What is Bitcoin? Complete Guide

What is Bitcoin? The Bitcoin has aroused the curiosity and attention of the world in the last 10 years. But do you know what it is and how it works? This is a big challenge, and our guide will help you overcome it in just a few minutes.

1.- What is Bitcoin?
2.- How did Bitcoin Emerge?
3.- How much is a Bitcoin worth?
4.- How to Invest in Bitcoin?
5.- Bitcoin Investment?
6.- How to Invest in Bitcoin in the right way?
7.- Bitcoin investment funds
8.- Do I need to buy an entire Bitcoin?
9.- How can I buy Bitcoin?
10.- What is the actual price of Bitcoin then?
11.- Bitcoin Charts
12.- How to save your Bitcoins?
13.- What is Bitcoin wallet?
14.- How does Bitcoin work?
15.- Key differences from Bitcoin (and other cryptocurrencies) to FIAT Money (Fiduciary Money):

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1- What is Bitcoin?

Bitcoin (BTC), is a form of money, as Dollar or Euro. What sets it apart is the fact that it is 100% digital.
Bitcoins exist only on the internet and can be used through a computer or even a smartphone. Therefore, there are no physical Bitcoin banknotes or physical coins.

Due to its digital nature, Bitcoin is the most practical currency to be used in the world. It is possible to send a transaction of any amount, to any place and at any time. These transactions do not need banks or other intermediaries such as payment systems.

Currently, it is possible to buy small fractions of BTC. This makes its use, either as a means of exchange or as an investment, much more practical and quick. In addition, cryptography is a censorship-free tool. No company or government can prevent transactions using Bitcoin.

Despite being a digital asset, Bitcoin has strict security rules. It is not a centralized system, which means that in theory, it cannot be overthrown by governments or companies. It is possible to check each transaction in the smallest detail. Its creation follows rigid and real mathematical protocols. We will get to know each one later.

Key Metrics:

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2- How did Bitcoin Emerge?

Bitcoin officially appeared on October 31, 2008. On that date, someone published an article under the pseudonym Satoshi Nakamoto, called “Bitcoin: a person-to-person money system” (in free translation). In its nine pages, the document contained in detail all the workings of the cryptocurrency. The launch of Bitcoin itself took place on January 3, 2009, when the first block – called the genesis block – was mined.

Satoshi remained active in Bitcoin until 2010 when he mysteriously disappeared. Since then, the community around BTC has grown considerably, but the creator of the cryptocurrency has never been seen again. Besides, the Bitcoins mined by Satoshi (about 1 million) have never been moved.

To this day, it is speculated who the person behind the name might be, but they have never been proven. However, certain names are often present on all speculation lists about who would be the creator of Bitcoin. The most highly rated for being Satoshi are:

– Hal Finney: mathematician and programmer, died in 2014. Finney was the first person to receive a Bitcoin transaction, in addition to being very active in the initial development of the cryptocurrency;
– Wei Dai: scientist linked to information security, Dai created a block protocol that would later inspire the operation of the Bitcoin blockchain;
– Nick Szabo: lawyer, cryptographer, and polymath, Szabo carried out several kinds of research in the area of digital currency and smart contracts. He even created a digital currency in 1998 (BitGold), which works very similar to Bitcoin;

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3- How much is a Bitcoin worth?

Bitcoin’s value is defined by the supply and demand of the market. Like trading any currency, its price fluctuates daily. In this way, we can classify BTC as a variable income instrument, as well as stocks and real estate funds, for example.

There is no official quote on the price of Bitcoin. Several platforms have their price evaluation mechanisms. Bitcoin trading works 24 hours a day and does not have mechanisms such as circuit breakers – which paralyze trading in the event of strong drops, as occurs on the stock exchange.
Therefore, the Bitcoin market is today one of the most free in the world.

Because of this, the Bitcoin quote can be quite volatile at various times. Strong drops of 5%, 10% in a day are common in this market, especially due to the permanent nature of the negotiations. So it is important to understand the dynamics of the market before you start investing.

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4- How to invest in Bitcoin?

Investing in Bitcoin has been a profitable strategy in recent years. Many investors who bought the cryptocurrency early on became millionaires. And even with the higher price today, having Bitcoin in your portfolio can be a good diversification strategy for the long run.

Many large funds and companies have been acquiring Bitcoin as part of their strategy. Crypto has little correlation with traditional investments, and this can go a long way in boosting the portfolio’s yields. Therefore, the Bitcoin investment market today is quite diverse and full of options.

There are two ways to expose yourself to Bitcoin:

– Direct: the investor buys the crypto and stores it in a portfolio controlled by himself. Despite being the safest way, it can leave the investor directly exposed to Bitcoin price fluctuations;

– Indirect: ideal way for those who do not want to buy Bitcoin or have to record wallet passwords. This direct purchase can be made through investment funds that invest in Bitcoin, derivatives (options or futures contracts), etc.

