Bitcoin is becoming a more common word thrown into business and personal conversations. It’s no surprise because it made headlines for its rise in value in 2017, ending with a value $14,129 in December of that same year. Now, everyone wants to own Bitcoins, and you may be one of those interested but wary to join in.
What is Bitcoin? It’s a digital currency that is created by mathematical computations and its transactions verified by computer users in a public ledger. You can use it to purchase goods and services like fiat money, but storing and earning Bitcoins are done differently.
Bitcoin may be a hot topic, but is it worth investing in? To help you decide if you’re going to invest, here’s a look at what Bitcoin is about.
What Makes Bitcoin Different from Fiat Money
While they are both mediums of exchange, the following features set Bitcoins apart from fiat money:
The Bitcoin network is maintained by a community of open-source developers, and not a central authority such as a bank. No one can interfere with transactions or impose transaction fees.
2. Ease of set-up
Setting up a Bitcoin account requires an e-mail address. You will then get a public key and a private key, where you receive and send Bitcoins, respectively. This eliminates the lengthy process of setting up bank accounts, with papers to fill and fees to pay.
Unlike a bank account, your Bitcoin address does not hold your personal information, your contact details, or your spending habits.
Despite the anonymity that your Bitcoin address provides, each of your transactions is stored in the blockchain, a public general ledger.
5. Fast transaction
You can send Bitcoins from any device to anyone and anywhere in the world. All you have to do is to provide the sender with your private key.
Take note that Bitcoins are not meant to get rid of fiat money, and the two currencies need each other to operate.
Where to Get Bitcoins
Exchanges are the most common way to get Bitcoins. These are similar to stock exchanges where you can exchange your fiat money for Bitcoin or other cryptocurrencies, and vice versa. Just like what happens in stock exchanges, the value of Bitcoins fluctuates according to demand, so expect exchanges to continually change prices.
You can trade Bitcoins through meetups. Several organizations also hold Bitcoin Marketplaces for people to acquire Bitcoins. However, be careful when you meet someone to trade for Bitcoins, especially if you carry a large amount of money.
Bitcoin ATMs function as regular ATMs where you can insert cash to deposit to your wallet as a Bitcoin, or where you can withdraw an amount to the Bitcoin’s equivalent of the fiat money. This is a new concept, however, so Bitcoin ATMs are not easily found anywhere.
Where to Keep Bitcoins
A Bitcoin wallet stores your public and private keys. There are different types of Bitcoin wallets to choose from, and each has its pros and cons:
1. Desktop Wallet
Desktop wallets store your private key from your computer’s hard drive. While you are in complete control over the security of your coins, being connected to the Internet makes the desktop wallet prone to security risks. It is also available to one computer only and you cannot make transactions outside the computer where it is installed.
2. Online Wallet
Online wallets store your private keys through an account from a third-party Web site. It can be accessed anywhere at any time, as long as you have a stable Internet connection. Online wallets are also linked to exchanges, making trading for fiat money and other cryptocurrencies quicker and easier. However, as you are reliant on a third party to store your Bitcoins, any security attack on the Web site will also affect your account.
3. Mobile Wallet
Most desktop and online wallets have a companion app so you can check your Bitcoin balance and make transactions on your phone. Some stores already accept Bitcoin as a mode of payment, and a mobile wallet makes it easier to make the transaction instead of loading the online wallet through a browser. Like the desktop and online wallets, mobile wallets are prone to security risks.
4. Hardware Wallet
Hardware wallets come in the form of external hard drives and can be connected to any computer in order to make transactions. It is highly recommended for storing huge amounts of Bitcoins. Because it is not connected to the Internet, hackers will find it difficult to infiltrate your Bitcoin wallet. However, if you lose your hardware wallet or if it gets stolen, then you lose the Bitcoins that come with it.
5. Paper Wallet
It may look flimsy, but paper wallets are a more discreet way to store your Bitcoins. All you have to do is register in a Bitcoin paper wallet Web site, where they will send you supplies so you can print and set up your paper wallet at home. However, you must take care not to lose or damage your paper wallet, as you will lose access to all the Bitcoins in it.
How to Earn More Bitcoins
Mining is the most common way to earn more Bitcoins. Bitcoin miners keep the network secure by validating transactions before they are posted in the blockchain, and they earn Bitcoins in return. Mining alone doesn’t earn much, so people join mining pools where they mine together and split the rewards. It also takes time and resources more expensive than the Bitcoins themselves.
If you want to mine but don’t have the resources to do so, you can invest in cloud mining. The corporation will mine for you, and you will earn bitcoins depending on the amount that you’ve invested. Although this saves you costs, you must make sure the mining corporations are legitimate.
Now that you know what Bitcoin is, should you invest in it? It will be up to you to decide. With any kind of investment, investing in Bitcoin comes with risk. But with risk comes reward, and who knows? Taking that risk might earn you huge rewards.