In recent years, the word bitcoin has become widely known and gained prominence in the global media for various reasons: its constantly changing value, stories of individuals who became millionaires through bitcoin, and tales of others who lost it all. But what exactly is bitcoin, and how does this famous digital currency work?
In this article, you’ll learn absolutely everything you need to know about the magnificent, intriguing, and mysterious world’s most valuable currency: Bitcoin.
We will cover the following topics:
- History of Bitcoin
- A.B (Before Bitcoin)
- D.B (After Bitcoin)
- Who is the creator of Bitcoin?
- What is Blockchain?
- What is Bitcoin?
- How much is a Bitcoin worth?
- Where to buy Bitcoin?
- Is it worth investing in?
- How to know if Bitcoin will go up?
- Getting Bitcoin for free
- How does Bitcoin mining work?
- What is a digital wallet?
- Bitcoin course
It’s time to understand everything about Bitcoin!
History of Bitcoin
We’ll divide this post into two parts so you can grasp the plot:
A.B (before Bitcoin) and D.B (after Bitcoin)
A.B (1980 a 2008)
DigiCash
The year is 1983, a guy named David Chaum, a computer science student in California, publishes an article about a digital currency: DigiCash.
DigiCash was an encrypted digital currency and its main advantage was its anonymity, but it didn’t eliminate the intermediary. The idea was as follows: people would receive digital money from the bank and use it without the bank knowing the purpose of its use.
The idea was quite promising for the time since people were very afraid of using credit cards to purchase goods and services on the internet. However, there was no demand. E-commerce only really took off in the mid-90s.
But, there’s more to this story.
According to our research, Chaum received several offers for DigiCash, one of them even coming from Bill Gates, aiming to integrate the currency into all installations of Windows 95.
Apparently, David Chaum thought the $100 million offered was too little. So, Bill Gates gave up on the proposal, as did the famous Netscape browser (nostalgic feelings).
The failure of DigiCash has a lot to do with the fact that David Chaum was a centralizer in the decisions about the future of the project and also a fan of patents and copyrights, which isn’t good for such a new technology.
In 1999, DigiCash closed its doors.
E-Gold
Now we’re in 1996. PayPal doesn’t exist yet, and Amazon is just getting started, but Backstreet Boys is already a thing.
If you lived through ’96, you’ll remember. That’s right! While the world was dancing to “Everybody yeahh yeahh,” two guys from Florida were racking their brains to create digital currencies based on gold.
Oncologist Douglas Jackson and attorney Barry Downey had a brilliant idea: put gold coins in a vault in Melbourne and sell digital portions of these coins through a website. Thus, E-Gold was born.
In the four years following its inception, E-Gold was used by about one million people and became the first non-credit card payment service that could be integrated into online stores.
Since E-Gold was divisible into thousandths of a gram of gold, it was the first functioning micropayment system. So, you could send a 10-cent tip to your favorite content creator as a thank-you or reward for an article.
To this day, this isn’t possible with credit cards and PayPal, as transaction costs are still too high.
Precious metal traders started using it first, followed by online merchants, then auction houses, casinos, political and non-profit organizations. Next came exchange houses, and as E-Gold’s popularity grew, it began to attract the attention of hackers.
E-Gold’s system wasn’t secure enough, and many customers were hacked and unfortunately lost their funds.
Moreover, the government was keeping an eye on these issues, and even though Douglas and Barry did everything they could to keep the business running according to U.S. regulations, they fell victim to state blackmail and couldn’t keep the business going.
Patriot Act
After the September 11, 2001, attacks, President George W. Bush decided to create the Patriot Act, which not only paved the way for the suspension of many civil rights but also privacy.
The “Patriot Act” allowed the monitoring of private phone calls, email exchanges, medical records, and bank transactions.
With this new law in effect, tax authorities froze Douglas and Barry’s gold reserves, and as a result, most users left the platform.
Moreover, since they were not granted a license to operate E-Gold, both had to face legal charges for money laundering. In 2008, Douglas was sentenced to 300 hours of community service and a $200 fine.
And so ended the story of E-Gold. However, it left many lessons, such as:
- Centralized management makes the system more vulnerable to hackers.
- A gold-based monetary system can lead to state blackmail.
- A company domiciled in a country is susceptible to local legislation.
- Founders who can be identified can be easily arrested by the FBI.