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5- Bitcoin Investment?

This question is common among novice investors and must be answered clearly. Due to its expressive appreciation in recent years, investment in Bitcoin has become very popular.

However, care must be taken as this has led many companies to make unrealistic promises of income.
Bitcoin does not earn interest, nor does it pay dividends or offer some kind of passive income. Buying it is like buying a dollar or euro and keeping the currency at home. The only gain that the investor can obtain is in the valuation of the crypto.

Many platforms promise interest by investing in BTC, and some even offer “guaranteed return”. However, you need to be careful of these promises. The vast majority of these tend to be scams known as Ponzi schemes. Entering this type of scheme can cause you big financial losses.

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6- How to Invest in Bitcoin in the right way?

To avoid falling into scams and lose money, avoid falling into offers that promise monthly income on Bitcoin. The safest way to purchase the crypto is to make the purchase yourself and keep it with you. Purchases can be made at specialized brokers (called exchanges) or through P2P sellers.

The storage of your Bitcoins can be done through a wallet. The wallet is a device that is under your control and that keeps your Bitcoins safe. There are several types of exchanges and wallets on the market and we will see them all in the section on How to Buy Bitcoin and How to Save Your Bitcoins.

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7- Bitcoin investment funds

Bitcoin investment funds are methods that give access to crypto through the traditional market. These funds usually allocate part or all of their capital in the crypto market, offering greater potential for return to their customers. Such funds may be open to any investor or restricted to qualified investors.

Open funds allow anyone to invest money in them.
However, funds restricted to qualified investors are exclusive to individuals – or institutions – who have at least $1 Million in investments. These products can be traded at several investment brokers worldwide.

There are some advantages to investing in this type of fund. One of the main reasons is indirect exposure: there is no need to buy Bitcoin. Another advantage is that these funds usually invest in assets other than Bitcoin. Thus, the volatility is reduced, which helps to protect the investor against sudden falls in the market.

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8- Do I need to buy an entire Bitcoin?

The short answer is no.
A Bitcoin costs thousands of dollars, and this tends to keep small investors away.
Fortunately, each Bitcoin can be divided into up to 8 decimal places, with the entire Bitcoin corresponding to 100 million units. Each small unit is called Satoshi, after the creator of the cryptocurrency.

Just like the stock market, a Bitcoin can be bought in small fractions, at the amount you want. You can buy $10,000.00, $1,000.00, or even $100.00 equivalent Bitcoin and build up gradually.
Many exchanges allow you to purchase even smaller amounts, such as $50.00 or up to $30.00.

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9- How can I buy Bitcoin?

Nowadays, there are several options to buy Bitcoin worldwide. You can purchase it from exchanges, ATMs or even buying from someone else (P2P), as well as in other ways. Currently, there are three main ways to make Bitcoin purchases.

• Exchanges:
  • Are trading platforms open to the general public, being the most common ways to buy and sell Bitcoin. They bring buyers and sellers together on a single platform, making negotiations easier. To open an account on exchanges, the user needs to Register, Send documentation (KYC), have the required asset (can be bought on most exchanges) and create a purchase or sale order on the platform;

• P2P:
  • P2P sellers are individuals who work with the purchase and sale of Bitcoin. Generally, the negotiation is done directly: the P2P seller informs his price (of purchase or sale) and the customer decides whether to accept it or not. This form of negotiation is usually faster and more practical than opening an account on an exchange, but it can have a higher cost (usually does);

• OTC:
  • is the acronym for Over the Counter, which means over-the-counter market. Trading via OTC is common in several markets, from commodities, stocks, derivatives, and also cryptocurrencies. These markets are usually used by those who negotiate large sums of money, as they have better prices, more liquidity, and lower rates.

As we saw in the previous topic, the price of Bitcoin does not have a uniform quote. And as there are hundreds of exchanges, each of them has its own quote. Today we have several tools that make the comparison of prices, letting you know where Bitcoin is cheaper, allowing you to choose where you can save on the fees (purchase or sale).

As for OTC sales, some exchanges often offer this service to customers with more capital. In addition, several P2P vendors also tend to operate with high values.

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10- What is the actual price of Bitcoin then?

Like most assets in the world, the international price of Bitcoin is quoted in dollars. The Bitcoin / Dollar pair is the main trading pair used in the world and considered the reference price for crypto. Your quote can be verified in real time through websites such as CoinMarketCap or Coingecko.
Here at CryptoDeFinance, you can check the price of most coins on our Market Cap section ->

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Several factors contribute to the formation of the price of Bitcoin in US dollars. Since there is no international standard, prices tend to use an average of the values in the main exchanges of the world.

