Bitcoin 101

What Is Bitcoin?

Bitcoin logoAt the most basic level, Bitcoin is an online currency, but it’s not the only currency. There are thousands of cryptocurrencies to choose from. They allow users to transfer money directly to each other, using peer-to-peer technology without a central authority or banking institution. It’s secure, seamless and a truly decentralized system. In this report, we’ll refer to Bitcoin, but the information applies to all cryptocurrencies.

Bitcoin (BTC) was invented by Satoshi Nakamoto. It’s unknown whether the pseudonym, Satoshi Nakamoto belongs to a single person, or a group, but he/they published a proof of concept white paper in 2008 that detailed how a decentralized currency could work. The open-source prototype software was released in 2009 and a decentralized cryptocurrency market was born.

Bitcoin, the original cryptocurrency, is divisible to 8 decimal points, known as Satoshi. The system is similar to the current monetary system that is based on dollars and cents. If we use the United States Dollar as a standard value, 0.00000001 BTC, is worth nothing and 0.00000099 BTC = 1 cent (USD).

Since a single Bitcoin is divisible down to nothing, it allows people to invest in the currency at almost any level.

Unlike the government issued Fiat currency that most of us are used to, Bitcoin is a completely decentralized currency. There is no single organization, individual, country, administrator, or central authority that controls it. All transactions are conducted on a blockchain that is run by thousands of computers all over the world.

All this computing power is networked together to create a market cap of 21 million Bitcoins. No one is sure where the market cap came from, but it’s estimated that it will be reached in approximately 2140.

Where Does It Come From?

Bitcoin miningBitcoin is created as payment for processing transactions, called mining. Mining is the verification and recording of payments into a public ledger called a blockchain. This is accomplished with a massive network of computers that provide computing power to complete these transactions.

In true decentralized fashion, the massive computer network includes huge mining farms as well as computers as small as the one you’re working on right now. Even your phone can process transactions that you get paid for, but we’ll discuss that a bit later.

Why Does The Price Fluctuate So Dramatically?

Stack of bitcoinsThe price of Bitcoin is determined by supply and demand. When there is a greater demand, the price increases, when there is less demand, the price decreases. Since Bitcoin is created at a predictable rate, there is only a certain amount of the currency available. And unlike our Fiat currency, which the government prints anytime it wants more, there is no ability to create Bitcoin at a different rate, so the supply and demand model works effectively.

Where Do You Keep It?

Trezor hardware walletSince there is no banking system involved, you keep your Bitcoin in a wallet, or several wallets. If you have a large number of Bitcoin, it’s recommended to keep it in a hardware wallet. These wallets plug into your computer’s USB port and are a secure way to keep your Bitcoin safe.

For smaller amounts of Bitcoin that you’ll be using on a daily basis, you can keep it in a wallet on your desktop, your phone, or online.

How Is Bitcoin Different From Conventional Money?

Bitcoin valueTo fully understand how the conventional monetary system works, watch Bitcoin vs Money – The Biggest Scam in the History of Mankind. You may be surprised to see how corrupt the system really is. Bitcoin and other cryptocurrency differ from the conventional monetary system, because:

• They are open-source and decentralized, making them immune to banking and Federal agency whims

• Transactions are conducted peer-to-peer instantly without an intermediary like a bank or other financial authority

• The system cannot be hacked or gamed, because the combination of cryptography and hashing provides an almost infinite number of random key codes

• It is very easy to setup Bitcoin software to make and receive payments. You can set up a Bitcoin address in less than a minute and start transacting instantly. You don’t need a bank account or documentation

• Transactions have minor fees that you control. They are not related to the amount of currency you transfer, they are related to the speed that you want your transaction to take. If you want your transaction verified quickly, you can choose a higher transaction fee. If you can wait for a few days, your transaction could be free.

• Transactions are secure, irreversible, and do not contain personal information. This high level of security protects users against identity theft.

NEXT: 5 Strategies to Make Money with Bitcoin (Strategies 1-3)

DISCLAIMER
Terry Telford is not registered to provide investment advice and is only providing an opinion. Information contained in this report, on terrytelford.com, and any other published media is not an offer or solicitation to buy, hold, or sell any security.

Terry Telford is not a broker/dealer or financial adviser and is not affiliated with an investment firm. Terry Telford and/or any companies affiliated with Terry Telford are not responsible for any gains or losses that result from the opinions expressed herein. Terry Telford makes no representation as to the completeness, accuracy, or timeliness of the material provided. Material is subject to change without notice.

When making an investment decision, investors must rely on their own due diligence. It is always recommended to investigate the company, person, or entity issuing the investment before making any investment decisions.

Any type of investing involves a degree of risk and should only be considered by persons who can afford to lose their investment.

NOTE:
The cryptocurrency market is evolving daily. It’s a highly volatile market, so investors can make a lot of money in a short period of time, but they can lose money too.

This report does not constitute financial advice. It is based on the results that I have experienced personally and is presented only as a source of information.