Bitcoin has been around since 2009. So it is a pretty old kid on the block now but still continues to make waves. Don't believe me? Well, a recent study reveals - bitcoin had a market capitalization of more than $ 782 billion as of September 29, 2021. Moreover, between 2012 and 2020, bitcoin has gained 193,639.36%. It appears to be surreal, but it's certainly true. 

Even though bitcoin has become a huge topic of discussion today, it still appears confusing to many (including you). 

I know you are super excited to invest in bitcoin. But at the same time, you must be really confused and completely clueless about what bitcoin actually is, how to use it, why everyone's crazy about investing in bitcoin, how one can make money out of it; and a lot more. Right?

I get that. The thing is - bitcoin is a complicated subject, and if you are thinking about investing in bitcoin, it can be really hard to know where to start. But don't worry! I have got your back.

Honestly speaking, I have been in your shoes once. When I started with bitcoin, I was a complete noob and didn't know how to start and where to go. I was directionless. Fortunately, you're not!

Because ...

I've once again put myself in a beginner's shoes and prepared this guide for all the rookies out there. This beginner's guide to bitcoin will provide you with everything that you need to know about bitcoin before making any decisions. Basically, this guide will teach you everything you need to know about bitcoin so that you are not confused anymore while investing in bitcoin.

So with no further delay, let's quickly get right into it and begin! 

Shall we? Perfect!

What Is Bitcoin, Exactly?

Bitcoin is a digital currency created by Satoshi Nakamoto (speculated to actually be more than one person). It can be used as a means of exchange, but it's highly known for transferring funds across borders quickly and anonymously.

It's a type of cryptocurrency, defined as a digital currency that uses cryptography (the process of converting legible information into an almost uncrackable code to track purchases and transfers). Bitcoin can be traded for goods and services, bought with traditional money (dollars/pounds), or exchanged for other currencies.

A Brief History of Bitcoin

The history of bitcoin is a fascinating one, and it's worth learning about if you truly want to understand why this digital currency has taken off like no other before it. The history of bitcoin dates back to 2008 when Satoshi Nakamoto published a white paper called "Bitcoin: A Peer-to-Peer Electronic Cash System." 

Satoshi Nakamoto said, quote - “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party,” unquote. Since then, bitcoin has come a long way. Today, big giants like PayPal and Microsoft accept bitcoin payments.

How Bitcoin Actually Works

This is a question that often causes confusion. Even though it can seem complicated by how complex the technology is, in reality, bitcoin is quite simple to understand how it works.

Bitcoin uses what's called public-key cryptography when transactions are made between users. Public key cryptography involves two mathematically linked keys - one public and one private (a string of numbers). 

The link allows for secure data sharing through encrypted codes across an unsecured network like the internet, where hackers may be lurking around every corner looking for their next prey! One user creates a message with their own personal "private key" before sending this information over the internet, which gets decrypted only once received at its intended destination using another unique "public key."

Why Do People Buy Bitcoin?

Straightforwardly speaking, people buy bitcoin because it's a secure way to store value. Bitcoin is decentralized. That means no single authority can control or manipulate the coin for their own benefit. It doesn't take a long time to send and receive bitcoins from one person to another anywhere in the world.

Other than being a safe and secure mode of storing value, there are various reasons why people choose bitcoin over traditional currency, such as quick and easy transactions anywhere in the world. 

These are some of the biggest reasons why people buy bitcoin. Bitcoin is undoubtedly great; give it a try yourself. It's more than an investment; it's an adventure!

Where Can You Buy Bitcoin?

Honestly speaking, it can be quite challenging and overwhelming when the question arises - where to buy bitcoin? There are many exchanges out there, and the one that can work wonders for you will depend on where you live (and where your customer base is) as well as what kind of trader/investor you're looking to become (day trading vs long term holding).

Having said that, if you want to buy bitcoin, some best options include:

To buy bitcoin, you need a marketplace where sellers and buyers meet. In the world of cryptocurrencies where there is no central authority or office that can regulate these exchanges. One advantage of buying from a big player in the market is better regulation and protection for users if something goes wrong.

