Cryptocurrencies have been taking the world of finance by storm for the past couple of years. With over five thousand different cryptocurrencies available in the market, Bitcoin still remains one of the best known primarily because it was the first of its kind. This has enabled Bitcoin to gain a lot of attention and media coverage, tracking every high and low of the crypto.
The volatile nature of Bitcoin is ideally suited for attention-grabbing headlines, but one must understand the story behind the headlines before investing in Bitcoin. The entire mechanism behind crypto trading and investment can confuse even the brightest. Therefore, let’s take a more transparent look at what Bitcoin is all about.
What Is Bitcoin?
Bitcoin is the first-ever decentralized cryptocurrency or digital currency to be introduced in the market. One which can be bought, sold, and even exchanged without any intermediary. This means, unlike conventional exchanges, banks will not be involved in these transactions.
Satoshi Nakamoto initially created crypto in 2008. The main idea behind Bitcoin was to provide the world with a payment system that operates on proof rather than trust. This was made possible by leveraging the potential of blockchain technology. This meant every Bitcoin transaction is recorded to a digital ledger accessible to everyone. This makes it almost impossible to reverse a transaction or fake it.
Decentralization means any government or institution does not back the currency. This sounds amazing until one realizes that there is a guarantee with the value of Bitcoin other than the evidence in the system. However, over the years, there have been many instances where the decentralized nature of Bitcoin worked to the detriment of the interest of investors and users.
Nonetheless, this has not stopped the growth of Bitcoin in all these years, and the future looks bright. Bitcoin holds a current market cap of $785,216,644,297 and these numbers are only bound to increase with its gaining popularity. But before you are enticed by this value and head to invest, let’s first understand the working principle of Bitcoin.
How Does Bitcoin Work?
Bitcoin revolves around Blockchain technology that is a distributed digital ledger record. This is basically like a digital chain where each block has information about every transaction. This includes all the information starting from the date and time of the transaction to even the distinct code used to identify the transaction or exchange.
The most distinct and enticing characteristic of blockchain technology is its decentralized nature. This means a single person or entity does not control the technology or the ledger. Instead, anyone with access to the blockchain can edit it, and since everyone has access to it, everyone can edit.
Hearing this, many might presume that blockchain is very risky. However, this is precisely what makes blockchain much more secure and reliable than conventional currencies. This is because before one can add a block to the Bitcoin blockchain, the majority of the holders in the network have to verify it. In addition, the unique code used to recognize the transactions and wallets of the users must conform with the encryption pattern.
It is not easy to identify these codes easily as they come in the form of long random numbers. Therefore, the odds of a hacker guessing your unique number is significantly less. However, if the hacker gets access to your number through fraudulent means, things can take a bad shape very quickly. In fact, many Bitcoin users had to learn it the hard way.
Different Things You Can Do With Bitcoin
Bitcoin has come a long way since its inception, and currently, there are many different ways you could use your Bitcoin and derive value from it. Some of these well-known ways include:
- Using It As A Medium Of Exchange: The primary intent behind the advent of Bitcoin was to use it as a medium for transactions. While this has not been easy over the past decade, things are changing for good emerging platforms that accept cryptocurrencies. Secure platforms like Coingate accept bitcoin payments and enable businesses to set up cryptocurrency payments infrastructure and manage crypto earnings. This offers users an easy way to use their crypto as a viable medium of exchange.
- Crypto Trading: The other viable of Bitcoin is using it to trade on crypto exchanges and capitalize on the same. At present, there is no shortage of crypto exchanges that enable users to trade their Bitcoin and other cryptocurrencies to generate a profit.
- Store Value: The volatile nature of Bitcoin has led to many using it as a long-term investment. While the value of Bitcoin might be volatile in the short term, one can still expect a viable and sometimes exceptionally significant return on their long-term investment.
Let’s Wrap Up
Bitcoin is currently one of many cryptocurrencies available in the market. However, it still remains the global dominant player, with a market cap that remains unrivaled by every other cryptocurrency you can think of. Therefore, leverage this information and make well-informed investments to increase the chances of gaining better returns.