Things You Should Know Before Buying Bitcoin
Bitcoin is a technical subject if you try to understand the inner workings of it. Most people don’t understand the backend of the Internet, but everyone uses it. Whether its for YouTube, Twitter or online banking, people of all generations use the Internet, and don’t even think about how it works.
Bitcoin is different. Bitcoin is value. And Bitcoin is intriguing, and there are things you should know about it before you buy it. After all, you never got the opportunity to invest in the Internet.
So, before you buy Bitcoin (BTC), like any investment, you should do some research and try and understand as much as you can about it.
A Few Basic Things You Should Know About Bitcoin
At its core, Bitcoin is more than just digital currency. Bitcoin operates on the simple premise of trust. It allows for the direct transfer of value between individuals, eliminating the need for any middleman.
Unlike traditional systems, Bitcoin thrives on decentralization. The protocol runs on thousands of nodes, with over a million mining devices working tirelessly. This decentralized nature ensures that power and control are distributed rather than centralized.
Miners and nodes are the backbone of the Bitcoin network. They’re essentially powerful computers that validate and record transactions. Every transaction is hashed onto the most recent block, and for a new block to join the blockchain, the network must reach a consensus, ensuring transparency and integrity.
Miners are incentivized through Bitcoin block rewards. For every block they solve, miners currently receive 6.25 Bitcoins. This reward is a thank-you for solving the complex cryptographic challenges presented by the Bitcoin protocol.
Your bitcoins are secured with a private key—think of it as the combination to a digital safe. Guard it zealously! When someone wishes to send you Bitcoin, you give them a public key generated from your private key. But remember, the private key remains just that: private.
Being open-source, Bitcoin’s code is available for anyone to view, modify, and duplicate. This has led to the birth of several “Bitcoin variants” with names like Bitcoin ‘XYZ’. But, they’re not the real deal. So, if you intend to buy some, make sure you’re buying Bitcoin (BTC).
“Store” Your Bitcoin on a Hardware Wallet
Just as you’d store your cash in a wallet or purse in the physical world, Bitcoin storage isn’t too different—though with a twist. Even though Bitcoins always reside on the blockchain, we often talk about “storing” them for practical reasons.
When someone suggests storing your Bitcoin in a “wallet,” they’re referring to a secure device that interfaces your unique Bitcoin addresses (both private and public) with your computer.
Two primary types of wallets exist: hardware and software. While software wallets are readily available and free to download, they’re more prone to cyber vulnerabilities like phishing and hacking.
In contrast, hardware wallets, like the Trezor or Ledger, offer heightened security. Their strength lies in their design: they never connect to the Internet, ensuring all transactions occur offline, away from prying eyes.
Rather than dealing with the intricacies of private keys, a hardware wallet provides users with a seed phrase—a lifeline if you misplace your PIN or lose the wallet.
But what if you do misplace the physical wallet? Fear not. The actual Bitcoin remains safely on the blockchain. Should you lose or damage your hardware wallet, simply get a new one and input your old seed phrase. Voilà, your Bitcoin returns.
A word to the wise: treat your seed phrase with utmost care. Think of it as the master key to your digital treasure. Secure it in multiple places and only let the most trusted individuals in your life in on its location.
Other Things You Should Know About Bitcon
Bitcoin Price is Volatile
Bitcoin’s price, known for its rollercoaster-like fluctuations, is one of its most talked-about characteristics. On any given day, its value can swing by 10-15%, with 5% variations being quite routine.
Interestingly, in recent months, Bitcoin’s volatility was even lesser than that of the Nasdaq—though such stability isn’t its usual modus operandi. Its relatively small market cap is a key reason for such dynamism.
If you’re someone who finds these wild rides disconcerting, especially when stacked against the steadier traditional markets, it might be wise to tread lightly. Always remember the golden rule: only invest what you’re prepared to lose.
Bitcoin Is Not Anonymous
Contrary to popular belief, Bitcoin isn’t anonymous. While it has unfortunately been tagged as a favorite for illicit activities on the dark web, the reality is quite different. Every Bitcoin transaction is recorded on an open ledger, available for anyone to view.
Each Bitcoin address is unique, represented by an alphanumeric string. Though these addresses don’t carry names, ensuring user privacy, the anonymity can be pierced if an individual makes a purchase tying a name to an address.
Criminals who’ve relied on Bitcoin’s supposed anonymity, including an FBI agent involved in the Silk Road case, have found themselves behind bars. So, if you’re thinking of a discreet monetary tool, physical cash remains undefeated.
Bitcoin Payments are Irreversible
In the world of Bitcoin, there’s no ‘undo’ button. Once a transaction gets the green light, it’s cast in stone. This irreversible nature demands utmost caution when sending bitcoins. A small slip-up in entering the address can lead to an unintended recipient getting your funds, with slim chances of retrieval.
Thankfully, the Bitcoin protocol has safeguards against typos. But, a manual triple-check never hurt anyone!
Bitcoin is Programmable Money
One of the exhilarating prospects of Bitcoin is its potential as ‘programmable money.’ A currency should be durable, divisible, portable, uniform, hard-to-forge, and widely accepted.
Bitcoin checks all these boxes and offers something traditional currencies don’t—extensibility. Current transaction speeds might render Bitcoin a tad sluggish, but solutions like the Lightning Network promise to supercharge it.
This layer two program can reduce transaction times to milliseconds while cutting costs to mere fractions of a penny. The decentralized, trustless nature of Bitcoin, combined with its potential as a platform, sets the stage for unprecedented innovation in the financial world.
Things You Should Know: Bitcoin is The Future
Btcoin is an exciting innovation. It’s decentralized, it’s trustless and it allows people to send value to each other without permission from any third party.
That being said, it’s a departure from the conventional concept of money. A misplaced transaction could mean bidding farewell to your precious BTC, so exercise caution. And while it provides privacy, don’t mistake it for anonymity—it’s not the cloak of invisibility some perceive it to be. Criminals, take note: Bitcoin might just be your downfall.
As with all disruptive technologies, Bitcoin will compel industries to adapt or risk obsolescence. Think back to the internet’s impact on print media and postal services. Bitcoin is poised to instigate similar industry revolutions.
If you’re considering venturing into Bitcoin, brace yourself for its price rollercoaster. However, such volatility is typical of emerging technologies. So, if you’re here now, you’re ahead of the curve, witnessing the dawn of a new financial era.