What Is Bitcoin: The Revolutionary Financial Freedom Is Here

Bitcoin is hope in a troubled world. This is what the CEO of a great company called Micro Strategy believes, and he’s not the only one. 

Globally, baby boomers and millennials show the highest levels of Bitcoin awareness. The latest statistics [1] say that people see promise in Bitcoin for a more equitable economy. But how can this be?

Education is the key, and this simple yet complex guide will walk you through the path of Bitcoin – a unique disruptive technology paved by its creator Satoshi Nakamoto. 

In this guide, I’ll take you on the ride of your life – hop in the Bitcoin wagon and become a part of the financial revolution.

What is Bitcoin?

Bitcoin is a digital currency created by Satoshi Nakamoto. This is pseudonymous for the person or group who created the technology in 2008. He revealed the famous Bitcoin white paper called “Bitcoin: A Peer-to-Peer Electronic Cash System.”[2] This was published online in October 2008.

Long story short, Bitcoin is a simple yet complex concept. It’s digital money that allows secure peer-to-peer transactions on the Internet. 

What’s unique about Bitcoin is that unlike other traditional financial systems such as PayPal or Venmo, Bitcoin is decentralized [3]. To put it simpler, two people who are anywhere on the planet can send Bitcoin to one another. The catch is that they’re doing so without dealing with the involvement of third parties. These include a bank, their government, or other institutions.

Since its creation, Bitcoin has become the most popular cryptocurrency in the world. Its booming popularity managed to inspire the development of many others. 

Today, many competitors are trying to replace Bitcoin as a payment system. Others are used as utility or security tokens in interesting emerging technologies. 

But given the rising popularity of Bitcoin, it became the best choice for novice investors. It’s perfect for any enthusiast looking for a stable store of value. 

Micro Strategy’s CEO, Michael Saylor, has a powerful definition of Bitcoin [4]:

Bitcoin has multiple functions [5], depending on your goal:

• Investment vehicle
• Store of value like gold
• A way to transfer value worldwide
• An innovative way to explore last-gen technologies 
• Hedge against inflation 

Useful Terminology 

Below, I will address a few technical terms that go together with Bitcoin. Decentralization, the blockchain, Bitcoin mining and miners, and scarcity –are some of the most important terms around Bitcoin.  

Decentralization. What’s It All About?

Bitcoin is a decentralized digital currency. Decentralization is one of the most important features that Bitcoin has. It gives it the great freedom of being a currency free of any central control. 

Bitcoin is not placed under the radar of banks or governments. Instead, the digital asset is solely relying on cryptography and peer-to-peer software. 

Satoshi Nakamoto published his Bitcoin-related work following the great financial crisis of 2008. The year involved the Federal Reserve bailouts. This resulted in the need for decentralized currencies becoming more apparent.

This means it was no longer viable for a single entity to make decisions that affected everyone. Instead, Satoshi came up with a golden plan. He envisioned a global currency. People should run it, in his opinion.

Here are the main benefits of decentralization that make the concept priceless.

Decentralization is trustless

Every member of a decentralized blockchain network has a copy of a DLT (distributed ledger). This makes it easy to check all the transactions without having to trust a central intermediary. This can be a random stranger online, for instance.

Decentralization is tamper-proof

This means that every transaction on the blockchain is logged on a DLT. The network verifies it, making it impossible to alter the transactions or corrupt the data. This also guaranteed that there would be no inflation or changes to the crypto’s value.

Decentralization is robust

This means that decentralization can boost robustness. How can it do this? Well, by simply reading reliance on one single member. Such a thing would make the networks less vulnerable to failure. It also secures them against most attacks online. Long story short, users will have fewer risks of a terrible data breach.

What Is the Blockchain? 

Unlike money or fiat currency, Bitcoin is created, distributed, traded, and stored via a decentralized system known as Blockchain [6]. The blockchain is a public ledger, storing all Bitcoin transactions, and copies are on servers worldwide. 

We can simply say that the blockchain is the ultimate account book of Bitcoin. All transactions are publicly broadcast to the network. It’s also shared from node to node. 

Transactions of Bitcoin are collected together every ten minutes or so by miners. They are placed into a group called block and then added permanently to the blockchain. 

Every transaction that has ever been made is recorded on this public ledger [7]. Transactions are tough to reverse, almost impossible, and difficult to fake. Due to its decentralized nature, no institution backs Bitcoin. We have nothing to guarantee its value besides the proof in the system’s core. 

