What is Bitcoin? | TradeOr’s Beginners Guide to BTC
Forex is short for “foreign exchange.” Each country has its own version of cash, called a “currency.” Foreign exchange is the largest financial market in the world.
The story of Bitcoin is mired in mystery and melodrama. The digital coin that launched all cryptocurrencies, BTC made global headlines this year when the value of a single coin soared to nearly $65,000.
The meteoric rise of BTC was helped (and hindered) in part by billionaire Elon Musk’s hot and cold tweeting in the first part of 2021. Many financial analysts predict that Bitcoin will continue to rise in value, some speculating levels above $500,000. The Bank of Singapore went as far as to suggest that BTC could replace gold as its store of value. First off, though, what is Bitcoin?
Bitcoin Explained: The World's first Decentralized Currency
Bitcoin is described in different ways: a cryptocurrency, a digital currency, or a virtual coin. Essentially, BTC is a form of online payment that has no physical form. It is digital cash that requires no central bank and operates on a peer-to-peer network of users. Each BTC is a block of code that you store in your “Bitcoin wallet” (an encrypted file on your smartphone or computer.) BTC is built on blockchain technology, i.e., every coin or “block” of financial data is added to the “chain” of the cryptocurrency, making it larger each time.
Who is Satoshi Nakamoto?
The story of the crypto asset began in 2008 when a strange whitepaper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” began circulating among cryptography circles. The author announces a new “purely peer-to-peer version of electronic cash” born from the need to avoid transaction fees, mistrust, and weaknesses associated with going through a third party. The author’s name was Satoshi Nakamoto, and this is now considered the Magna Carta of BTC.
When you google “Satoshi Nakamoto,” photos of an elderly Japanese man come up. This is likely to be a certain Dorian S. Nakamoto who lives in Los Angeles. He has had to remind the world many times over that he is NOT the inventor of Bitcoin. The real Satoshi Nakamoto disappeared from online records back in 2011, leaving only his name on crypto articles and mystery in his wake.
There are other apocryphal characters around the Bitcoin legend. Hal Finney was an early Bitcoin enthusiast who worked alongside Nakamoto and perhaps contributed to the coin’s creation. One theory is that the crypto-expert Nick Szabo is the real identity behind Satoshi Nakamoto after a team of researchers compared their writings and found the similarities between them to be “indisputable.” Let’s not forget Roger Ver either, a.k.a “Bitcoin Jesus.” Ver is a controversial ex-convict whose financial and vocal support of Bitcoin helped the coin become what it is today.
What is the Philosophy of Bitcoin?
On the surface, BTC is a simple concept. An alternative form of electronic payment that allows you to avoid the transaction fees associated with banks. Today, digital currency is also a hot stock to invest in, with many traders scrambling for a piece of the Bitcoin pie.
For many people, BTC is more than just a way to buy stuff online. The cryptocurrency represents an alternative financial reality. For some extreme disciples, even a new world order. A decentralized digital currency that circumvents the need for a third party – the concept is revolutionary. Every time a new Bitcoin is created or “mined,” the cryptocurrency is strengthened, and individual “miners” are rewarded in BTC.
The Cypherpunk Movement
Bitcoin was born out of the cypherpunk movement, which included Julian Assange, Edward Snowden, and the Hal Finney mentioned earlier. These men and women believe in a libertarian society where freedom of speech is protected and Big Government is held at arms’ length. One of the early disciples of the cypherpunk movement is an American mathematician and coder called Eric Hughes. In his “Cypherpunk Manifesto,” he declared that “privacy in an open society requires anonymous transactions.” In finance, anonymous transactions protected by cryptography instead of a central bank are exactly what BTC represents.
How Does it all Work?
Understanding the technical workings of any cryptocurrency is hard enough, let alone trying to get your head around Bitcoin’s relatively new and revolutionary decentralized digital money. Fortunately, you don’t have to. If you want to trade Bitcoin, you will simply need to download a “Bitcoin wallet” (to store your Bitcoins) on your computer or phone. After installing it, you will be given a “Bitcoin address” (essentially an account number to send Bitcoins to). You will then be able to buy and sell Bitcoins from many online trading platforms.
However, if you want to understand Bitcoin a little better, a good starting place is its transaction system, known as “blockchain technology.” There are two types of people who will use this: customers and miners. Customers are the people who want to send and receive Bitcoin to each other, using it as a currency. Miners essentially check and add the customers’ transactions to Bitcoin’s “shared ledger” (a record of who owns what). With fiat currency, the ledger is controlled and operated by the banks. Bitcoin distributes the information across all of its users, thus decentralizing the currency.
Should you Trade Bitcoin?
BTC has become an extremely popular digital currency. The proof of this is reflected in its value. Just over a decade ago, you could have bought one BTC for less than a dollar. A single Bitcoin is now worth tens of thousands of dollars. Here are some of Bitcoin’s key features which have made it as successful as it is.
Pros of Bitcoin
- BTC’s shared ledger makes it a decentralized currency, and is able, therefore, to sideline banks that many see as too powerful;
- The crypto can speed up transaction times and at less expense;
- The digital asset can be transferred and traded anywhere in the world and at any time, all that is required is an internet connection;
- There are no credit checks involved, BTC is freely available to anyone;
- By using a shared ledger, BTC is far more transparent and easier to audit than transactions in traditional banking.
Cons of Bitcoin
- Blockchain technology is still in its infancy and, therefore, vulnerable. DAO was a blockchain-based company that was successfully hacked, losing over $50 million because of its flawed “smart contracts;”
- Vast amounts of energy are required for mining Bitcoins. The annual energy consumption of Bitcoin mining has been compared to that of Argentina;
- There is still no “buyer protection” or means of reclaiming your Bitcoins if you send them to the wrong address or forget your wallet’s password;
- Currently, exchanging Bitcoins for fiat currency is an expensive operation.
If you think the positives outweigh the negatives, you will want to find a good trading platform to buy and sell Bitcoin. TradeOr is an excellent option. Not only do we have Bitcoin and numerous other cryptocurrencies available to trade, but we also have other marketplaces such as the stock market and forex.
BTC has risen to fame since its inception in 2008. Its “blockchain” is a revolutionary technology used in countless ways, but what is Bitcoin going to become, and is it a good thing? These questions are open for debate. What can be said is it has surpassed everyone’s expectations and continues to do so. If you choose to get a piece of the BTC pie, TradeOr is the perfect trading platform.