Friday, October 7

What is Bitcoin? A Simple quick Guide for Beginners

Bitcoin is a fully decentralized peer-to-peer electronic cash system that allows users to exchange value without the need for intermediaries. It is the first internationally adopted cryptocurrency network That records and confirms transactions through a public ledger called Blockchain.

Nowadays, if you are active in the world of investments, it is not possible to go days, or even weeks without hearing about Bitcoin or cryptocurrency in general. If you don’t hear it from folks around you, you can’t miss seeing it on social media, television, or from your favorite celebrities and others.

Truly, Bitcoin is a whole lot of things and in this place, you will get to know what Bitcoin entails and how to explore it.

Read Also: Best cryptocurrency to invest in 2022

What is Bitcoin?

Bitcoin is the first cryptocurrency that operates without any centralized body like a government or banks, it was created in 2008 by a man or group of persons with the pseudonym Satoshi Nakamoto back in 2008. However, the identity of Satoshi Nakamoto remains a mystery to date. Let’s take a closer look at some of the information we have on the creator. 

What is Blockchain?

Blockchain is a digital ledger that records information in a way that makes it possible for anyone to the altar. In another way of defining it, once data is saved on the blockchain, there is nobody, I mean absolutely nobody can manipulate or change it. 

Blockchain is generally made up of a single chain of separate blocks of information arranged in sequence. This simply means that blockchains are designed to record and store information including personal documents, contracts, or even transactions between people and organizations. 

Thanks to innovation, blockchain has since evolved into a separate concept and many blockchains have been created using the same cryptography algorithm as the original Bitcoin Blockchain.  Many people misunderstand this concept and sometimes refer to every blockchain like the one built on Bitcoin protocol instead of it as a technology. 

Who is Satoshi Nakamoto?

The question is rather an interesting one because no one isn’t asking this question. Everyone is looking for who is the creator of bitcoin and till now no one can boldly with fact comes out and say this is who Satoshi Nakamoto is. The name “Satoshi Nakamoto” was used to submit a Bitcoin whitepaper with the title “A Peer-to-Peer Electronic Cash System”  back in 2008, which was later published by a cryptography mailing list. 

The whitepaper that first introduced Bitcoin contains a complete roadmap of how to use the peer-to-peer network. It is important to understand that the Bitcoin whitepaper wasn’t the first idea for digital currency based on the fields of cryptography.

On January 3rd, 2009, Bitcoin was introduced with Satoshi Nakamoto mining the Bitcoin blockchain from block one, also known as the genesis block, which has a reward of 50 bitcoins (BTC). Satoshi proceeded to mine until his disappearance in 2010.

Satoshi Nakamoto was responsible for developing most of the early software such as Bitcoin private keys and the bitcoin protocol as the genesis block, which is the one that has a 50 Bitcoin reward.

Why did Satoshi Nakamoto leave? 

There is no straight answer to this question. Just as no one knows his identity, it is difficult to say why Satoshi decided to go off the radar. However, there are some hypotheses from crypto experts that might explain this. 

Some crypto experts opined that Satoshi lost interest in Bitcoin and abandoned the project due to the complexity of the coding involved in the protocol. They also believed there were some flaws in the protocol that needed to be resolved. 

Another group of experts agrees Satoshi is still actively involved with the project but under a different pseudonym. And others say Satoshi left due to his thought that bitcoin wouldn’t break through if he remain behind.

Although, before Satoshi Nakamoto’s disappearance, the pseudonymous character dropped a final message warning developer that the software is not all resistant to denial-of-service (DoS) attacks. 

“There’s more work to do on DoS, but I’m doing a quick build of what I have so far in case it’s needed, before venturing into more complex ideas. The build for this is version 0.3.19… Added some DoS controls. This is one improvement, but there are still more ways to attack than I can count. I’m leaving the -limitfreerelay part as a switch for now and it’s there if you need it.”

As Gavin and I have said before, the software is not at all resistant to DoS attacks. This is one improvement, but there are still more ways to attack than I can count. I’m leaving the -limitfreerelay part as a switch for now and it’s there if you need it,” the message reads. 

