Bitcoin for Dummies – What Is Bitcoin?

There’s no one on Planet Earth who’s never heard about Bitcoin. For newbies, this might be hard to figure out. To be honest, it is not difficult at all. In this piece, you’ll enjoy the explanation of Bitcoin for Dummies. We’ll be dwelling on what Bitcoin represents, where and how it is used, and whether you should consider investing in it. Take a look.

What is cryptocurrency?

Money in circulation today is predominantly recognized as government-issued notes and coins. However, in recent years, a new form of digital money has emerged, known as cryptocurrency.

Cryptocurrency is a digital or virtual form of currency that relies on cryptographic techniques for its security. One of its key features is that it operates without a central governing body, ensuring transactions remain genuine and secure.

It’s worth noting that cryptocurrencies aren’t simply generated at will. They’re “mined” through computational processes that can be energy-intensive, requiring significant electrical power.

There are different types of cryptos. These are Utility, Transactional, Governance, Platform, Security Tokens. Bitcoin belongs to Transactional since they are intended for use as a medium of exchange. 

In the following chapters, there’s Bitcoin explained for dummies more deeply. 

BTC primary definition

In 2009, an entity named Satoshi Nakamoto introduced Bitcoin through a concise 9-page whitepaper. The intriguing aspect is that the true identity of Satoshi remains a mystery—whether it’s an individual, a consortium, or an entity.

At its core, Bitcoin was designed to enable one individual to send money directly to another, bypassing traditional intermediaries like banks. This method is termed a peer-to-peer transaction.

Such transactions are notably efficient, and there’s a cap on Bitcoin: only 21 million will ever be produced. Currently, about 18.5 million are in circulation, with the remainder being progressively mined. The price that people are willing to pay for Bitcoin determines its value, just like with stocks. For instance, today’s Bitcoin price in AUD stands at $22,500, but this can vary daily.

How does Bitcoin operate?

How does Bitcoin work for dummies? Bitcoin thrives on a decentralized model. Its major advantage? It isn’t tied to a specific country’s economy. Transactions are immediate, free of any unnecessary fees, and not subject to bank hours. This universality propels a truly global economy. 

After using Bitcoin, the transaction is etched into a blockchain, a transparent digital ledger. Subsequently, Bitcoin “miners” authenticate every blockchain transaction, ensuring security and transparency, making Bitcoin distinct from other currencies. If you did not catch Bitcoin mining explained for dummies here, address Investopedia for a process in detail.

How to use Bitcoin?

After explaining what is Bitcoin for dummies, let’s figure out how to use it. Due to forward-thinking businesses and an enthusiastic customer base, Bitcoin is becoming more widely accepted as a legitimate payment method. 

While major corporations are adopting Bitcoin, nearly 2,300 U.S. small businesses were already on board by December 2020, as per Fundera. A survey by Piplsay in February revealed that a significant 57% of over 30,000 U.S. adults hope for a wider acceptance of cryptocurrencies by brands. 

Since most entities don’t directly facilitate Bitcoin payments, it’s crucial for users to have a “Bitcoin wallet”. These wallets, ranging from mobile apps and desktop software to USB-based hardware, enable transactions via alphanumeric and QR codes, ensuring both security and convenience.

Buying and Selling Bitcoin: Exchanges and Marketplaces

Navigating the world of Bitcoin trading requires not just Bitcoin definition for dummies but an understanding of the platforms and processes. Different exchanges have varied interfaces; some provide straightforward “purchase” and “release” buttons, allowing users to specify their trading amounts. Others, however, mirror traditional securities markets in their complexity. Generally, there are three core order types on most platforms:

• Current Rate Order: Enables users to acquire Bitcoin at the ongoing rate, ensuring a prompt transaction, usually within moments.
• Price Guard Order: Sets a predefined price for transaction purposes. This can be instrumental in capitalizing on market highs or avoiding lows, albeit with possibly longer wait times.
• Preferred Rate Order: Directs exchanges to finalize a deal when the market hits a desired rate. Beneficial for those eyeing a specific price point, even if it may take longer.

While advanced platforms might offer extended order choices, novices are recommended to master these basic types first. Although there are peer-to-peer (P2P) options available, for a combination of trust and security, mainstream exchanges are generally preferred, reserving P2P for transactions with known counterparts.

Is Bitcoin worth investing in?

It’s up to you to decide. Bitcoin is a highly volatile asset type. It’s prudent for prospective investors to confine a minor segment of a broad portfolio to speculative ventures like Bitcoin.

You need to factor in the advantages and disadvantages of Bitcoin. 

Bitcoin for dummies explained: Advantages vs Disadvantages

• Efficient Transactions
• Enhanced Privacy
• Decentralization
• Growth Potential
• Global Reach

Vice versa

• Price Volatility
• Security Concerns
• Lack of Insurance
• Regulatory Ambiguity
• Limited Acceptance

FAQ

How do I get Bitcoin?

The primary methods to acquire Bitcoin involve using digital wallet applications and centralised cryptocurrency exchanges (CEXs) that accept traditional currencies.

Can I use Bitcoin to buy things?

Numerous enterprises currently accept Bitcoin (BTC) for transactions, both offline and online. Although BTC might have steeper fees compared to other cryptocurrencies, it’s preferred for sizable transactions due to its robust security measures. 

Is Bitcoin safe?

Understanding Bitcoin for dummies is enough to figure out if you should jump into the game or not. Bitcoin is volatile; it is neither regulated nor insured, implying that if the exchange collapses, your investment might vanish entirely.

Disclaimer: Please keep in mind that the content of this article is not financial or investing advice. The information provided is the author’s opinion only and should not be considered as direct recommendations for trading or investment. Any article reader or website visitor should consider multiple viewpoints and become familiar with all local regulations before cryptocurrency investment. We do not make any warranties about reliability and accuracy of this information.