INTRODUCTION TO BITCOIN – THE FIRST APPLICATION OF BLOCKCHAIN

1. INTRODUCTION TO BITCOIN – THE FIRST APPLICATION OF BLOCKCHAIN If you are new to the term Bitcoin, you will be interested in learning about it. You might have heard from your friends that they have made great returns from investing in this cryptocurrency. You can learn more about it here:  What is Bitcoin? Bitcoin is a kind of digital money. It holds the pride of being the very early introduction in this niche. Following this cryptocurrency, many such digital currencies started to bombard the market. The good thing about this cryptocurrency is that you can store it, exchange it and even you can use it to make payments like you use your regular currency. So, your question will be what makes it different from regular fiat currencies like Euro and US dollar for instance. The feature that makes it unique is its decentralized structure. Further, its opt-in model makes it special.

2.  How is Bitcoin Different from Regular Fiat Currency? Regular Fiat Currency has a centralized structure. The central bank of any country issues this fiat currency for the country. In this regular currency other than liquid cash, investors transact via intermediaries like banks and payment gateways. But, Bitcoin on the other hand is a digital and opt-in currency. No central authority control it. Rather, the consensus or the wish of its users control it. It encompasses a growing group of people and all of them give consent at their own will to the rules of the Bitcoin protocol. Also, the participants use a decentralized infrastructure for making peer-to-peer transactions. Further, the good thing about using this currency is that there is no need to ask permission to use it. Moreover, there is no risk of being removed from the system.  The Launch of Bitcoin Following the Blockchain Technology: Bitcoin holds the pride of being the first application in blockchain technology. This technology is presently appreciated and being used by many industries. But, the first-ever niche to be benefited from this technology is a digital currency. Satoshi Nakamoto, who is believed to be the mastermind behind Bitcoin is also known to be the person behind blockchain technology. While many believe Satoshi Nakamoto to be a single person, some believe that it is the name of a group of people that worked on Bitcoin. The first blockchain was made a concept in the year 2008 by Nakamoto. From there, technology has improved a lot. The first whitepaper about this technology was released by its founder in 2009. In this white paper, he described how the technology has been equipped well for improving digital trust. The reason he claimed for the same is the decentralized nature of this technology. It means that nobody can ever gain control over this technology. The founders of Blockchain technology worked on it between 1991 and 2008. In 2009, Satoshi Nakamoto released the white paper for Bitcoin.

3. It was only in 2010, the first bitcoin transaction of purchase of 10,000 Bitcoins or BTC happened. Only after Bitcoin, the next popular cryptocurrency Ethereum’s white paper was released in 2013.  How Does Bitcoin Get Value? Bitcoin has value for a couple of important reasons. The first reason is its set of features. Due to its safety and other related features, people use it as a means to store and exchange value. The second reason is that a group of people accept that it has value. In the olden days, people used everything including bottle caps and seashells as money. Nevertheless, the most enduring form of money is gold. Do you know why? It is divisible, durable and it is rare. These features motivated people to use gold as a useful method not only to store but also to exchange value. Often, bitcoin is compared to gold as it shares similar characteristics. These features include:  Durability  Divisibility  Restricted supply The durability of Bitcoin is ensured by the fact that the ownership of this digital currency is tracked by a huge internationally distributed network of independently functioning computers. This ensures that this digital currency is not lost.  Its divisibility is ensured by the fact that it is possible to divide a single bitcoin into 100 million pieces.  The restricted supply denotes that there will be only 21 million supply of bitcoins. In short, Bitcoin brings the monetary properties of gold to the digital era. Not only for those reasons mentioned above but also for many other reasons for the value of Bitcoin like those mentioned below: You can send and receive this digital currency with ease. Moreover, you can do this securely as you send an encrypted email. It is possible to verify the authenticity of bitcoin with ease. Of course, bitcoin is comparatively new than gold. The network of bitcoin is benefiting greatly from the speed and scale of the modern internet. The number of people adding value to this digital currency has grown considerably right from its inception. Its value is now nearing the value of gold and it can even go beyond.