People Claiming to be Satoshi Nakamoto

Although the real identity of Satoshi Nakamoto is still unknown, several people have come out to claim his fame. However, no one has been able to prove beyond reasonable doubt that they are the mysterious creator of Bitcoin. 

Craig Steven Wright

Australian computer scientist Craig Steven Wright has claimed many times that is Satoshi Nakamoto, the Bitcoin creator. But is Craig Satoshi Nakamoto? 

To back up his claims, Craig provided a list of 145 wallet addresses containing some of the addresses used to mine BTC during the Satoshi era of 2009. 

Craig presented the list during his court battle with Ira Kleiman, the brother of the late David Kleiman, Craig’s former business associate. 

The list of addresses was quickly re-sealed by Kleiman’s legal team, but CourtListener had already published it, making it public knowledge. Some of these addresses were then used to sign a message calling Craig Steven Wright a liar and a fraud. 

“Craig Steven Wright is a liar and a fraud. He doesn’t have the keys used to sign this message. The Lightning Network is a significant achievement. However, we need to continue to work on improving on-chain capacity. Unfortunately, the solution is not to just change a constant in the code or to allow powerful participants to force out others. We are all Satoshi.”

Take note that the court filing wasn’t about Craig’s claims of being Satoshi rather it was about his business dealings with his former partner David Kleiman. 

Craig also registered a copyright for the Bitcoin Whitepaper in 2019. Afterward, he requested for every website that published the whitepaper to pull it down. This caused an uproar within the media community and led to more publications of the whitepaper.  

Dorian Nakamoto

In March 2014, Newsweek identified a man known as Dorian Nakamoto as the brain behind Bitcoin. The publication caused chaos among members of the crypto community as this was the first attempt made at discovering who the hell created Bitcoin. 

The updates displayed by the media have several similarities between Satoshi Nakamoto and Dorian Nakamoto as both shared Japanese networking. At last, Dorian said clearly that he had no connection with Bitcoin at all.

Nick Szabo

The third individual who might be Satoshi Nakamoto is a computer engineer and scholar Nick Szabo. 

Szabo came up with the concept of a smart contract in 1996 way before bitcoin was fabricated far back in 2008, He released a bitcoin precursor called Bit Gold. His case for being a bitcoin creator was made by Dominic Frisby, author of a book titled Bitcoin: the future of money. As stated by the author of the above book, Szabo shared the same writing style as Satoshi Nakamoto in the Bitcoin whitepaper. More so, both Szabo and Satoshi referenced Carl Menger, an Economist in their books. 

What We Know And Don’t Know About Satoshi Nakamoto

Satoshi Nakamoto is an interesting character as no one knows his identity. Bear in mind that very little in terms of facts is known about the Bitcoin creator and that’s because he hasn’t been identified yet. 

What We Know About Satoshi Nakamoto

  • Satoshi Nakamoto might be a group

Thirteen years ago, a person or group of persons called Satoshi Nakamoto released a paper that contained details of the Bitcoin software. Although the name is Japanese, the whitepaper was completely written in English. 

In the paper, Satoshi also used the words “we” and “I” at intervals to address himself which makes us believe there could be a team behind the pseudonym. 

  • The short public life of Satoshi Nakamoto

After the launch of Bitcoin in 2009. Satoshi regularly interacted with a group of developers on the BitcoinTalk forum, updating them on the progress of the new software. 

At this time no one cared about his identity as most of the people in the group were skeptical of the new idea. Satoshi continued to exchange information on the platform before they left for good.

His private email conversations with Mike Hearn and Garvin Anderson were later published in April 2011 when Satoshi claimed to have moved on to other things. 

  • Satoshi mined the first bitcoins

During the first year of the Bitcoin release, Satoshi Nakamoto mined about one million bitcoins. The coins are estimated to be worth about $55 billion in today’s market which is a lot of money for those behind the pseudonym. 

  • Satoshi BTC stack remains unclaimed

Interestingly, the 1,000,000 BTC belonging to acclaimed Satoshi addresses have never been claimed or moved between wallets. 

In the early years, members of the crypto community assumed the coins were left untouched out of fear. Some think that Satoshi Nakamoto might have lost access to the private keys and cannot move the coins. 

However, this is just speculation as no one knows why the asset remains untouched. 