Hashcash
During the 90s, computer sales were booming, and the Internet quickly became popular for messaging services, better known as EMAILS.
I can perfectly remember my first computer and the dial-up internet with a BOL CD. But, as with everything, there’s a good and a bad side, and something utterly annoying soon emerged.
Spam.
These invasive and super annoying emails started flooding the internet in 1994 and persist to this day. Believe it or not, currently, 85% of all emails sent globally are spam!
Well, what does Hashcash have to do with EMAIL?!
In 1997, Adam Back, a computer scientist, cryptographer, and today CEO of Blockstream, proposed a potential solution to effectively combat spam, an idea he called Hashcash. In other words, Adam Back wanted to free us from the annoying spams filling our inboxes.
So, the idea of HashCash worked like this:
To send an email, your computer would need to perform a mathematical calculation based on a hash. If you sent only a few emails, you wouldn’t even notice your computer doing these calculations. However, if you sent a barrage of emails (spams), the time and processing required would become immense, and all that computational power would need more electricity, resulting in higher costs for the user.
Here we have a clear idea of Proof of Work, which is used in Bitcoin.
In the end, HashCash didn’t gain much visibility, but the project’s ideas caught Satoshi Nakamoto’s attention to the point where he exchanged messages with Adam Back.
Check out the whitepaper here.
The B-Money Moment
Although B-Money never made it off the drawing board, this project was so important that it would later be cited in Bitcoin’s whitepaper.
In 1998, a computer scientist named Wei Dai proposed B-Money, a distributed and anonymous electronic cash system.
Wei Dai included several features that have now become common in cryptocurrencies, such as:
- Computational work;
- Community verification in a collective ledger;
- Rewards for contributions.
Wei Dai suggested that collective accounting was necessary, with cryptographic protocols helping to authenticate transactions. This is much like the blockchain we know today.
Furthermore, Wei Dai also proposed the use of digital signatures, or public keys, for transaction authentication and contract enforcement.
Nick Szabo
In December 2005, Nick Szabo appeared with a post on his personal blog Unenumerated, discussing a decentralized financial system that combined various elements of cryptography and mining.
The name is Bit Gold, and much of what Nick Szabo presented in this project ended up being used in Bitcoin’s architecture, such as proof of work, mining, decentralization, and the idea of a long-term value asset.
In the project description, Nick Szabo describes Bit Gold “not only as a payment scheme but also as a long-term store of value, independent of any trusted authority.”
It’s this mix of similarities between Bit Gold and Bitcoin that leads many people to believe that Nick Szabo is Satoshi Nakamoto, or at least a part of the team that created Bitcoin.
D.B (2008 a 2020)
There’s a line from a Jorge Drexler song that I really like, which says, “nothing is lost, everything is transformed.” And that’s precisely what Satoshi Nakamoto did. He implemented much of what already existed to create Bitcoin.
In a 2010 forum post, Satoshi Nakamoto said:
“Bitcoin is an implementation of Wei Dai’s B-Money proposal on the Cypherpunks list in 1998 and Nick Szabo’s Bit Gold proposal.”
The Birth of Bitcoin
To understand the importance of Bitcoin and why it exists, we need to look back at what happened in 2008.
That year, an economic crisis in Europe and the United States led to a crash in the New York Stock Exchange and widespread business failures.
The American investment bank Lehman Brothers filed for what remains the largest bankruptcy in U.S. history.
However, while all this chaos unfolded in the markets, someone with the pseudonym Satoshi Nakamoto was discussing the creation of a decentralized global digital currency with other cypherpunks in online cryptography forums.
The world first heard of Bitcoin on October 31, 2008, at 8:10 AM (Central European Time), when, at the height of the U.S. financial crisis, Satoshi Nakamoto sent a message to a cryptography nerd mailing list stating:
“I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third parties.”
Nakamoto emphasized in his email that the main feature of the protocol was that “double spending is prevented with a peer-to-peer network.”
He pointed out that there were no third parties or trusted intermediaries, and that “participants can be anonymous” if they so desired.
The first email explained that “new coins are made from Hashcash-style proof of work, and the proof of work for the new coin generation also secures the network against double spending.”
This message included a link to the project – a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
What’s most surprising is that the entire idea and functionality of Bitcoin were described in a straightforward, simple manner in just nine pages.
