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What Is Bitcoin?

What Is Bitcoin? Bitcoin Investment Guide For Newbies

Should you invest in Bitcoin or not?

This time, you must be very curious: What is Bitcoin?​ Why are people rushing to invest in Bitcoin? What makes Bitcoin so attractive?

This article will help you answer the above questions, and provide all information about Bitcoin and all about Bitcoin investing.

Famous photo of a fan calling to buy Bitcoin when Former Fed Chair Janet Yellen testified before the US Congress in 2017

What is Bitcoin?

Bitcoin (BTC) is a digital currency released in the form of open source software and invented by Satoshi Nakamoto, this is also the world’s first electronic currency, laying the foundation for the development of Bitcoin. of the Crypto market.

Bitcoin uses a peer-to-peer protocol for all transactions, which helps Bitcoin eliminate the middleman step in the transaction execution process. In a word, Bitcoin transactions will be made directly from the sender to the receiver with extremely low transaction fees (almost zero) without having to go through any intermediary organizations or individuals.

History of Bitcoin (BTC)

According to Wikipedia: “Bitcoin began to be designed by Satoshi in 2007 when he believed that it was possible to design a trading system where members did not need to trust each other. The domain bitcoin.org was registered on August 18, 2008.

Bitcoin was first mentioned on October 31, 2008 in the anonymous peer-to-peer payment protocol prospectus Satoshi Nakamoto. It began to be used on January 3, 2009 with the birth of the original Bitcoin block (genesis block).

The first Bitcoin transaction was made when Satoshi Nakamoto sent 10 bitcoins to cryptographer Hal Finney on January 12, 2009, right after the Bitcoin software was first released.”

This transaction marks the birth of Bitcoin, the world’s first cryptocurrency that is not subject to government or central bank control.

The difference between Bitcoin and other currencies

The difference between Bitcoin and other currencies

As noted above, Bitcoin (BTC) is a digital currency so it has no shape. It is the same as all mainstream currencies like USD, Euro, VND… but encrypted electronically. What makes Bitcoin different will lie in the following 4 factors:

Decentralization

In the traditional centralized financial market (CeFi – Centralized Finance), fiat currencies such as USD, VND, EUR, etc. will be controlled by organizations such as the Central Bank or the government.

However, Bitcoin is not like that, with its decentralized nature (DeFi), Bitcoin can be accessed and used anywhere, anytime without being controlled by individuals or organizations concentration of power at all. This means that no one can control Bitcoin.

Learn more about the nature of DeFi and its potential and investment opportunities now: What is DeFi?

Confidentiality and impossibility

Bitcoin has a very high security, appears and is divided automatically based on algorithms. Hacking into the Bitcoin network seems impossible. If you want to do that, you need to hack into all the nodes in the Bitcoin network at the same time. And to do this is almost impossible!

At the same time, Bitcoin cannot be created any more but can only be mined (also known as Bitcoin mining). It sounds quite similar to gold mining, however, the difference here is that you will mine Bitcoin through decoding extremely complex mathematical equations. Likewise, Bitcoin cannot be counterfeited. I will describe this in more detail below.

Low transaction fees

Thanks to a peer-to-peer protocol that eliminates the middleman step like in normal transaction execution, transaction fees with Bitcoin (BTC) are extremely low, almost zero.

It is not possible to get a refund once the transaction has occurred

Once you have made a BTC transaction, you will not be able to undo or get your money back because the information is now recorded in the Blockchain, no one will be able to change or edit that information. Therefore, you need to consider carefully when investing in Bitcoin.

How does Bitcoin work?

All of Bitcoin’s superior properties are built on two new technologies:

  • Blockchain Technology.
  • Distributed ledger technology.

Blockchain Technology

Blockchain technology is seen as the financial breakthrough of the future.

You can understand Blockchain is an electronic ledger distributed on many different computers (decentralization), storing all transaction information and ensuring that information cannot be changed under any circumstances. any form (transparency). All information stored on that ledger will be verified by a series of computers connected in a common network. No machine will be able to change, overwrite or delete the data in that ledger.

As such, Blockchain is designed to resist data change.

How Blockchain Works

As I said, the information in the Blockchain cannot be changed, but only added when there is a consensus of all nodes in the system. This system is preserved even if one part of the system fails.

