Bitcoin regularly makes headlines with yet another BTC/USD crash or explosion, thus attracting more attention of newbie investors. It is possible to spend a full day reading about Bitcoin to get a better understanding of it, but this is simply not practical. Few people have the time or interest level to sift through all the information about the first cryptocurrency.
Instead, make sure that you know a few key things about Bitcoin. The following facts will give you a better understanding of it and the entire world of cryptocurrency.
New Alternative to Fiat Currency
One of the most important things to know about Bitcoin is why those in the world of cryptocurrency feel that it is necessary. Throughout history, we have changed our financial systems or type of money several times. Every time this occurred, the new type of money resolved issues with the previous version. The timeline went as follows: Barter – Precious metals – Paper money (backed by gold) – Paper money (not backed by gold) – Bitcoin and other cryptocurrencies.
Barter eventually became impractical for transactions, leading to the shift to using precious metals and coins. However, using precious metals to pay for large purchases was also impractical due to the size and weight. This led to introducing paper money with gold backing, so you could easily carry money around. Backing it with gold prevented massive inflation, but the world transitioned to paper money not backed by gold since not every country has those resources.
Although we still use paper money (and its digital equivalent on debit and credit cards), it is fraught with flaws, such as:
● A lack of privacy, as banks and others can view your transactions with cards;
● Fees for everything from withdrawals to transfers;
● The potential for human error;
● The possibility of forgery.
We needed an alternative to this type of paper/card currency, and Bitcoin is the solution.
The fixed supply of Bitcoin limits inflation, and human error cannot occur because Bitcoin does not require printing. The coding for Bitcoin ensures no one can forge it, and you can prevent most theft by storing Bitcoin offline.
No One Knows the Inventor
Interestingly enough, the world does not know who invented Bitcoin. However, the consensus is that the person in question is definitely rich at this point. The white paper behind Bitcoin comes from someone who uses the pseudonym Satoshi Nakamoto. Over the years, several people have claimed to be Nakamoto, but everyone turned out to be lying.
Some view the fact that the inventor of Bitcoin is anonymous as a good thing, given that decentralization plays a key role in Bitcoin. This may even be one of the reasons that the inventor chose to stay quiet. It is also likely that the person behind Satoshi Nakamoto just wants to stay out of the spotlight.
Bitcoin Is Not Anonymous
Another crucial thing to know about Bitcoin is that this cryptocurrency is not completely anonymous. The blockchain network stores each and every transaction involving Bitcoin. While this ledger does not share your personal information, such as a name or date of birth, it does have your wallet address. Eventually, someone with enough dedication and skills can link that to an actual person.
There are some ways to get around Bitcoin’s lack of anonymity if you prefer that type of privacy. Most Bitcoin wallets generate new addresses to receive Bitcoins every time to reduce the risk of someone figuring out who an address belongs to. There are also Bitcoin mixing platforms that enhance privacy. Or you can opt for a different cryptocurrency with more anonymity, such as Zcash or Monero.
You Can Do a Lot with Bitcoin Today
When Bitcoin arrived, no one had heard of it, and it was extremely hard to use. While Bitcoin’s creation was in 2009, the first real-world use of Bitcoin did not take place until May 22, 2010. The pioneer Bitcoin exchange platform, BitcoinMarket.com, arrived just before this on March 17, but it has since closed.
Bitcoin has come a long way. Today, you can do a lot more with it and have hundreds of options for trading it against other crypto or fiat currencies. There are many websites that offer goods and services in exchange for Bitcoin, and more retailers are accepting Bitcoin now. There are also Bitcoin ATMs that let you instantly withdraw fiat currency from your Bitcoin wallet. You can buy nearly anything, provided you know where to look, including:
● A car;
● A flight;
Of course, you can also trade Bitcoin, either for fiat currencies or other cryptocurrencies. Many crypto-traders make a living doing this, just as you would with traditional assets.
Keep Your Private Key Safe
Before you even think about buying Bitcoin, you must know that you should not lose your private key. You need this to access your Bitcoin, or you will lose all the coins you have. The private key is the address of where your wallet is, and only you will know it. Most Bitcoin wallets let you stay in control of your private key, but some do hold it for you. Remember that unless you use a wallet that holds your private key, you are the only person who knows your private key, and losing it will cost you your money.
A real-world example of this is James Howells, who accidentally threw out his hard disk with private keys for Bitcoin. He had mined them in 2010, and this accident took place in 2013. In total, he lost 7,500 BTC, which would be worth about $57.1 million today. You do not want to share your private key with someone, as this key will give them access to all your Bitcoins. Use Howells as a cautionary tale and always keep your private keys in a secure place, such as a safety deposit box.