{"id":2013,"date":"2021-12-16T23:12:40","date_gmt":"2021-12-16T23:12:40","guid":{"rendered":"https:\/\/insidebitcoins.com\/uk\/?page_id=2013"},"modified":"2024-03-14T11:54:13","modified_gmt":"2024-03-14T11:54:13","slug":"bitcoin-for-beginners","status":"publish","type":"page","link":"https:\/\/insidebitcoins.com\/uk\/invest-in-cryptocurrency\/bitcoin-for-beginners\/","title":{"rendered":"Bitcoin for Beginners"},"content":{"rendered":"

What is Bitcoin and How Does it Work?<\/span><\/h2>\n

Do you know what was the first-ever transaction that was conducted through Bitcoin?<\/span><\/p>\n

It was used to buy two Papa John’s pizzas for around 10,000 BTC, worth around $41 at that time, in May 2010. <\/span>Fast forward to 2022, and the same amount of Bitcoins are worth around $486,510,000.<\/span><\/p>\n

That’s how the journey for Bitcoin has been in the past decade. From being something associated with computer experts and engineers to breaking the barriers and joining the mainstream, it has certainly traversed a whole lot of situations and use cases.<\/span><\/p>\n

However, if you are someone who hasn’t yet been able to grasp the concept of Bitcoin, it can get a little too complex at times. This page might help you out. Read this Bitcoin for beginners to make yourself aware of this digital behemoth, touted to become the ‘future of money’, and learn how to invest in cryptocurrency<\/a>.<\/span><\/p>\n

What is Bitcoin?<\/span><\/h2>\n

In the simplest of terms, Bitcoin is a digital currency that can be bought, sold or exchanged without the requirement of any intermediary in the entire transaction, i.e. a bank. It allows a person to conduct secure peer-to-peer transactions with the help of the internet. <\/span><\/p>\n

While some people out there might think of Bitcoin as something similar to payment gateways like Paypal or any other digital wallet, it isn’t. While those methods certainly conduct transactions through the internet, they are still reliant on the traditional finance system.<\/span><\/p>\n

However, when it comes to Bitcoin, any two people around the globe can conduct transactions with each other. Every transaction as such is then recorded on the blockchain ledger. This ledger which contains the transaction details is available for anyone to view on the blockchain, unlike a bank’s ledger. It isn’t in control or has the influence of any government, bank or any other supervising institution.<\/span><\/p>\n

This is to ensure transparency and reduce the role of a single authority in this entire process.<\/span><\/p>\n

Interestingly, what gives Bitcoin its value is the fact that it has a finite supply. There will only ever be around 21 million bitcoin that are going to be mined. This has made many traditional investors look up to Bitcoin as a way to shield them from inflation and volatility. At the time of writing, one BTC is trading at $46,000 (or £36,600).<\/span><\/p>\n

How Does Bitcoin Work?<\/span><\/h2>\n

This analogy was given on the <\/span>Bitcoin Matters<\/span> podcast. In order for someone to understand how Bitcoin works, an analogy of a text message was used.<\/span><\/p>\n

Bitcoin works like text messaging. The only catch is that you can send numbers instead of letters or words. These numbers that are sent are called Bitcoin and they are limited in supply (unlike text messages). Now, since there’s only a finite number of these Bitcoin messages to be sent, they can be used as a form of currency or money.<\/span><\/p>\n

Just as someone needs a messaging app, say, WhatsApp to send a message to another WhatsApp user, the same is for Bitcoin. One Bitcoin user can transact money to another user through any of these Bitcoin apps.<\/span><\/p>\n

Let us come to the technical part now. <\/span>Bitcoin is essentially built on a digital platform of records called a blockchain. To put it simply, a blockchain is a unit of data compiled together, containing the necessary information called blocks.<\/span><\/p>\n

How Does Blockchain Work?<\/span><\/h2>\n

\"Blockchain<\/p>\n

As mentioned above, blockchain technology or Distributed Ledger Technology (DLT) is quite similar to a bank’s ledger. As a bank’s ledger, it contains the data about all the transactions that are taking place online. The key difference is its accessibility. It is accessible to anyone who wishes to view the transactions in the ledger.<\/span><\/p>\n

A blockchain consists of three important elements.<\/span><\/p>\n

    \n
  1. Blocks<\/b>: Every blockchain consists of a series of blocks (hence, the name). These blocks are nothing, but data. In terms of Bitcoin, a block’s data consists of details like sender’s details, receiver’s details, number of coins and so on. <\/span>The 32-digit number generated is called a nonce (number only used once). Apart from the data of any current transaction, every block consists of a <\/span>hash<\/b>. This hash is a unique fingerprint or signature. Moreover, there’s a hash of the previous transaction as well.<\/span><\/li>\n
  2. Nodes<\/b>: In order to keep the entire system decentralised, it has to be kept functioning through a series of nodes. No single device or supercomputer can run the entire system. Hence, Nodes can be any electronic device that maintains copies of the blockchain and keeps it functioning.<\/span><\/li>\n
  3. Miners<\/b>: Miners are an essential part of the entire process. Every bitcoin is required to be ‘mined’. This means that the miners use software that solves extremely complex maths problems to find a nonce that generates an accepted hash.<\/span><\/li>\n<\/ol>\n

    This is an intricate process, due to there being a possible 4 billion combinations that must be mined before getting the right one.<\/span><\/p>\n

    Now, coming back to how all of this works, there’s a Google Doc analogy that’s quite popular out there. <\/span>Say, you are working on a Google Doc. Now, you want your co-workers to collaborate on the document and provide their inputs. Instead of sending them a copy of the document differently to each person, you simply share the document with them. This document is distributed amongst them.<\/span><\/p>\n

    Hence, you can continue working on the edits, observe their inputs and more. All of this is happening in real-time. So, this creates a decentralised distribution chain that allows everyone to access the document at the same time, making it transparent and accessible.<\/span><\/p>\n

    This allows everyone to see the changes in the document together and there’s no lock-out period for any of the selected users. <\/span>While blockchain technology is quite expansive and complex, the analogy sits perfectly well with its core functioning.<\/span><\/p>\n

    Top Crypto Exchanges to Buy Bitcoin<\/h2>\n

    1. OKX<\/h2>\n

    OKX<\/a> is a leading digital asset trading platform for buying Bitcoin and other crypto coins. Since its launch in 2017, the exchange has grown rapidly and now boasts a customer base of millions of users in 100 countries. OKX is one of the best options for traders as it also offers a comprehensive trading experience.<\/p>\n

    Users can buy cryptos through Apple Pay, or any other convenient payment method. The platform is not just limited to allowing trading of crypto, it also offers access to new, high-quality crypto projects through its ‘Jumpstart’ initiative.<\/p>\n

    \"Invest
    \nAs of now, there are more than 1.5 million followers of this initiative keeping an eye on 13 projects. The platform also offers an entirely separate section for institutional investors which displays its versatility to a lay-user. Overall, while buying BTC is easy on OKX, we suggest checking out its other features too.<\/p>\n

    Pros <\/b><\/p>\n