And yet, Blockchain has the ability to transmit data without requiring an intermediary to confirm information. It is very convenient when one importer can share information for many units in the same built network.

Learn more about the nature, operation and applications of Blockchain in practice today: What is Blockchain?

Distributed Ledger Technology (DLT)

Distributed Ledger Technology (DLT) is a collection of databases that are not stored or verified by any central authority.

For DLT, the person integrating it will have greater control over how it is integrated. In principle, they can still dictate the structure, purpose and operation of their service-using network. Distributed ledgers can be seen as the first step towards Blockchain.

However, it is not made up of a chain of blocks but the ledger will be stored on many different servers. They will then communicate with each other to ensure the most accurate and up-to-date transaction data is maintained.

How many Bitcoins were created in total?

The total number of Bitcoins that have been created is 21,000,000 BTC. No one will be able to change this number including the founder Satoshi Nakamoto.

Currently, the number of Bitcoins that have been mined falls to about 17 million BTC, that is, there are only 4 million BTC left to mine. However, the actual number of Bitcoins circulating in the market will be less than 17 million due to a number of different reasons.

Units of Bitcoin (BTC)

Bitcoin, like other traditional currencies, has Bitcoin units.

The smallest unit of Bitcoin is named after its founder, Satoshi.

At the rate of 1 BTC = 100,000,000 Satoshi.

That is, one unit of Satoshi = 0.00000001 BTC.

Units of Bitcoin (BTC)

Where is the real value of Bitcoin?

In recent years, Bitcoin has increased in value rapidly, BTC once reached a record price of $63,825/BTC on April 14, 2021. But this is not its actual value, but only reflects the law of supply and demand of the market.

So where is the real value of Bitcoin? The most appropriate answer is in its technology! Because Bitcoin uses a peer-to-peer protocol for all transactions and eliminates the middleman step in the transaction execution process. This is the reason Bitcoin exists.

Is Bitcoin a scam?

According to people’s thinking, the default is that what is virtual is mostly a scam. But Bitcoin is not at all!

This can be 100% sure because have you ever seen gold can be a scam? Bitcoin cannot be created, you can only mine (mine Bitcoin) just like gold. And Bitcoin is like digital gold.

If you have ever heard of someone being scammed for Bitcoin, it can only be someone taking advantage of Bitcoin to cheat.

Is Bitcoin a scam? The answer is No!

Types of Bitcoin Investment

As I said above, now a lot of people choose Bitcoin as an investment channel like stocks or Forex. Now I will guide you some ways to make a profit from Bitcoin.

Bitcoin Mining (Bitcoin Mining)

The first form to help you make money from Bitcoin is Bitcoin Mining (Bitcoin Mining).

For transactions in the Bitcoin network to work smoothly, they need to be confirmed by people called miners – miners. Bitcoin mining will be done by Bitcoin miners with terrible configuration, and people have also developed specialized Bitcoin miners called ASICs.

When you mine Bitcoin, the first concern is how Bitcoin works, as well as the cost of Blockchain Technology? The consensus algorithm will tell you that!

Consensus algorithms are designed to ensure that transactions are valid and distributed across multiple participants to verify accuracy and create chargebacks for transactions.

There are four top algorithms you need to know:

  • PoW – Proof of Work.
  • PoS Proof of Stake.
  • DPoS – Delegated Proof of Stake.
  • BFT – Byzantine Fault Tolerance

 

Bitcoin miners are similar to regular coin miners with technical specifications.

  • The unit of measurement to know how much Bitcoin you mine is the Hashrate, the unit of measurement of the computing power of the device used to mine virtual currencies (Bitcoin Mining).
  • At the time of Bitcoin mining, miners need to solve a lot of problems and only after finding the answer can they earn Bitcoin. All previous transactions will be stored in the common area.
  • Miners assemble the required hash from different combinations, allowing access to secret keys and new transaction operations.

You should refer to some types of Bitcoin miners: Antminer S9, Antminer S7, AvalonMiner 761, WhatsMiner M3, AvalonMiner 821.

Besides investing in a dedicated rig, you can also dig Bitcoin for free through reputable Bitcoin mining sites or Bitcoin mining apps and software on your phone. However, with this method, the possibility of mining Bitcoin will not be high, if not very low.