Bitcoin has great values.
For those who live in more developed countries, it is just another asset to diversify assets. Today, many large companies and investors in these countries use it for this purpose.

However, Bitcoin also has value for people who live in the world’s poorest countries. In these places, banking services are expensive or inefficient, the currency is worthless and governments tend to be corrupt. Bitcoin is a way for the population to escape this.

Thus, we can divide the use of Bitcoin into four fields:

• Means of speculation:
  • as we have seen, the appreciation of Bitcoin draws attention. Speculation is the way that many find profit in the purchase and sale of crypto. This activity, although it is frowned upon by many, provides liquidity to the market and allows cheaper and more agile trades;
• Value reserve:
  • could you be able to live in a country whose currency loses 50% or more of value each month? Countries like Brazil have faced hyperinflation in the past, and countries like Venezuela and Zimbabwe still face it today. For these people, Bitcoin is a haven and protection of their purchasing power;
• Means of exchange:
  • in addition to reserving value, many people use Bitcoin on a daily basis as their currency. As its purchasing power tends to increase, it ends up being an alternative to local currencies;
• Technological disruption tool:
  • Bitcoin is perhaps the most important technology that has emerged since the internet. That is why it has enormous potential to drive changes in the financial, banking, and even crypto sectors.

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11- Bitcoin Charts

Another way to examine the price is through the Bitcoin chart.
As it is very volatile, this can represent a risk of loss, as we have seen in the history of this asset. On the other hand, volatility can open windows to many gains.

A didactic way of tracking the price of Bitcoin is using platforms on which the charts are displayed.
Many exchanges have charts on which this fluctuation analysis can be done. These fluctuations can bring signals such as points of purchase or sale, support or price resistance, and even indicate possible short, medium and even long-term movements.

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12- How to save your Bitcoins?

With Bitcoin, you can take custody of your money without needing banks. Therefore, it is extremely important to know how to store your Bitcoins safely, after all, they are like cash: if you lose access to them, there is no way to recover them.

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13- What is Bitcoin wallet?

The safest way to protect your Bitcoins is to keep them in wallets. Bitcoin wallets are devices that allow you to send, receive and store your cryptocurrencies. These wallets can be physical devices or applications installed on your smartphone, tablet, or computer. There are basically three types of wallets to store Bitcoin.

They are as follows:

• Online wallets (hot wallets):
  • these are applications that work connected to the internet. They are very practical for using Bitcoin as a currency on a day-to-day basis, as they enable fast spending. However, passwords are in constant contact with the internet, so they are not so secure to keep them stored for a long time;

• Paper wallets:
  • these wallets can literally store your Bitcoin on a piece of paper, where passwords are noted. They do not have an internet connection, which makes them the safest among the types of wallets. They are indicated only to store your Bitcoins safely, as they are not practical for daily use;

• Hardware wallets:
  • these are specific physical devices for the use of cryptocurrencies. These wallets store private keys inside the device, which does not come into contact with the internet, which makes them very secure. They can be used to send and receive Bitcoins almost without risk.

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14- How does Bitcoin work?

Unlike traditional currencies, Bitcoin does not depend on governments or banks to function. You can send any amount to anyone, anytime, anywhere in the world. The network has no time or location restrictions to operate.

This network is maintained by thousands of computers spread across the planet. They verify and confirm all transactions. Once confirmed, the transactions are grouped into blocks of the network. This network is called blockchain (block chain), as each block is directly connected to the other.

The transaction blocks confirmation process takes place on average every 10 minutes. Although it seems like a long time, it is much faster than traditional means. A transfer of money abroad in a traditional monetary system, for example, can take up to 3 days to be processed.

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15- Key differences from Bitcoin (and other cryptocurrencies) to FIAT Money (Fiduciary Money):

• Bitcoin does not depend on central servers that can collapse and paralyze the network. In more than 10 years, it has never stopped working for any reason;
• Bitcoin transactions do not require personal data or the names of those involved. Thus, they offer more privacy and security than traditional means;
• Even with more privacy, Bitcoin is fully transparent and auditable. Each transaction on the blockchain is public and can be checked on the internet by anyone. Portfolio movements can also be verified;
• The rules of the system are known to everyone and cannot be modified. Even the creator of Bitcoin would have no power to modify its protocol;
• Bitcoin’s money supply is rigid: there will only be a maximum of 21 million units. It cannot be printed or manipulated by governments and central banks;

Check our other “Complete Guides:

What is Cryptocurrency?
What is Blockchain?
What is Bitcoin?
What is Ethereum?
What is DeFi?
What are smart contracts?