bitcoin miner has already limited mining opportunities to a select amount of people.
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