Buy and Hold Bitcoin – HOLD

The second way I want to mention to you is to buy BTC for long-term holding (HOLD).

Hold is the most popular form of Bitcoin investment. And if you don’t know about technical analysis then maybe you fit this form.

In essence, Hold Bitcoin is when users buy Bitcoin at a low price, hold it for a long time until the price increases and sell it for a profit. Buying and selling decisions will be based on fundamental analysis, evaluation and prediction of the future of the project, not technical analysis (or very little).

Buy and HOLD Bitcoin

There are two ways to hoard Bitcoin (HOLD) by buying Bitcoin on Bitcoin exchanges and on the black market. Each way has its own advantages and disadvantages.

  • Some reputable Bitcoin exchanges you can refer to are: Remitano, Binance, Okex, Huobi, …
  • Buying Bitcoin on the black market is the wildest and most dangerous way to buy Bitcoin.
  • With many countries calling this the black transaction of illegal money flow. This amount is completely invisible to the tax authorities or the central bank.

Read more: Where to buy Bitcoin? How to buy cheap Bitcoin in just 3 steps

Trade Bitcoin

Trade Bitcoin

Trade Bitcoin is a form of making profits in a short period of time, usually hours or days. This created a group of people known as Bitcoin Traders.

They use Bitcoin price chart analysis techniques. With the aim of finding entry points at low prices and selling points at higher prices.

There are some other ways to invest in Bitcoin that you should refer to:

  • ICO (Initial Coin Offering) is a form of raising capital through cryptocurrency for startups in the Blockchain field. To invest with this form, you will need to use another cryptocurrency, not Bitcoin.
  • Trade Margin, also known as margin trading – this is a form of borrowing money from a certain exchange. Technical explanation a bit, it is a form of using financial “leverage” which is the capital of the floor. Thanks to that, you will have more money to trade and bring higher profits. And, of course, when you join the margin in trading coins, you will be charged interest on the loan.

See also: Bitcoin investment roadmap for newbies

Where to buy Bitcoins? Bitcoin Exchange (BTC)

As I mentioned above, you can buy Bitcoin on exchanges that support BTC. We all know there are 2 types of exchanges, DEX (decentralized exchange) and CEX (centralized exchange), but currently Bitcoin can only be bought and sold on CEX exchanges.

Some reputable Bitcoin exchanges you can refer to are: Remitano, Binance, Okex, Huobi, …

Users often prefer to buy Bitcoin on Remitano, because when you buy and sell Bitcoin on this exchange, you will be assured of safety, fast transactions and no worries about being scammed.

Refer to the top 6 most reputable Bitcoin exchanges!

Where to store Bitcoin (BTC)?

What is a Bitcoin wallet?

Surely the question you are wondering is: Bitcoin is a cryptocurrency, how should it “carry” it? Similar to other coins, Bitcoin will also be stored in a wallet called a Bitcoin Wallet.

A Bitcoin wallet will be considered a Bitcoin account, just like your bank account or email. Each Bitcoin wallet will include:

  • A public address (like an account number and owner name) is called a Bitcoin Address.
  • A private key (like the password of an Internet Banking account) is the Private Key.

You will log in to your wallet with your Private Key and send Bitcoins to others through their Bitcoin Address.

Bitcoin Wallet

Thus, once the private key is lost, it means that you will lose your wallet and lose all the assets stored in it. So far, no one has been able to get back those lost Bitcoins but they are still stored on the system.

So keep this in mind, store your private key carefully and don’t reveal it to anyone!

The most prestigious Bitcoin wallets today

Like the bank account you choose to use, you often consider it reputable. Bitcoin wallet too, you need to know which wallets are reputable to send your BTC to.

There are 3 types of wallets that can store BTC:

  • Hot wallet is an online storage wallet in which users will hold a private key to secure their own assets. Some typical names for this type of wallet are: Trust Wallet, MetaMask, etc.
  • Cold wallets  are physical wallets that can be held in the hand. Usually, cold wallets are suitable for long-term investors who rarely have to trade because each transaction is quite laborious. But in return, the security of cold wallets is extremely high. Some of the names in this array are Ledger, Trezor, …
  • An exchange wallet is a wallet created on exchanges and users do not directly hold the private key, so there is a risk that a scam exchange or suddenly shut down cannot withdraw money. Some exchanges such as: Binance, Okex, Huobi, Remitano, …

Risks of Bitcoin Investment

If you have invested, you must accept risks, and this is an area that needs people who are brave enough and dare to take risks to find success.