4.  Bitcoin Creation: Bitcoins get into the virtual world by the validation of transactions on the Bitcoin network. This is done by a process known as mining. People engaged in the validation process are referred to as miners. When miners verify a combination of transactions successfully, they are awarded a value for their work. They get this value along with the transaction fee included in each. To keep the network secure, safe and stable, the miners are recommended to follow a set of cryptographic rules.  How to Earn, Use and Store Bitcoin?  Earning Bitcoin: It will be possible to earn bitcoin in multiple ways. You can earn bitcoin as a miner. Also, you can get it transferred from another entity or person. Moreover, you have the option to buy or exchange it using a traditional payment method that you use for your fiat money.  Storing Bitcoin: When it comes to storing bitcoin, it is possible to do it only when you have a Bitcoin Wallet. You can download a secure bitcoin wallet from your smartphone, computer or other mobile devices. Here, each bitcoin wallet stores your private key. So, you can sign transactions that help you send bitcoins to other participants.  Using Bitcoin: When it comes to using bitcoin, you can use this digital currency as a method of payment for services and goods. Many retailers these days have started accepting payments in bitcoin. It will not be an overstatement to say that its commercial use is expanding in an ongoing fashion. When talking about the usage of bitcoin, you can use it as a currency for international remittance as well. Otherwise, you can use it for investment purposes. Even, you have the option to use it as a tradable instrument or you can simply own it. You can also buy and sell this digital currency in exchange for a fiat currency like the US dollar and UK dollar. The premiums for Bitcoin differ across currencies. This nature of this cryptocurrency helps with the creation of arbitrage opportunities. When compared to other cryptocurrencies, bitcoin is the most liquid. Above all, its adoption by institutions and individuals continues to improve.

5.  Is Investing in Bitcoin A Good Option? If one of your friends recommends you to invest in Bitcoin, you might naturally get a question about the safety of your money. Is bitcoin a good investment? You know that not only Bitcoin but also no other investment can be stated as good or bad. It depends wholly on the level of risk you can tolerate. Further, it relies on your monetary goals and investment strategy. Before you choose to invest in Bitcoin, you should consider your financial goals and should identify what you wish to achieve from your investment in this digital currency. Do you think that you should use this investment as a passive source of income? Otherwise, do you wish to become a full-time investor? Apart from these things, you might also be thinking about saving money for your retirement. Based on the purpose of your investment, the level of risk you can handle will differ. So, you can decide whether this investment will be the right move for you.  Invest for Long: From the paragraph above, you might have understood that Bitcoin is a high-risk investment. The reason is its volatile nature. There is no central regulator to make sure that its value remains stable. Further, it is not supported by any physical asset like gold or silver. You might wonder why Bitcoin is volatile. The reason is that its value can increase or fall drastically within a day. At times, the value change can happen within a few hours as well. When many people buy this digital currency at the same time, its value will increase. On the other hand, when many owners sell it at the same time, its value will decrease drastically. Further, to make a considerable profit in this digital currency, you will have to wait longer. If you can wait, it is a wonderful investment. Otherwise, it is not a good investment option as returns with higher margins can take a longer time to reach.  How to Invest in Bitcoin? If you have decided to invest in bitcoin, you will be interested in knowing the process involved. You can do this investment following the 5 easy steps given below:

6. 1. Join an Exchange: As the first step, you should identify, where you wish to purchase bitcoin. The easy method that most investors follow is to use crypto exchanges. As it is an open-source technology, there is no official company from where you can buy this cryptocurrency. You will come across different exchanges that help with buying and selling this cryptocurrency and many other cryptocurrencies as well. Like a stock brokerage, these exchanges function as middlemen for cryptocurrency investing. In case, you decide to buy it from an exchange, you should decide on the exchange to choose. Many exchanges have gained immense popularity due to the facilities and features that they offer to investors. 2. Get a Bitcoin Wallet: You should own a wallet to store the Bitcoins you buy. When talking about wallets, you will come across two types. They are cold and hot wallets. A hot wallet is a crypto wallet that is owned by an exchange or by a provider. A hot wallet will be beneficial as you can access your account from a software program via the internet. A cold wallet is a piece of hardware that will store your coins. It is a physical piece of portable device like a flash drive. 3. Connect your Wallet to your Bank Account: When you connect the bitcoin wallet to your bank account, you can easily transfer the profit you get from the sale of bitcoin to your bank account. Not only to the wallet but also the bank account can be linked to your crypto exchange account. 4. Place your Order: Now, with your crypto account and wallet, you are now ready to purchase bitcoin. Here, you need not have to worry that a single bitcoin costs huge for you. The reason is that almost all exchanges allow you to buy these coins in fractions. Your initial investment can be as less as Rs.1000 as well. 5. Manage your Investments: Once you have purchased Bitcoin, you can use your coins to pay for your online transactions. If you wish to earn better returns, you can hold the coins in your wallet as long as you can. Then, once, the value reaches a good level than what you invested, you are now ready to sell. Even, you have the option to use the crypto exchange to do day trading. It means that you can buy not only bitcoin but also other cryptocurrencies and can sell them daily.

7.  Conclusion: Bitcoin, the first application in the blockchain is gaining more and more popularity and value. Any change in the value of this cryptocurrency has an effect on the value of other cryptocurrencies as well these days. So, you can expect to make great returns by investing in this cryptocurrency and holding your investment for longer.