Bitcoin was launched in 2009, as the first decentralized, blockchain-based cryptocurrency, by the anonymous developer or group of developers known only as Satoshi Nakomoto. To this day, it remains the most widely-used and popular cryptocurrency, becoming accepted for payment in a number of online and offline stores. This article will outline some more information about cryptocurrencies in general and Bitcoin specifically, particularly in terms of buying and mining Bitcoin.
The goal of Bitcoin
The primary goal of Bitcoin as a cryptocurrency was to provide a viable, trustworthy alternative to traditional currencies and financial institutions; whereas these are controlled by small groups of people, Bitcoin is essentially entirely run by its users, and no single person – not even the mythical Satoshi Nakomoto – can control it single-handedly. Information about transactions is stored not by one or a few institutions, but on a system called the “blockchain”, which exists across a network of computers; this allows the information to be protected and verified by many users at once. This means fraud can easily be detected, and users’ funds and transactions are therefore kept both anonymous and safe from hacking or theft.
A first way to acquire Bitcoin is by buying it from other users. In order to do this, it’s important to, first of all, acquire a Bitcoin wallet, which is essentially a program or application that allows a user to digitally access his coins. Once a user has a wallet, he can buy (or sell) Bitcoin through an exchange, which is usually a website that offers the opportunity to exchange traditional currency for Bitcoin.
Before considering buying Bitcoin, users must acquire a Bitcoin wallet. Such a wallet is a program or application that generates and maintains the user’s Bitcoin address, which he will use to conduct transactions, and as such it is the basic tool for any Bitcoin investor. Once the user has selected and installed a wallet, he must choose an exchange, which is a website through which to exchange traditional currency for Bitcoin. The user then registers on the exchange, and afterward, he can start buying Bitcoin or a subdivision of the token – Bitcoin can be subdivided up to eight decimals. It’s important to note that transactions using Bitcoin can take slightly longer than transactions using traditional currency, because each transaction needs to be recorded and verified on the blockchain. This can take up to a couple of hours per trade.
A second way to acquire Bitcoin exists, however, and this is mining – a process which is integral to the way cryptocurrencies work. Essentially, Bitcoin miners are users who choose to put some processing power at the disposal of the network: in this way, they help secure the transactions on the blockchain and help keep the network safe. In return, they gain compensation in the form of Bitcoin; the greater their computing power, the higher the reward will be, because they will be able to mine more blocks more quickly. Up until 2017, the mining reward was 25 BTC per block mined, but this has now been reduced to 12.5 BTC per block.
Because mining has become increasingly competitive in recent years, a regular PC (CPU) or graphics card (GPU) no longer tends to be enough for it to be profitable. Bitcoin miners have thus moved on to using Application Specific Integrated Circuit (ASIC) chips, which have mining Bitcoin has their only function and are much faster than CPU or GPU.
Although there are some risks attached to Bitcoin, such as the comparative volatility of its price compared to traditional currencies, the cryptocurrency has nonetheless gained great popularity with a wider audience recently. In spite of the risks, the speed of transactions, the promise of anonymity, and the security of transactions logged on the blockchain make it a tempting payment method to increasing numbers of users.