Bitcoin Bubble – The times when Bitcoin fell into crisis

Bitcoin bubble is the phenomenon of Bitcoin coin spike in a short time.

Example: At the beginning of 2017 Bitcoin only cost 1000 USD. But after 24 hours it hit the threshold of 11000 USD then exceeded 11000 USD and then returned to 9000 USD.

When BTC rose too quickly in 2017, it was not until 2018 that the bubble burst when BTC had 10 consecutive declines.

This is a big risk for Bitcoin investors.

Let’s review the ups and downs of Bitcoin’s history with strong fluctuations affecting the entire Crypto market and the process of Bitcoin recovering to create higher peaks through the following analysis and synthesis: Bitcoin Crash – Market Crash & Recovery creates new peaks

Bitcoin Halving

Các sự kiện Bitcoin Halving

The next risk that I want to show you is Bitcoin Halving.

Halving means halving: For every 210,000 Bitcoin Blocks born (about 4 years), the reward for mining from 1 new Bitcoin Block will be halved (1/2).

Thanks to that, the total amount of Bitcoin generated is an asymptotic limit of 21 million BTC only.

Milestones in Bitcoin Halving:

  • Bitcoin Halving #1: From January 3, 2009 to November 28, 2012, there were 10,500,000 BTC created, which is 50 BTC on average every 10 minutes.
  • Bitcoin Halving #2: From November 28, 2012 to July 9, 2016, there were 5,250,000 BTC created, which is an average of 25 BTC every 10 minutes.
  • Bitcoin Halving #3: From July 9, 2016 to mid-2020, there will be 2,625,000 BTC created, which means 12.5 BTC is mined every 10 minutes on average.
  • Bitcoin Halving #4: And from 2020 to 2024, there will be 1,312,500 BTC created which means on average every 10 minutes only 6.25 BTC will be mined.
  • Bitcoin Halving #64: No more Bitcoins will be mined.

Bitcoin Dominance

Bitcoin Dominance can be understood as the dominance rate of Bitcoin. This ratio represents the dominance and dominance of Bitcoin over other Altcoins in the cryptocurrency market.

BTC Dominance rate is calculated by market capitalization. The higher the market capitalization of Bitcoin compared to other Altcoins, the higher the BTC Dominance rate.

Bitcoin ATM – Simple way to trade Bitcoin

Bitcoin ATM

At this point, you already understand quite well about Bitcoin, but I still want to mention one more issue that is how to trade Bitcoin. You should refer to Bitcoin ATM, this is an extremely simple way of Bitcoin transactions.

Bitcoin ATM (BTM) is an Internet machine that allows users to exchange Bitcoins and cash. Bitcoin ATM service providers may require users to present relevant information in order to be able to perform transactions on the machine.

Bitcoin ATMs are not like traditional ATMs, as it does not connect to a bank card and users can directly exchange Bitcoin and cash.

Some two-way Bitcoin ATMs allow Bitcoin or cash withdrawals. Currently, the highest transaction cost at Bitcoin ATM is 7%.

Reputable information sites about Bitcoin

Crypto is a market that is constantly evolving at breakneck speed, and so is Bitcoin. You need to constantly update information and knowledge about Bitcoin to be able to keep up with trends and make the right investment decisions.

But on the Internet there are many pages providing information, how to choose the latest and most complete information sources? Here are some reputable Bitcoin websites:

  • The fastest news updates: Telegram, Twitter, Facebook.
  • Update market information: Coindesk, Congecko, Coinmarketcap.
  • Provide in-depth research information: Coin98 Insights, Messari, The Block, Dephi Digital, Medium, Binance Research.

Summary

So I introduced you to what Bitcoin is, and provided all the detailed information about Bitcoin such as: history, advantages and operation of Bitcoin, Bitcoin wallet, Bitcoin investment forms and risks to pay attention to in the investment process.

If you find this article useful or have any questions, please leave a comment below, I will assist you as soon as possible.

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