A beginner’s guide to the shiny world of bitcoin
What is Bitcoin?
Although bitcoin has grown in popularity in the digital space (honestly, who hasn’t heard of it at this point?), the currency isn’t really that tradable in the traditional sense. Simply put, you won’t be seeing bitcoin ads on TV anytime soon (if ever).
And although you may be silently wondering: what is Bitcoin? Let’s start at the most rudimentary level. Bitcoin is a currency, just like the dollar and the euro. And as currency, it can be used at certain online stores and brick-and-mortar retailers to buy goods and services.
On the other hand, Unlike traditional currency, bitcoin is not a physical thing you can hold. While other currencies around the world all have physical denominations such as coins and bills, bitcoin is completely digital – you can’t carry ‘bitcoins’ around in your wallet and take them out to pay for your groceries.
As a fully digital currency, bitcoin exists solely in the digital space, which frankly can make some people wary of its security and value – after all, how can you trust a currency that you can’t physically keep on you ? However, what makes bitcoin hold its value is its creation process.
Here’s how it works: each bitcoin unit consists of a unique series of complex algorithms and codes that cannot be replicated or counterfeited. This uniqueness is what makes each bitcoin unit so valuable, and also the biggest difference between bitcoin and other traditional currencies.
Another big difference is one that you probably already know – bitcoin is not as widely accepted in stores as traditional currencies. That said, more and more places and providers are allowing it as a valid form of payment.
A third difference is that bitcoin is decentralized, while most other currencies are not. What does this mean? Well, when a country needs more money (eg dollars), the country’s bank will work with the government to decide how much more money to print, and when. But it is precisely this process that has led to many of the world’s currencies depreciating in value; as your parents will often remind you, how much a dollar (or whatever currency your country uses) is worth now is not equivalent to what it was worth 20 years ago. This effect is perhaps most visible when you look at a country’s housing market where the price for buying a home today is significantly higher than it was in the past.
In contrast, there is no large central institution that calls the shots with bitcoin because the currency operates independently.
How Bitcoin is made
But wait, how is bitcoin actually made if there are no officials running the show? To understand that, you must first understand how bitcoin changes hands. When you and your friend trade bitcoins, the process is facilitated by a network of highly complex security protocols that prevent anyone from being scammed or from duplicating coins.
To facilitate these transactions, you need hardware. How do you get this hardware? “bitcoin miners” build computers that can keep the bitcoin network alive, and in return they receive newly minted bitcoins. This keeps the minting process constantly regulated while ensuring that the network remains self-sufficient. All of this is an incredibly stripped-down explanation of the entire process, but it’s the basics you need to be aware of to start trading with Bitcoin Prime.
Some bitcoin miners only have a room or two full of computers dedicated to mining, while others have entire warehouses. Depending on how much and how quickly you want to expand, bitcoin mining can be quite an expensive business, so it is highly recommended that you learn as much as you can about Bitcoin Prime, their services, and the risks associated with cryptocurrency investment well in advance of commit your money.
Note: Coconuts Media is not a financial services company, does not provide financial advice and is not a qualified expert on the storage of digital assets – financial or otherwise. This article is part of a paid partnership with Bitcoin Prime and is for educational purposes only.
