A few things you should know

  1. Bitcoin is a digital form of cryptocurrency without any central bank or a single person controlling it.
  2. It is peer-to-peer which means, there is no middle man whenever any transaction is being done.
  3. It is an open-source software and any one can participate in bitcoin ecosystem.
  4. Bitcoin transactions can be made from any time, anywhere in the world with just a computer or a bitcoin wallet and internet.
The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. - Bitcoin open source implementation of P2P currency

Bitcoin supply is limited to 21 million, which makes it a store of value for some investors. Also, a lot of people don’t spend their bitcoins, instead chose to hold them for the long-term (also known as hodling).

How does bitcoin work?

Bitcoin works on blockchain technology, which is defined as an open ledger system which broadcasts all the transactions and everyone can see those transactions, but only written once to the blockchain when the transaction is made.

Suppose Alice pays one bitcoin to Bob and now Bob pays half a bitcoin to John. All these transactions can be seen on blockchain. There isn’t a centralized bank or institution to process transfers. In order to add new information, the Bitcoin blockchain uses a special mechanism called mining. It is through this process that new blocks of transactions are recorded in the blockchain.

But how does bitcoin actually work

Who created Bitcoin?

Well, nobody really knows who created bitcoin. It was created by someone who used the pseudonym Satoshi Nakamoto, but we don’t know anything about their identity. Satoshi could be one person or a group of developers anywhere in the world.

Satoshi published the Bitcoin white paper as well as the software. However, the mysterious creator disappeared in 2010.

Bitcoin creation aka mining

The science behind bitcoin creation is, what is called bitcoin mining, which is the generation of freshly mined bitcoins through the use of GPU miners, Asic miners or cloud mining. By mining, participants add blocks to the blockchain. To do so, they must dedicate computing power to solving a cryptographic puzzle. As an incentive, there is a reward available to whoever proposes a valid block. Block generation is expensive, but block validation is cheap. If someone tries to cheat the system to validate the invalidated block, the system rejects it, and the miner will be unable to recoup the mining costs.

The reward is the block reward, which is made of two components, fees attached to the transactions and the block subsidy. The block subsidy is the only source of “fresh” bitcoins. With every block mined, it adds a set amount of coins to the total supply. It takes approximately ten minutes to find a new block. Blocks aren’t always found exactly ten minutes after the previous one – the time taken merely fluctuates around this target.

How can I buy Bitcoin?

To buy bitcoins, you can use your credit/debit card and even use your bank accounts on some websites. I have listed few good exchanges below where you could buy bitcoins :

  1. Binance
  2. Coinbase
  3. Iconomi

What can I buy with Bitcoin?

Well, what about a Lamborghini.

Other than that you could buy almost anything with bitcoin, pay your bills, do online shopping and much more. useBitcoins is a platform with almost 5,000 listed businesses that accept BTC.

You could use it for travel, video games, food, charity, taxi, gift cards and what not

Heatmap of retailers which accept cryptocurrency as payment. Source: https://coinmap.org/

Bitcoin Trading

Bitcoin trading is the buying and selling of bitcoin against various other cryptocurrencies using different methods of technical analysis and earning profits out from it. Unlike traditional stocks or commodities, crypto trading activities work 24 hours and 7 days a week which gives it an edge over other asset classes. There are many crypto exchanges where one can trade and learn about crypto trading. The most famous one’s are :

  1. Binance
  2. Coinbase
  3. Bitmex
  4. Bybit
  5. Deribit

Bitcoin is largely known to be the most volatile cryptocurrency and the traders take leverage of this volatility to gain profits out from trading it on both spot and margin exchanges. This volatility is driven by both institutional investors and crypto whales alike. This hacker noon article explains who are these cryptocurrency whales and how they affect the coin market.