Bitcoin’s creator originally talked about his creation and described it interestingly. He discussed the need for “an electronic payment system based on cryptographic proof instead of trust.” 

Once a block becomes part of the blockchain, “it becomes accessible to anyone who wishes to view it,” [8] according to Stacey Harris. She is a consultant for Pelicoin, a network of crypto ATMs. She said the blockchain acts as a public ledger of crypto transactions [9].

The fact that anyone can edit the blockchain might sound risky. But it’s actually what makes Bitcoin secure and trustworthy. Here comes the issue of mining and miners.

What Are the Bitcoin Miners? 

To add a transaction block to the Bitcoin blockchain, most Bitcoin holders have to verify it.

The unique codes for recognizing users’ wallets and transactions must conform to the right encryption pattern. Such codes are long and random numbers. It’s challenging to produce them fraudulently. 

Bitcoin mining is a process that involves adding new transactions to the blockchain. People who do this difficult job are miners and blockchain superheroes. They use proof of work and deploy computers in a race to solve complex mathematical puzzles.

These end up verifying transactions. Miners get rewards for such a tough job. The quest to solve puzzles and support the complex system of the blockchain gets them 6.25 Bitcoin for each new block.

How To Mine Bitcoin As A Solo Miner?

Here is the most important steps solo miners must follow to mine Bitcoin.

Choose Your Bitcoin Mining Hardware And Set It Up

First of all, you will have to choose your Bitcoin mining hardware. You can use an old laptop or computer, but this way, you will not earn any Bitcoin. You have to be able to invest in a more powerful setup that is specially created for mining Bitcoin. You can also go for used mining hardware because this is not as expensive as new items.

It’s essential to note the fact that there are a lot of rigs that run on the Linux operating system. They need more computer knowledge to set up and operate them. If you’re a newbie in the game, you will have to plan some extra time to learn about mining and troubleshooting.

Set Up A Dedicated Bitcoin Wallet

If and when you will successfully validate your first Bitcoin block, you will need a Bitcoin wallet to get paid. You should consider a wallet that will be used for your mining-related activity. This should be separate from your other Bitcoin-related investments.

You can create various types of Bitcoin wallets. All of them should have all kinds of levels of security. You become a Bitcoin miner, which means you will have to establish a hardware wallet. This is the safest way in which you can get boosted security.

Configure Your Mining Equipment

After you set your Bitcoin mining hardware in place and set up a Bitcoin wallet, you can move on. Start installing and configuring the mining software. This requires strong knowledge, and it’s essential if you link together more miners. The end target is that this will boost your mining capacity.

Finally, Start Mining!

As soon as you download a local copy of the blockchain for the crypto that you want to mine, in our case, Bitcoin, you can start mining at last. The setup will be known as your rig and will do all the hard work for you.

All you have left to do is check out the rig periodically to ensure it’s working properly and mining your Bitcoin.

Bitcoin’s Limited Supply – Scarcity And Inflation Control 

Satoshi Nakamoto built Bitcoin around the concept of a finite supply. He set a fixed upper limit to the number of Bitcoins that can ever exist. This supply upper limit is exactly 21 million [10]. We can control inflation by maintaining the Bitcoin number capped at 21 million. We’re talking about the inflation that can arise from an unlimited coin supply.

The limited supply of Bitcoin is a huge advantage because it keeps the coin scarce. This is what makes Bitcoin a scarce asset. This is also the trigger that can boost its price.

The scarcer something is, the more valuable it will get over time. Keeping an asset scarce can ensure its value remains steady for years. Bitcoin is called digital gold for this specific reason. 

How To Buy And Use Bitcoin?

People generally use Bitcoin to diversify their portfolios apart from bonds and stocks. Besides using it as an alternative investment, people also purchase with Bitcoin. Some companies and vendors accept crypto payments amidst a boom in crypto mass adoption.

The mainstream adoption of digital assets is growing stronger with each passing day. More and more people are also interested in the blockchain’s underlying technology of digital assets. 

People buy Bitcoin mostly via crypto exchanges. The most important ones are Coinbase, Binance, eToro, and more. 

Some people buy Bitcoin to hold it as a store of value, while others buy it, aiming to sell after a price rally.

CNBC [12] posted a piece a long ago describing how Bitcoin is a great hedge against inflation.

A proper hedge against inflation can appreciate over time. This should take place even as the purchasing power of fiat currency decreases. The scarcity of Bitcoin is the same feature that makes it a great hedge against inflation. 

