My First Coin #2 - Bitcoin in 5 minutes
Learn what Bitcoin is, how it works, and why everyone is investing in it.
Welcome! you are about to start on a journey to learn how to invest in Bitcoin. In this first content, you are going to learn what Bitcoin is and how Bitcoin transactions work.
By the end of this content, you will have a foundational overview of crypto on which you can add more knowledge.
What is Bitcoin?
Bitcoin is a digital form of cash that you can store, send and recieve. It was created by Satoshi Nakamoto in 2008 and went live in 2009. While everyone knows Satoshi Nakamoto is the name behind Bitcoin, no one knows who Satoshi is. Some believe it is a single person and some believe it is a group of persons. However, till today, no one has publicly fact-claimed to be the founder of Bitcoin.
How do Bitcoin transactions work?
Always remember that Bitcoin is not a currency you touch and feel. The fact is, there are no bitcoins in the world, only records of Bitcoin transactions. Every Bitcoin transaction is stored in a public ledger called "Blockchain".
To send bitcoin to someone, you will need a "private key" and the person's Bitcoin address. A Bitcoin address is a sequence of random characters that look like this "bc1qxy2kgdygjrsqtzq2n0yrf2493p83kkfjhx0wlh".
When you send a bitcoin to someone, the transaction is put into a "block" for "miners" to solve. Usually, it takes the miner about 10 minutes to process the transactions.
These days, there is a transaction fee attached to every bitcoin you send, and this money goes to a miner. Now, you don't have to pay this fee when you send bitcoin, but no miner will be willing to process your transactions since they are mining for reward. So your money will be stuck or probably gone forever.
What is Bitcoin Mining?
CBN print naira for circulation. But bitcoin is discovered by mining. There are only 21 million bitcoins ever to be mined.
Like I mentioned above, each Bitcoin transaction is stored in a public record called Blockchains. Blockchains are padlocked. To unlock it, Miners apply some mathematical formulas to find the key to the padlock for the transaction to be verified. Everything is done digitally with a physical machine.
As a Bitcoin investor, there is no need to go into many details to know exactly how mining works. Just the way you don't need to know how CBN prints naira for you to send, recieve, and store.
Why Bitcoin?
Bitcoin is growing so fast mainly for three things:
Decentralization
High Volatility
Deflationary
Decentralization means, nobody controls it and it does not belong to a central body. CBN controls the Nigerian naira. The naira in any bank account is owned by CBN, they can choose to freeze, inflate, or deflate it anytime. Bitcoin offers freedom and full control of money to people, allowing them to transact or trade any amount instantly, anywhere in the world, at any time.
Volatility is the decrease and increase in the price value of an asset. Volatility is a good and bad thing, but a good number of investors find volatility in Bitcoin attractive. Investors are aware that the value of bitcoin can go down by 99% anytime, but they don't care. Why? In December 2012, 1 bitcoin was $10, by December 2013, 1 bitcoin was worth approximately $1000. In other words, N100,000 invested bitcoin in 2012 would return N10,000,000. In late 2021 bitcoin rose to $68,000 after falling from $64,000 to $29,000 in May.
People see Bitcoin as "digital gold" a way to also protect their wealth against inflation.
Bitcoin is deflationary because its purchasing power increases over time. Only 21 million bitcoins can ever be available, no more. People believe this limited supply will create scarcity, and because people will continue to desire bitcoin, the value of a bitcoin will keep rising.
As of this writing, about 18,919,318 bitcoins is currently in circulation.
Bitcoin Alternatives
In 2015, a new Bitcoin alternative went live, called "Ethereum" also referred to as "Ether" or "ETH". Since then, several Bitcoin alternative currencies are popping up daily. Today there are over 16,000 Bitcoin alternatives online.
You should know by now that Bitcoin is a currency, but it is fully digital and cryptographic by development - the reason it is commonly called "cryptocurrency" classified as "digital currencies".
Bitcoin is the first and still the most popular cryptocurrency out there, understanding Bitcoin is key to understanding crypto.
Next week you learn about Bitcoin Alternatives also known as "Altcoins".
Recap
In this issue, we covered the following:
What is Bitcoin?
How do Bitcoin transactions work?
What is Bitcoin mining?
Why Bitcoin?
Bitcoin Alternatives.
Subsequent content for only "Bitcoin in 5 minutes" will be available every Tuesday at 8 AM.
There will be an email tomorrow Wednesday 8 AM, Wednesday content will be things we feel you need to know in crypto.
Have a great day!
WAGMI