In summary, Bitcoin would be an encrypted digital currency independent of any government, which people could transact directly worldwide – without the need for a bank or any other intermediary. The currency would be created mathematically using computers through a process known as “mining,” and there would only ever be 21 million units in the world.
The Bitcoin white paper is available on bitcoin.org in english and over 40 other languages.
Interestingly, this domain was registered on August 18, 2008, shortly before the white paper’s release.
While it’s usually possible to discover the owner of a domain, Satoshi thought of everything and used a service that keeps that information anonymous. Today, the domain is “Whois Guard Protected,” meaning the identity of the registrant is not public information.
The Beginning of Mining
Two months after the project was published, on January 3, 2009, Satoshi mined the first Bitcoin block, block zero, called the genesis block. For mining this block, he received a reward of 50 Bitcoins, and most intriguingly, the block contains an encrypted subliminal message in its code, left by Satoshi himself:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
This is the headline from the British newspaper The Times on January 3, 2009.
The article reports that Alistair Darling, then UK Chancellor of the Exchequer, was considering a second bailout for UK banks, which eventually took place a year later.
With this message, it seems likely that Satoshi created Bitcoin as a form of protest against the endless money printing by Central Banks, which leads to inflation and poverty.
The First Bitcoin Transaction
In the same week, a programmer named Hal Finney became interested in helping to get the Bitcoin idea off the ground.
On January 11, 2009, Hal Finney tweeted the epic phrase: RUNNING BITCOIN, to share that he was running the Bitcoin network and helping Satoshi with some bug fixes. Hal Finney received 10 BTC from Satoshi Nakamoto, making him the first person to receive a Bitcoin transaction.
Sadly, Hal Finney suffered from a degenerative disease and passed away in 2014, but the craziest part is that he decided to have his body cryonically preserved. That’s right, at this very moment, his body is frozen at a temperature of -200 degrees in an aluminum capsule inside a nitrogen tank.
Could he be Satoshi Nakamoto, wanting to return in the future to see the progress of his creation? The story of Bitcoin is truly fascinating!
Running bitcoin
— halfin (@halfin) January 11, 2009
Who is the creator of Bitcoin?
In the Bitcoin whitepaper, there’s no doubt about how the peer-to-peer payment system works, but at no point does Satoshi reveal his true identity.
Over a decade after Bitcoin’s creation, nobody knows to this day who Satoshi Nakamoto is.
So, he could be an individual or a group of people.
The fact is that it was someone with a wide range of skills and knowledge, including technology, cryptography, economics, mathematics, and a deep understanding of the banking system.
Another interesting fact is that Nakamoto claims to have been born on April 5, 1975. Coincidentally, on that very date, April 5, 1933, Roosevelt, who was the U.S. president at the time, signed special laws prohibiting the accumulation of gold by individuals. The year 1975 is when the U.S. severed the last link between the dollar and gold.
To this day, the only thing we know is that there is no person named Satoshi Nakamoto.
But as you know, here at Area Bitcoin, we have a Special Department of Conspiracy Theories, and we couldn’t help but compile our list of suspects for the role of Satoshi Nakamoto. Today, the top contenders are Hal Finney, Nick Szabo, and Dorian Nakamoto.
Want more information about the creator of Bitcoin? Then check out everything about Satoshi Nakamoto here!
What is Blockchain?
The literal translation means a chain of blocks. In other words, it’s blocks of information linked together.
It’s like a digital fabric, where you can’t pull a block from the middle of the chain without affecting the subsequent blocks, just like when you pull a thread from a fabric, you alter the entire seam that follows. Blockchain is like digital stitching.
So, if it’s altered, everyone will notice that there’s a mess, meaning there’s something wrong with that point in the chain.
Once registered on the blockchain, the information is recorded in the history of the blockchain, which is why the blockchain also serves as a timeline where events cannot be modified. It’s an IMMUTABLE and IRREVERSIBLE network.
What is Bitcoin and why did it succeed?
Bitcoin is a currency, just like the real, like the dollar, but in digital form (check out our bitcoin calculator to analyze the price of Bitcoin in relation to other currencies, as well as the Dollar, Real, Euro and more).
This means you can use Bitcoin to pay for goods and services in everyday life or store it in your wallet as a store of value. You can also use it as insurance in case the traditional system collapses.