What Are the Pros of Buying Bitcoin?

You must be wondering - why you should invest in bitcoin, what are the benefits of buying bitcoin, what perks can it offer to you if you opt for it, and so on. Well, keeping all your questions (full of curiosity), I have handpicked some of the greatest benefits of buying bitcoin.

Have a look:

  • Dodging - Avoid the prying eyes of government officials and other nosy third parties.
  • More Control - Gain control over your own money to avoid overdraft fees, etc.
  • No Dependency - Ain't depend on stock market fluctuations or interest rates set by banks.
  • Fully Anonymous - Anonymity when buying bitcoins online (or at least a greater sense of privacy).
  • No Intermediary - No middlemen are involved in transactions between buyers and sellers/miners which leads to faster processing times for payments and transfers.
  • Zero Fees - There are no bitcoin transaction fees to worry about.
  • Ease of Accessibility - Since you don't need a bank account or credit card information to purchase bitcoins - all you need is an internet connection and a physical address where the coins will be sent.
  • Transparency - It offers transparency of transactions for everyone on the network due to the verification process.
  • Fully Secured - Transactions cannot be reversed once they have been completed which makes them secure from frauds/scams if done correctly.
  • High Flexibility - Bitcoins offer flexibility in that payments can be made with minimal processing fees (much less than those charged by most financial institutions).

What Are the Cons of Buying Bitcoin?

Today, it is easy to buy bitcoin. There are various exchanges where you can purchase bitcoins with a bank account or credit card. It's also pretty easy for people who already own bitcoin to sell their coins on these same platforms. However, there are also some cons of buying Bitcoin which you shouldn't ignore, and you need to consider them before making your decision.

Have a look:

  • Risks Associated - Possible risks associated with investing in bitcoin, especially for first-time buyers.
  • Price Fluctuations - Potential price fluctuations make it difficult to determine the value or cost of a single coin at any given moment.
  • Taxable - Buying Bitcoins is considered taxable income by the IRS, so any gains made must be reported and can be taxed heavily.
  • No Guarantee - There's no guarantee that bitcoin will continue increasing in value over time which could ultimately result in huge losses.

How Can You (As a Beginner) Make Money from Bitcoin?

To make money from bitcoin, you need to first invest in them, keeping all your research and risks in mind. There are two ways to do this - buy and sell bitcoins or start mining operations.

By Buying and Selling Bitcoins

With this option, you exchange your dollars for bitcoins which will be placed on a wallet ( where cryptocurrencies can be stored ) and offer them at a higher price than what they were bought for. If it happens that people want bitcoins as badly as you do, they will buy them off of you; if not - there is no way you could get your investment back but only lose some money on fees while exchanging currencies.

With Mining Operations

As for starting mining operations, the procedure involves setting up computers with powerful processors which help users solve complicated algorithms to get new bitcoins. Mining operations are more profitable if you join a group of people who work together, whereas the earnings will be shared between all participants according to how much power they have contributed.

How to Store Your Bitcoins? Hot Wallet vs Cold Wallet

When it comes to storing your bitcoins, there are two main types of wallets - "hot wallet" vs "cold wallet" that you can use. 

Let's go over what it means for a bitcoin wallet to be 'hot' or 'cold'. 

A "hot" wallet refers to any type of digital currency storage solution accessed via an internet connection, while a "cold" wallet can refer to either hardware devices or paper wallets where the currency is stored offline.

In other words, a hot wallet is a bitcoin wallet that is stored online on a computer or mobile device. However, a cold wallet refers to any type of wallet that is offline and not connected to the internet.

Final Thoughts

Bitcoin is a revolutionary, digital currency that allows you to make transactions without the use of any third-party institutions. I hope this beginner's guide to bitcoin has helped you understand everything crucial about bitcoin. I covered almost everything from what bitcoin is and how it works to where you can buy bitcoins and store them securely.

Honestly speaking, my motive was - by the end of this beginner's guide to bitcoin, you all should feel confident enough to invest in bitcoin. And I think I have accomplished that. Right?