  • Nobel Prize Nominee

Satoshi Nakamoto was nominated in 2015 for a Nobel Prize in Economic Science by a professor of finance at UCLA, Bhagwan Chowdhry. 

What We Don’t Know About Satoshi Nakamoto

  • Satoshi Nakamoto biography

Apart from the fact that he created Bitcoin, there is no public record of Satoshi’s biography anywhere on the internet.  In a digital era where it’s difficult to conceal information, Nakamoto’s mystery has remained unsolved. 

He was too careful not to reveal anything related to his personal life. All the information he shared was about Bitcoin and its code. 

  • He could be dead

There is speculation that one of the reasons Satoshi Nakamoto is still unable to be identified is probably because he’s dead. 

One theory was that Hal Finney, a computer scientist who received the first bitcoin transactions on 12 January 2009 was Satoshi Nakamoto. If this is true, then the identity of Satoshi may never be uncovered as Finney passed away in August 2014. 

  • Satoshi Nakamoto could be a group of companies

Some crypto community members have suggested that Satoshi Nakamoto may not be a person. Instead, some groups of companies such as Samsung, Toshiba, Nakamichi, and Motorola allied and crafted the name from their brand names. 

  • Satoshi Nakamoto may be the NSA

There are claims that Bitcoin was invented by the NSA or CIA  and that Satoshi Nakamoto is an acronym for a group of secret service cryptocurrency experts. According to the claims, Bitcoin is a privatized asset of an American intelligence agency designed to provide quick funding to United States intelligence activities across the globe. 

  • Will Satoshi Nakamoto ever reveal himself?

Well, no one knows if Satoshi Nakamoto will ever reveal his identity as numerous attempts to uncover this truth have proven elusive. 

What does a real bitcoin look like?

 

In the wake of growing interest in Bitcoin, a lot of people have been asking questions about the appearance of a real bitcoin. However, the cryptocurrency doesn’t have a physical attribute except for the computers used for mining (verifying and processing transactions on the network).

Bitcoin is a computer code that looks like 1s and 0s on a computer screen because it does not exist outside the internet. Just look at it like a file saved on your comp[uter but in this case, the file is saved in your Bitcoin wallet other than a computer.

A wallet address refers to an alphanumeric string made up of characters such as lowercase a to z, uppercase A to Z, and the numbers 0 to 9.

What is Bitcoin’s support?

 

As you may already know, Bitcoin is an open-source system and as such does not need the backing of centralized authorities, such as the government, nor does it require intermediaries like banks to propagate its use.

Bitcoin is supported by anyone who interacts with the protocol ranging from developers to miners and end-users who send and receive coins on the network. The worth of BTC is calculated by demand-supply, usability, acceptance, and technological value and not by any assets like gold or silver. 

How does Bitcoin mining work? 

Bitcoin mining refers to the process of verifying and recording new transactions on the Bitcoin public ledger. Mining requires the use of extremely high processing machines including Graphics Processing Units (GPUs) and Application-specific Integrated Circuits (ASICs) to solve complex computational puzzles called hashes.  

The Bitcoin protocol uses a Proof-of-Work (PoW) consensus to enable miners to create new blocks. In addition to adding blocks and verifying transactions, mining also creates new bitcoins as a reward for the miners, which adds to those already existing. 

Technically anyone can set up powerful miners to participate in the Bitcoin mining process. Sadly mining has become saturated and competition is on the high side.  Miners have now resolved to purchase even more powerful machines that consume less electricity to profit from mining. 

Technically anyone can set up strong miners to participate in the Bitcoin mining process. Unfortunately, mining has become saturated and competitive Miners have now resolved to purchase even more powerful machines that consume less electricity to profit from mining. 

Bitcoin has a limited supply of 21 million, which is the total number of bitcoins that will ever exist. This makes the cryptocurrency the most desirable coin among investors.  So far, about 90.5% of the total supply has been mined, and the last BTC will be mined around the year 2140. 

Currently, miners receive up to 6.25 BTC as a reward for completing each block. Anyone who solves the puzzle first gets the reward. Although this amount decreases by half at four years intervals as a result of a process called Bitcoin halving. The halving occurs after each set of 210,000 blocks is mined. 

