When it comes to Bitcoin, there seem to be two camps—those who are excited about the cryptocurrency and eager to invest, and those who are confused, perhaps even a little intimidated. If you find yourself in the latter group, don't worry—you're not alone. The world of Bitcoin can be confusing for those who are just getting started. But with a little bit of research, it doesn't have to be. Here's a beginner's guide to Bitcoin.
What is Bitcoin?
In the most basic terms, Bitcoin is a digital asset and a payment system. It's often referred to as a cryptocurrency, which is a type of digital or virtual currency that uses cryptography for security. Transactions are recorded on a decentralized public ledger called a blockchain. And like other assets (think stocks or real estate), you can buy and sell Bitcoin for profit.
How Does BTC Work?
Bitcoin works by allowing users to transact with one another directly, without the need for a third-party intermediary like a bank or financial institution. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them—21 million—so it can be thought of as a scarce commodity, like gold. This makes them different from fiat currencies (like the US dollar), which can be printed by central banks at will. So, when people talk about Bitcoin being volatile or unstable, what they're really referring to is the price fluctuations that occur on exchanges as people buy and sell it.
Why Do People Use Bitcoin?
People use Bitcoin for all sorts of reasons. Some see it as an investment opportunity, buying Bitcoin in hopes that its value will go up so they can sell it at a profit down the road. Others use it as a way to send money to friends or family members overseas without having to pay costly international transaction fees charged by traditional financial institutions. And still, others use it simply because they like the fact that it's not controlled by any government or company—its decentralized nature appeals to them for personal or political reasons.
Bitcoin is one of the hottest topics in the world right now—and for good reason. It's a revolutionary new way of handling transactions that have the potential to upend the traditional financial system as we know it. But if you're new to the world of cryptocurrency, all of this might sound confusing or even intimidating. Luckily, it doesn't have to be. With a little bit of research, you can quickly get up to speed on all things Bitcoin.