You’re not alone if you have ever heard of Bitcoin and aren’t sure what it’s all about. There’s a lot of conflicting information out there, and the whole subject can be pretty confusing if you haven’t studied it in-depth yet.
However, understanding the basics of this innovative digital currency can help you decide whether or not it might be worth investing in yourself, especially since Bitcoin prices continue to skyrocket into the stratosphere.
Read on to learn more about how Bitcoin works, where it comes from, and how to invest safely in it.
What is Bitcoin?
A digital cryptocurrency that was created by an anonymous coder using the alias Satoshi Nakamoto.
The coins are mined by computers solving complicated math problems and then sold online on exchanges where they can be bought with a traditional currency like dollars or yen.
It’s also possible to earn bitcoins by lending them out through a process known as bitcoin lending.
Mining is getting increasingly harder over time, and so miners are constantly looking for new ways to optimize their efforts and make more money from their investments.
How do I get Bitcoins?
There are many places to buy bitcoin. You can purchase them using traditional fiat currency (dollars), trade for them on an exchange, or use a service like LocalBitcoins and meet up with someone locally.
You can also start mining for coins. The most popular method is through an app called Coinbase that lets users link their bank accounts directly and make purchases via credit card.
It will then convert your Bitcoins into USD for further spending, which has its own upsides and downsides. Some merchants may not want to deal with digital money, so your options are limited there.
But if you live where Coinbase operates, it’s a great option since it’s both easy and cheap to buy/sell Bitcoins through their service.
If you don’t want to get into mining but still have access to a high-speed internet connection, consider buying Bitcoins through a cryptocurrency exchange.
If you live outside of North America, these exchanges aren’t as common, but they exist worldwide.
Keep in mind that just because an exchange accepts cash deposits doesn’t mean they’ll accept other forms of payment.
In some cases, it might be possible to purchase Bitcoins from individuals who already have them and are willing to sell at whatever price they choose-but proceed with caution here since Bitcoin transactions are irreversible.
Where can I spend my Bitcoins?
There are more merchants accepting Bitcoins every day. Since Bitcoin is virtual money and exchanges are just a platform that transfers real money, you can use your Bitcoins anywhere.
Although most of us will probably stick with more traditional purchases and transfers for some time, things like online dating services are great venues for using your bitcoins.
It might sound counterintuitive, but many consider using bitcoins for adult entertainment sites safer than using credit cards or checking accounts.
Moreover, it gives you access to many options that aren’t available with other payment options.
How are new Bitcoins made?
A maximum number of Bitcoins can be created, which is 21 million. At present, there are close to 16.5 million coins in circulation.
New coins are generated through a process called mining. Every time someone successfully mines a block (in essence, solves a complex math problem), they receive 12.5 Bitcoins and transaction fees paid by everyone sending Bitcoins at that time.
Because blocks must have a hash below a certain target threshold (currently set at 1/1000th of all hashes combined), it’s extremely difficult-nearly impossible-to solve them at will.