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The Basics of Bitcoin: What Is It? How to invest?



What is Bitcoin?

The crypto market can seem like a seven-headed bug to many people, and if you still don’t have any knowledge about this market, know that this is perfectly normal.

Bitcoin is a digital asset used to buy and sell products and services online, basically a means of payment similar to the fiat money we use today. Unlike other currencies such as the real, the euro or the dollar, today bitcoin only exists in a virtual environment and is stored in digital wallets.

Bitcoin emerged in 2009 as a way to facilitate online commerce. We know very little about its creator, except that it was a programmer or group of programmers who used the pseudonym Satoshi Nakamoto. Satoshi is also the name of the smallest fraction of a Bitcoin, similar to a penny, for example.

Bitcoin is a decentralized currency, that is, it is not administered or controlled by any financial institution such as a bank to arbitrate the exchange of money between two people. Due to decentralization, Internet transactions are faster and cheaper, and cryptocurrencies can be used in any country without restrictions or special conditions.

Due to its rapid appreciation, Bitcoin has become the preferred application of many with high income potential. Thousands of people have multiplied their fortunes by buying Bitcoin, but it is important to understand how this market works before venturing into the world of cryptocurrencies.

Bitcoin was the most profitable investment in the last 5 years, and its great appreciation is due to the wide adoption by many companies and even countries like El Salvador. Since Bitcoin values ​​itself through the law of supply and demand, these adoptions fully favor Bitcoin’s popularity, thus attracting more investors, which increases the market capitalization and, as a result, increases the price of the cryptocurrency.

A bill was recently approved to regulate the crypto market in Brazil, this is something that will become common in the coming years, with the great adoption of Bitcoin, many countries tend to regulate this market.

How does Bitcoin work?

The foundation of the entire Bitcoin ecosystem is cryptography. She is the one who keeps the system safe and in full operation, which ensures that all transactions are carried out securely and anonymously. This is why Bitcoin is also known as a cryptocurrency.

In a simplified way, Bitcoin is stored in an online digital wallet or even in physical wallets that store cryptocurrencies without the need for internet. Bitcoin works through a complex, unique code that cannot be changed in isolation.

The entire Bitcoin ecosystem is based on the blockchain network. Blockchain technology is nothing more than a public ledger that records all transactions in Bitcoin, so when the record is made in one of the network’s information blocks, it becomes permanent and unchangeable.

In a more simplified way, the blockchain records information such as: how much Bitcoin was sent, which wallet it sent, which wallet it received, when the transaction occurred and where in the world it is in the ledger. This shows that transparency is one of the most important features of the blockchain network.

As the currency is not administered or regulated by any financial institution, the processing of transactions is done by so-called miners.

What are miners?

Some people think Bitcoin mining is similar to gold ore mining, but that’s not how it works. Cryptocurrency mining is the name given to the process of validating and adding new transactions to the blockchain.

In other words, mining takes care of circulating more cryptocurrencies, just as central banks do by “printing” money. The main difference is that with a digital currency like Bitcoin, there is no authority controlling the process – everything is controlled by an algorithm. What makes Bitcoin a decentralized currency.

Bitcoin’s algorithm or consensus mechanism is called proof of work or proof-of-work in English. This protocol defines the operational steps of the system, such as what to do when a transaction is executed, organize it in a specific format and how to perform verification and validation, inserting and recording the information in the blockchain network permanently.

This consensus mechanism started working alongside Bitcoin and is used as the basis for validating thousands of other cryptocurrencies today.

Is Bitcoin safe?

Blockchain technology is revolutionary and has applications even outside the world of cryptocurrencies, being one of the main technologies responsible for the security of Bitcoin transactions. Decentralizing information (ie not centralized on a single server) helps prevent piracy.
Operations are grouped in blocks of information protected by a strong encryption layer. For every transaction that takes place on the network, a copy of each transaction is simultaneously sent to thousands of computers around the world. This makes tampering with the system basically impossible.

Another point that reinforces the security of the Bitcoin ecosystem is the fact that since its creation until today, there has not been a single hacker attack, instabilities or any other type of intercurrence on the network. Making the ecosystem extremely safe.

How to buy Bitcoin?

It is possible to buy Bitcoin in two different ways. The traditional and best known way is through a cryptocurrency brokerage. Brokerages or exchanges are intermediaries in negotiations for buying and selling cryptoassets, in a more simplified way, it is a platform where buyers and sellers connect, intermediating these negotiations.

Another known way is the purchase of Bitcoin via P2P (Peer-to-Peer). Basically it is someone who holds Bitcoin in their wallet, and sells it to someone else, receiving fiduciary money in the form of real or dollar. The process takes place in a similar fashion to a bank transfer, where the selling party sends Bitcoin to the buying party’s wallet, which in turn sends the amount in fiat currency to the selling party. This same process can occur using cryptocurrencies, for example, one person sells Bitcoin to another, who pays in Tether USDT for example.

Is it worth investing in Bitcoin?

In summary, Bitcoin is, basically, a means of payment just like the real, euro or dollar, however, its ecosystem is completely decentralized, in this way, its security becomes one of its main pillars, in addition to which Bitcoin can be sent from a wallet in Brazil to anywhere else in the world in minutes, unlike fiat money which involves several bureaucracies. Another factor that further increases the security of the ecosystem is the use of blockchain, an extremely secure technology that is used as the basis for several projects in the crypto world.

Bitcoin has a bright future ahead of it, this is a fact, given that it has been adopted by large companies and even countries, however we are in a pessimistic economic moment around the world, but that does not change the fact that Bitcoin is indeed a great investment for the long term. Since even in lows, those who invested in Bitcoin 5 years ago are making an excellent profit.

Therefore, even though Bitcoin is a great investment, do not go too thirsty for the pot, manage your investment portfolio well and always diversify well, to reduce risks and maximize your profits.

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