This guide is designed to teach you everything you need to know about Bitcoin so you’re ready to take your own crypto journey. For a more general guide to cryptocurrencies, check out our Ultimate Beginner’s Guide to Cryptocurrencies.
What is a Satoshi?
A millionth of a Bitcoin – 0.00000001 BTC – is called a Satoshi. You may have heard of the creator of Bitcoin, Satoshi Nakamoto, the illusive person or people who are still yet to come forward as the inventor of the world’s first cryptocurrency. The Satoshi, the smallest possible denomination of Bitcoin, was named after it’s mysterious creator and is often used as a measurement when comparing other cryptocurrencies to Bitcoin.
So instead of a single source verifying every single transaction on the network there are many people, called “miners” that verify the transactions.
For more information on how the blockchain and mining works, check out the video below for a great demonstration:
One of the most popular ways of mining Bitcoin today is to use an ASIC (Application Specific Integrated Circuit) mining rig. These are built specifically for mining and are much quicker and more energy efficient that standard processors. In the early days of Bitcoin and other cryptocurrencies it was possible to use a desktop computer or laptop to mine Bitcoins, but due to the way Bitcoin is designed it has become more difficult to do this and so specific, sophisticated hardware is now needed to make mining worth while. But why would you mine Bitcoin in the first place?
Bitcoin has a built in reward system that rewards miners with Bitcoin for verifying the transactions on the network. The amount that is rewarded and the difficulty of verifying a block changes over time. The rewards are becoming smaller and the task of mining a block is becoming increasingly more difficult. This is why mining is becoming more and more expensive to get into so many people join pools of miners that all work together over the network to verify block and then share the rewards.
So now you know what Bitcoin is, where it came from, roughly how it works and a little bit about why it’s such a big deal, but why would you buy some and how can you make money with Bitcoin?
Well a lot of people, from hedge fund managers to your next door neighbour, are starting to see the value in the technology and the potential to make a lot of money from investing in it. Whilst it still isn’t really the currency that it intends to be, it has paved the way for other currencies and innovative blockchain projects, making it the cornerstone of the crypto world and a potential investment opportunity like the world has never seen before. The late 2017 increase in price elevated it into the mainstream public eye, creating huge public awareness and made some people very rich. If you’re looking to be another one of those people then we advise you to do a lot of research first, not only into Bitcoin but into other cryptos as well. Use the rest of Cryptos Decoded to find information on many of the most interesting altcoins available today as well as Bitcoin itself.
So, let’s say, after a bit more research into the financial side of Bitcoin you decide you want to buy some.
If you’re not looking for a variety of in depth methods and just want the best way to buy Bitcoin then we’d recommend signing up for a website called Coinbase, that we rate as the best Bitcoin exchange for beginners.
Coinbase is an exchange where you can trade fiat currencies (USD, EUR, etc) for cryptocurrencies, specifically Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH) and Litecoin (LTC). It has a simple sign up process, is easy to use and is one of the most popular exchanges available today.
If you sign up using our referral link, not only do you support Cryptos Decoded but you’ll also receive $10 worth of Bitcoin for FREE when you make your first purchase.
Read More: Coinbase Review – Is Coinbase Safe?
What you need is a Bitcoin wallet.
As you can probably tell, a Bitcoin wallet isn’t an actual wallet. The best way to think of a Bitcoin wallet is like a keyring with a set of keys. Your money is always on the Bitcoin network but with your set of keys you can access it from a very secure part of the network that only you can access.
If keeping your keys on a piece of paper doesn’t sound like your kind of thing, then you can buy a hardware wallet. A hardware wallet is essentially a USB stick that will very securely store your keys. This is what we recommend and think that if you’re planning on keeping substantial sums of Bitcoin or any other currency then a hardware wallet is a must! The only way other people can access your money if it is stored on a hardware wallet is if they physically steal the wallet. So, make sure you keep it safe!
There have been instances, such as the hacking of an exchange called MtGox where people have lost fortunes in Bitcoin due to the insecurity of the exchange. In the case of MtGox, they lost 850,000 Bitcoins.
Bitcoin is completely decentralised – This basically means that there will never be an inflation problem as there is no one party in control of the money. It means that if things start to go bad the government can’t print more Bitcoin to inflate the price. It will give confidence to people storing money as there will be no need for banks to hold it, which means there will be no risk of losing it all if another financial crisis hits like the one in 2008.
(Almost) Instant, (almost) free transactions – No more waiting 3-5 business days for cheques to clear. No more paying substantial fees and waiting days for international payments to go through. Bitcoin doesn’t discriminate, because there is no-one in control of Bitcoin. It’s just maths and it just works.
Hugely secure – Bitcoin is, by design, more secure than any other payment system on the planet. Without the need of additional layers of cryptographic encoding it provides a system that gives people freedom and security like no other payment system today.
Volatility – Whilst a very volatile currency is great for investors and traders, it doesn’t make for a good currency. Imagine buying a car with Bitcoin with today’s volatility. By the time you’ve driven home the car could be worth 25% more or less than what you paid due to the volatility of the crypto market. For Bitcoin to become a fully functioning currency it needs to stabilise to be able to be used as a wide spread currency by the masses. This will happen as more people being to use it.
Fees and number of transactions – Due to the high number of transactions per second (tps), Bitcoin’s fees have recently increased to almost unusable figures. There are plans to alleviate the stress on the network during 2018 which will help to reduce fees so this might not be as much of a problem in the near future. Hopefully these additions to the network will also be able to increase the amount of transactions per second. At the moment Bitcoin can handle 5-10 transactions per second whereas VISA is capable of a theoretical 24,000 tps!
Exchange Hacks – Whilst Bitcoin itself is hugely secure, there is always the potential that the exchanges themselves will be the victim of attacks. This has always caused the market to crash as the media and the ignorant slate Bitcoin for lack of integrity. Secure exchanges are beneficial for everyone and seeing features such as Coinbase’s “vault” is a step in the right direction but it will always be a problem.
