What is Bitcoin: How do cryptocurrencies work?
The world has come a long way when it comes to currency and how we use it. We started off with the trading of products and services when time first began, before moving to bronze and copper cowrie at the end of the Stone Age, and slowly transitioning to paper and metal money over a period of hundreds of years.
However, with advances in technology and the cut-throat approach to an imminent cashless society, it was only a matter of time before a currency you could not touch or see became commonplace.
Years ahead of its time, bitcoin – a cryptocurrency and digital payment system – firmly established itself in the market in 2009. Volatile in its value, it could, and still can rise several hundred percent in a matter of days, before crashing in the same timeframe. Therefore, it’s clear to see that, at least in the beginning, investors were taking a punt when they forecast bitcoin value. You could buy one bitcoin for as little as USD 0.30, whereas now, one bitcoin is worth USD 7,133.23. It’s worth more than gold, more than every global currency, and continues to grow in popularity and usage on a daily basis. In fact, over 100,000 merchants and vendors worldwide now accept it as a valid form of payment.
So, what is bitcoin, and how do cryptocurrencies in general work? We’ll run you through the basics below, including how to buy bitcoins in Canada, and what you can expect when you choose to swap your physical cash for something that you can’t keep in your physical wallet.
What is Bitcoin?
As mentioned above, bitcoin is cryptocurrency as well as a digital payment system that gained its title as the first decentralized digital currency. Being decentralized means that it exists and operates without a central repository, an administrator, or an intermediary such as a bank. All transactions take place in the public market between various cryptocurrency users and are then verified by network nodes in a blockchain, also known as a public ledger, that anyone can see and access.
Just like most currencies, the bitcoin represents the full portion of the currency (just like a dollar), with smaller amounts of the currency (like dimes, pennies, cents) being known as Millibitcoin (mBTC) and Satoshi. A mBTC is equal to 0.001 Bitcoin, a thousandth of a bitcoin, whereas a Satoshi, named after bitcoin’s creator, is equal to one hundred millionth of a bitcoin.
There is also other cryptocurrency that is less common, including Litecoin, Ethereum, Zcash, Dash, Ripple, and Monero.
How can you buy cryptocurrency?
Bitcoin and other forms of cryptocurrency can be purchased with ease, but learning how to buy bitcoin in Canada and other countries can take a little bit of research. Firstly, it’s helpful if you have a smartphone. If you’re familiar with cryptocurrency, however, there’s every likelihood that you will own one.
The next step is to head to the app store on either your Android or Apple device to download the CoinBase app. This app is primarily going to be your “bank” for checking your balance, purchasing bitcoin, checking bitcoin to CAD and other currency exchange rates, and getting up-to-the-minute information. Please note that this app is not functional for buying and selling in all countries.
You then need to make an account by using your email address and creating a password. This will now be your login information to access your cryptocurrency information.
When you’re ready to buy cryptocurrency, you tap the buy button at the bottom of the screen. This enables you to add a payment account. If you’re using either a credit or debit card, you will only have the ability to purchase $150 in Bitcoin per week, but if you link a bank account, you have a far higher buying limit.
And now you wait. Your investment in cryptocurrency can prove lucrative in the very beginning, or it can plummet. The key is to play the long game when it comes to bitcoin value. Don’t see cryptocurrency as a get rich quick scheme. After all, it can take several years for stock and investments to ripen, and cryptocurrency can be no different.
Ownership and security
If you’ve ever been the victim of theft, you will know how easy it is to steal physical items. You merely need to take someone’s wallet, pull out the money, and discard the wallet. Keeping bitcoins safe, fortunately, is far easier. Every single bitcoin is registered to an address. This address equates to a completely random but valid private key. Only you hold that key, and you must keep this key safe.
Every time you wish to spend your bitcoins, you must enter that key and digitally sign for each transaction. This prevents anyone else from taking ownership of your bitcoins unlawfully. The secure network in which you transfer ownership of bitcoin recognizes and verifies the purchase.
If you happen to lose or misplace your private key, you will lose all your bitcoins. They are effectively unusable, and there are no other ways to confirm ownership of them. Therefore, it’s essential that you keep that sensitive information secure.
What is a wallet?
A digital wallet does precisely what a physical wallet you leave in your jeans pocket does: it holds money. But, the definition of money and how it’s stored in your wallet is where the difference between the two lies. While your real wallet houses real cash – cash that you can touch, remove and put back in, a bitcoin wallet (either Software, Full Client or Lightweight Client) merely stores the credentials to your bitcoin. It’s a form of proof that bitcoin is yours, but it never truly leaves the blockchain or transaction ledger. Essentially, you can use your wallet to house your bitcoin credentials, while being able to spend it from these wallets at the same time.
You can also choose to store your credentials in a bitcoin physical wallet, which is more of a novelty coin with credentials etched onto metal, or printed on paper. This allows you to spend your coins offline.
Are you ready to join the world of online currency? Bitcoin value will continue to fluctuate, but you can’t experience the many benefits of bitcoin and cryptocurrency if you don’t get involved now. The change is happening, and it’s up to you to decide whether you’re going to be a part of it.