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The Beginner's Guide to Bitcoin

Tuesday 12th December 2017 | Osh

You would have to be in the deepest, darkest cave to not have heard about the quite unbelievable rise in the price and value of Bitcoin lately. 

Many people are still asking questions. What is it? Where does it come from and should I buy some?

 

What is Bitcoin?

Bitcoin is a cryptocurrency, which is a digital currency. It can be passed from one person to another with codes or "addresses". They are usually stored in "wallets" either online, on your phone, on your computer or on some other hardware device. Bitcoin was  created in 2009 by an unknown person using the name Satoshi Nakamoto , who realised there was a way for humans to make transactions without a middleman.

Perhaps Satoshi was upset with banks but Bitcoin was created as a software that sits on the “Blockchain”. The Blockchain is simply a network of computers around the world. Most software and websites run on one PC or server which can be hacked.

Basically, Bitcoin lives on all the computers that mine it. It is one giant and accessible database that continuously logs all the transactions and also logs who owns each bitcoin or each piece of one, as each one is divisible. The database is on every computer across the world that mines it, in a ‘blockchain’ which makes it immutable, unhackable, and also uncontrollable.

So when someone buys or sells Bitcoin or a piece of one, every computer in the world that is on the Bitcoin Blockchain is instantly updated with the information pertaining to the amount which has been transferred and which user it has been transferred to.

 

How is it different from fiat currency like pounds and dollars?

Like pounds and dollars, Bitcoins are not connected to any tangible asset. Unlike pounds and dollars though, which are often printed at will, there is a finite amount. No-one can just print more to manipulate the market. There are 21 million of them and that’s it. When they are gone they are gone. Hearin lies the value.

The value of bitcoins are pretty much governed by the rules of supply and demand. That means that while people buy them and sell them at a certain price, that is what they are worth. So the more people buying and selling them, the more demand there is. The more demand there is, the more the value goes up. No one can magic up more bitcoin, so everyone has equal rights to bitcoin.

 

Who is in charge?

Many people are attracted to the currency because of its decentralised nature. Currency has always been something that the general public has never had any power over. The elite have always had control of the money, printing more cash at will and with impunity. This is something that has often caused deflation and led to financial collapse, a situation that has become increasing frequent in modern times.  

Yet the global rise of technology powered by the web has now manifested in the world of currency, which makes control of currency no longer a far-fetched daydream for the average joe. It’s completely turned the tables for the general public by cutting out the middlemen - bankers, investors and administrators. It genuinely has the ability to give the power to the people.

 

Why do people like Bitcoin?

Many people invest in the philosophy of decentralisation. No one person, country, government or organisation is in charge of Bitcoin.

Cryptocurrencies are borderless. When China tried to regulate it, Chinese all over the world purchase Bitcoin on behalf of their family members back home. Bitcoin was crucial to farmers in Venezuela as one of the few ways they could put food on the table when the economy collapsed .

Bitcoin allows for a significant transfer of wealth from the few to the many. This is why mass media and finance often try their hardest to discredit Bitcoin. Many millionaires and some billionaires have made their wealth from Bitcoin and many of these early adopters were not part of the 1% of the population that is the most wealthy. In some ways, it evens the playing field. Bitcoin is an equal opportunities investment.

Cryptocurrency can enable banking and lending facilities to those often denied them. It is a judgement free opportunity, open to all, and provides a good incentive for people to save.

 

What can I use Bitcoin for?

Of course, since its inception enthusiasts have been buying and selling things with Bitcoin. You can purchase from websites such as scan.co.uk, even buy a house, use over 18 ATMs, in London. It is used far and wide. BUT, due to its huge popularity and because of the fees and the time it now takes for a transaction, it is now very unlikely to be the digital currency we all use in the future. We may well use it as a store of value like the way gold has been treated over the ages. 

 

How can I make money from Bitcoin?

Anyone can invest in Bitcoins, and usually with fruitful results. In 2009 when it had first started, Kristoffer Koch bought 5,000 Bitcoins for a tiny sum of $27. That is now worth over a staggering $78 million (not a bad investment!). He is just one of thousands that have made staggering profits through Bitcoin, and just a quick surf on the internet can guide you to grabbing your slice of the pie. A good place to start is www.coinbase.com.

Remember the price goes up and down dramatically. The term used is “The price is volatile”. If you are going to invest follow the rule, buy low and sell high. Historically, so far, it has been a bad idea to sell anytime. (Unless of course you manage to buy it back at a lower price!)

You should only ever invest what you can afford to lose.

This is JUST a beginners guide so of course, you should Do Your Own Research (DYOR).

This article is NOT financial advice

I have persuaded a few of my friends to invest in Bitcoin and other cryptocurrencies, starting with a small amount of £100. All of them now have more than they started with. Invest a bit then watch the market. See what happens.

 

Am I too late to jump on the bitcoin rollercoaster?

Bitcoin (or BTC) started in 2017 worth around £596 and as of 12th December 2017, it’s worth a whopping £13,348! For this reason, understandably many people have kept hold of their Bitcoin. As more people hear about the rises and invest the price has been going up. But so far less than 2% of the world owns Bitcoin. Some say one Bitcoin may be worth $100,000 at the end of 2018. John Mcafee of the Mcafee antivirus fame has said if Bitcoin is not worth $1,000,000 by 2020 he will eat his own dick! So there may still be a chance to make a penny!

Since it became available to the public, Bitcoin has had multiple 'crashes' whereby it's gone down 50% or more, but each time it has regained and surpassed its previous value. Long term, year on year, it has only been rising. It will  in all likelihood crash again, but if it follows its historical trends, Bitcoin will continue to surpass expectation and become more valuable than ever.

The longer crypto is around, the more it will be seen as a stable store of wealth, which Bitcoin has so far proven itself to be. It’s not a great currency though because it has high fees and transaction times can be lengthy, but that’s where other cryptocurrencies will come in.

We will talk about those in part 2. Happy Hunting (or mining as it were!)

 

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