Privacy and security are two essential terms for Bitcoin and crypto in general. Investors who gain private keys to a public address on the blockchain can authorize transactions.

What people need to know is that private keys should remain secret. Also, investors should know that the balance of public balance is visible.

It’s worth noting that you can create more public addresses, and your Bitcoin collection can be distributed on them. Bitcoin transactions are more traceable compared to cash or fiat money. The main reason is that they are available to the general public.

How To Buy Bitcoin?

Buying Bitcoin is something that a lot of people plan on doing when they get into the crypto business. Here are the main steps regarding how to buy Bitcoin:

• Choose your favorite crypto trading service/venue – exchanges are probably the most convenient option
• Connect the chosen exchange to a payment option – the process resembles setting up a brokerage account (you will need personal ID/social security card/driver’s license and so on)
• Place your order – most crypto exchanges provide various order types and ways of investing
• Store your Bitcoin safely – crypto wallets are the safest option in 2022, and keeping digital assets outside of exchanges is your best option

It’s also important to note that you can buy Bitcoin via the following services:

• PayPal
• Credit card
• Bitcoin ATMs

How To Use Bitcoin?

To use your Bitcoin, you need a crypto wallet. Such devices hold the private keys to your Bitcoin. These have to be typed when you are making a crypto transaction. Bitcoin is accepted as a means of payment for services and goods worldwide.

Many services and merchants, stores, retailers, and more are accepting Bitcoin as the mass adoption of crypto is getting stronger.

You can use Bitcoin in locations that accept crypto, such as the following:

• Entities that have “Bitcoin accepted here” displays
• Online businesses that have payment options which include credit cards, PayPal

How Much To Invest in Bitcoin? 

Many financial experts support that their clients buy Bitcoin, but they don’t necessarily recommend it. This happens especially due to the volatility of the coin’s price and the risks that are involved. Most experts don’t recommend investing too much in Bitcoin. According to them, you should invest as much as you can afford to lose. 

Ian Harvey, an important financial planner (CFP) in New York City, has been quoted by Forbes [11] highlighting the importance of investing with caution. 

Usually, experts suggest investing between 1% to 10% into Bitcoin. And only if you’re on your way to becoming an enthusiast. The main advice is never to allocate too much of your portfolio to one asset.

Volatile or not, risky or not, more people will understand the nature of Bitcoin in 2022. They become more interested in learning about available digital assets and blockchain and know how much to invest in Bitcoin.

This disruptive technology is currently changing the financial world and more. We’re seeing a massive wave of innovation through crypto and the blockchain, and investors have decided to ride it.

Compared To Traditional Currencies, What Are Bitcoin Pros and Cons?

Here are the best advantages that Bitcoin flaunts and the most important risks and challenges involved in using Bitcoin.  

Pros:

Cons:

Risks Of Investing In Bitcoin

Just like any other financial action, Bitcoin investing comes with various risks. These are always present, along with the great opportunities it can bring its users. Here are the most important ones that you should learn about:

• Volatility – Bitcoin is a volatile digital asset with various falls and spikes in its value.
• Identity crisis – the government cannot tax Bitcoin like other commodities, and due to its decentralization, taxing becomes challenging, and its future is unclear.
• Inadequate regulation – no government or central bank can regulate Bitcoin, which translates into high volatility, which can trigger money loss without the ability to get it back.

Closing Words – Friendly Recommendation

The advantages of holding and using Bitcoin overcome the potential challenges. And you know what they say: if you take no risks, you will not suffer any defeats. But on the other hand, if you don’t take risks, you can’t win either.

As a crypto-enthusiast who has been holding and accumulating Bitcoin for a few years now, I recommend you invest even a small part of your portfolio in the digital asset. It’s like buying digital gold.

Freedom is vital for us, and the past few years have already made a point in this direction. Financial freedom is also crucial, and I think this is exactly what Bitcoin offers the world.

Satoshi created Bitcoin as an alternative to the financial system. Bitcoin came to life amidst a financial crisis, and offering freedom was its primary goal, to begin with. Bitcoin can be a savior in the chaotic world we live in. This is why more people are interested in learning more about tech innovation.

The increasing inflation in our troubled world is already weakening global currencies. But this is also the trigger that mostly boosts crypto adoption on a mass scale, and I believe this is great for crypto. 

We’re at the dawn of a new thrilling era. Get ready, buckle up, and become part of it!