 By declining the number of rewards, fewer bitcoins are fabricated, The last halving took place in May 2020 which means the next one will happen in 2024 and miners will start to receive 3.125 BTC per block. 

Miners also receive rewards for each transaction fee paid within the network. These rewards are sent directly to their wallets that have been set in place. It takes the blockchain roughly 10 minutes to process and record transactions once the math problem has been solved. 

Difference between Bitcoin and Ethereum 

When people talk about cryptocurrency, at least one person who is new to crypto must ask about the differences between Bitcoin and Ethereum. 

Due to the random mentions of cryptocurrency on television and everywhere else in the mass media the phrase “Bitcoin and Ethereum” has been drilled into our collective consciousness. 

Bitcoin and Ethereum are unarguably the most influential cryptocurrencies, both by market cap and adoption. They have greatly contributed to the growth of the crypto industry. 

To many, Bitcoin and Ethereum are simply examples of cryptocurrencies that use blockchain technology and encryption to run their operations. 

Although both cryptocurrencies share some similarities, there are differences in their designs and functionalities so much that sometimes it might seem as though they are two completely different technologies. 

Read Also: How to buy cryptocurrency

Bitcoin was originally designed as a payment gateway and a store of value. Simply put, Bitcoin is built as a database of accounts or wallets for monetary transactions which allows nodes or messages to be attached to each transaction. 

Ethereum, on the other hand, was created by a group of developers including Vitalik Buterin, as a smart contract ecosystem that facilitates the development of decentralized applications (dApps). This simply means that developers can build crypto projects on the Ethereum network. 

With that said, Ether (ETH) is the native cryptocurrency of Ethereum. It is used to process transactions as well as interact with applications built on the network. 

Read Also: Cryptocurrency UPSC, crypto definition, advantages, and disadvantages.

Advantages and Disadvantages of Bitcoin

To help you decide whether investing in Bitcoin is the right move for you, let’s explore some of the advantages and disadvantages of cryptocurrency. 

Advantages of Bitcoin

  • Bitcoin transactions are fast with low transaction fees compared to the traditional financial system
  • Fully decentralized with no third-party involvement. 
  • Anyone can trade and invest in bitcoin regardless of their age. 
  • No money “chargeback” after transaction confirmation since it cannot be reversed. 
  • Cross-border transactions
  • Bitcoin transactions are pseudonymous.
  • Bitcoin transactions do not involve banks or require bank accounts. 
  • Bitcoin cannot be banned
  • Bitcoin transactions are mobile and secure.
  • Bitcoin transactions are permanently recorded on the blockchain for reference purposes. 
  • 21 million max supply

Disadvantages of Bitcoin

  • The price of BTC is volatile. It is called high-risk = high-profile for a reason. 
  • The government sees Bitcoin as a threat.
  • You cannot access your funds if you lose your private keys
  • Bitcoin transactions cannot be canceled. 
  • Bitcoin can be used for illegal transactions since there’s no central authority.
  • High energy consumption.
  • The layer-one network has an in-built scalability issue. Transactions may take several hours to settle and may cost significantly higher fees.

Is Bitcoin a good investment?

 

Many financial experts believe that bitcoin should be an important part of any diversified investment portfolio because its price increases in response to events relating to the crypto industry or other markets such as stocks and bonds causing their price to drop. 

During the first decade of bitcoin, it was a nice and cool investment rising from $0.0008 to $69,000 during its current all-time high price in 2021.  Today the cryptocurrency is trading at around $44,000 and still has a significant possibility for further increase.

With that said, Bitcoin proponents often say that there is never a bad time to join the bandwagon. But before investing in BTC, make sure you are not investing out of fear of missing out (FOMO) and you understand how the crypto market works. Having an investment strategy is also important as that will help you determine how long you are willing to hold your investment. 

Bitcoin Regulation Around the World

Since the invention of Bitcoin in 2009, the world has been highly divided on the cryptocurrency debate. Some of its supporters refer to cryptocurrency as a new monetary system. However, the legal status of the cryptocurrency differs from one jurisdiction to another, and governments around the world are closely observing the fast-rising cryptocurrency debate on how to control it. 

How to buy Bitcoin for the first time

Buying BTC for the first time is not as complicated as you may think. However, you will need to access a crypto trading platform to complete the process. 

There are a series of crypto exchangers for this purpose, just check on it and make your choice.

Below are the steps to buying bitcoin on Binance:

1: Create your Binance account

2:  Verify your Binance account

3: Time to buy BTC

4:  Choose payment method

 5: Activate fiat currency/share account details

6:  Final Step

Note: in case the exchanger you want to use is different from this, just get through to us through our support email or comment box. We will get to you ASAP.

Best Bitcoin Wallets

After you have purchased BTC, the next thing that comes to mind is to make sure it’s properly stored in the right wallet. 

Bitcoin wallets contain a pair of cryptographic keys known as private and public keys used by the owner to send and receive BTC. Private keys must be kept safe away from unauthorized persons. Anyone who has access to your private keys can control your wallet. 

Let’s explore some of the types of wallets you can use to store your BTC.

Hardware wallets: Hardware wallets are the most secure type of wallets that allow users to store their private keys in a separate offline device. This wallet is recommended for storing large amounts of bitcoins. Unlike paper wallets which require you to import your keys to software to access your funds, hardware wallets can be used interactively. 

Web wallets: These are online Bitcoin wallets used mostly on centralized exchanges to send and receive BTC. Web wallets store private keys on an online server controlled by a third party.  One of the amazing features of this type of wallet is that users can access their funds on the go from any device connected to the internet. However, the funds are not controlled by you as the organizations running the platform can gain access to your private keys. 

Apart from gaining access to your funds, there have been reports of exchanges shutting down and users being unable to withdraw their funds.

Desktop wallets: Just as the name implies, desktop wallets are downloaded and installed on your computer which gives the users total control over the wallet. Private keys are stored directly on your hard drives or solid-state drives (SSD), although they are still connected to the internet. 

Mobile wallets: These are wallets designed for small phones. Since we live in the era of smartphones, mobile wallets are considered the best choice for small investors. The wallets are designed differently to meet your needs. Some focus on security, some on convenience while some are focused on decentralization. 

Frequently Asked Questions About Bitcoin 

Is Bitcoin a bubble?

Bitcoin has gained more than five billion percent in profit since it first started trading in 2010. This has given critics the impression that the entire crypto market is nothing but a speculative bubble waiting to pop.

According to a BusinessInsider report, the billionaire investor said that the crypto market is worse than the infamous dot-com bubble.

“The dot-com boom was crazier in terms of valuations than even what we have now. But overall, I consider this era even crazier than the dot-com era,” he said. 

Similarly, financial adviser Ryan Payne, president of Payne Capital, also commented on BTC, saying it’s going to be ugly when the financial bubble bursts. 

“This whole Bitcoin (BTC) thing — this whole cryptocurrency — is one of the biggest bubbles ever,” Payne said. 

Despite this, Payne also believes that the price of bitcoin can still go higher because of its excessive liquidity. 

“There’s too much money out there that can funnel into this market. It’s just becoming a bigger and bigger casino,” he added.

Is Bitcoin a Metal?

Bitcoin is not a metal. It is volatile and more digital.

How old do you have to be to buy Bitcoin?

18 and above

Can you buy partial bitcoin?

Yes,

How did people buy Bitcoin in 2010?

The first known use of BTC in real-life payment happened in May 2010 when Laszlo Hanyecz used 10,000 BTC  (now worth $460 million) to pay for pizzas worth around $25. But before that trade, bitcoin was mostly obtained via mining since it required less computational power, unlike today.

Can Metamask hold bitcoin?

No

What happens to my Bitcoins when I die?

Nothing happens, unless someone knows your see phrases or private key

Are there taxes on bitcoins?

The Internal Revenue Service (IRS) addressed BTC and other cryptocurrencies as assets similar to property in 2014

Can the government take your bitcoin?

The government can take your bitcoin if used illegally or unlawfully.

What happens when all bitcoins are mined?

Bitcoin has a fixed supply of 21 million coins. Once all the coins are finally mined in the year 2140, the amount of BTC in circulation will be permanently fixed

In conclusion, in trading Bitcoin wisely and digest this article.

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