The main difference between Bitcoin and conventional currencies is that currencies are associated with a government or central bank, while Bitcoin is entirely decentralized. Financial transactions can be made from person to person, without intermediaries.
Transaction validation is performed by numerous computers worldwide, called miners, which generate new Bitcoins and record all transactions in a massive digital ledger called the Blockchain.
As transactions are entirely recorded on the Blockchain, anyone can access this information since it is online. See? That’s what makes Bitcoin a transparent, secure, and anti-fraud currency.
Bitcoin is now well-known among investors due to its significant appreciation over the years. However, it’s essential to remember that Bitcoin’s purpose is different; it’s meant to be a means of transferring value between people without needing a bank.
It has unique features compared to all other existing currencies.
Main features of Bitcoin:
Accessible to all
All you need is a smartphone and an internet connection. There’s no need to prove income as with traditional banks.
Also, to transact Bitcoin, you don’t need any extra information from the person you’re transacting with, like a tax ID number or full name.
Secure and transparent
Bitcoin is immutable because all transactions are recorded on the blockchain, and any attempt to alter the records in the blocks would be easily recognized and communicated.
Once a record is made, it cannot be erased or undone. This makes transactions much more secure and transparent since anyone can track transactions in real time.
Scarce
In Bitcoin’s design, Satoshi determined that there would only be 21 million units of the currency globally and that they would be issued until the year 2140.
Today, 18.5 million have already been mined and are circulating in the market. Due to its limited supply, this currency is non-inflationary and scarce. Its scarcity and finite nature are the main reasons for Bitcoin’s value increasing year after year.
Decentralized
In the United States, the Federal Reserve (the Fed) issues dollars and decides how quickly new dollars will be created.
In the Bitcoin system, there is no owner, CEO, leader, or central body regulating the issuance of new Bitcoins or changing monetary policy over time.
Bitcoin is coordinated by a network of computers worldwide, all following the same rules in sync.
The rules are pre-established in Bitcoin’s source code, and the project is open source.
Additionally, there’s no need for an intermediary, meaning you become your own bank. This is one of the most powerful aspects of the system since it gives you complete control over your money.
As a result, you can transfer funds from your own wallet to anyone else’s wallet, anywhere in the world, at any time of day or week, without asking for permission from anyone.
Censorship-resistant
Since Bitcoin isn’t tied to any country and isn’t controlled by any government or institution, it’s a currency resistant to censorship. If you store your Bitcoin properly, the government can’t confiscate it.
In other words, this store of value can’t be seized. It’s impossible for the government, banks, or even companies to take your money because, with Bitcoin, you are your own bank, meaning your bitcoins stay in your wallet (Bitcoin wallet).
Learn how to store Bitcoin the right way!
Global
Bitcoin operates 24/7 worldwide.
To stop transactions, it would be necessary to turn off the internet or all computers worldwide – essentially impossible. Moreover, if everything were turned back on, the network would resume full speed ahead!
To gain a better understanding of Bitcoin and its mechanics, please watch the video provided below.
Will there be enough Bitcoin for everyone?
The fact that Bitcoin is scarce and limited to only 21 million units raises questions about whether access will be limited to just a few people.
So, if there are currently over 7 billion people in the world, and of those 7 billion people, 52 million are millionaires, it means that if each millionaire wants to buy just 1 Bitcoin, there won’t be enough Bitcoin for all of them.
However, what many don’t know is that each Bitcoin is divisible into 100 million Satoshis. To clarify, a Satoshi is the smallest unit of Bitcoin and is named in honor of its creator, Satoshi Nakamoto.
Therefore, Bitcoin has eight decimal places, but what does that mean?
It means that 1 Bitcoin can be divided many times, allowing us to exchange small amounts. Just as 1 real is made up of 100 cents, 1 Bitcoin is made up of 100 million Satoshis.
So, there won’t be enough Bitcoin for everyone, but at least there will be Satoshis for all.
How long does a Bitcoin cycle last?
A Bitcoin cycle lasts, on average, four years. This is due to the halvings, which is an event that occurs every 210,000 blocks, taking about four years to happen.
During halvings, the reward for miners for each mined block is cut in half, which impacts the supply of Bitcoin in the market, also cut in half, making Bitcoin even scarcer and causing its price to rise even further.
The next halving is expected to happen in early 2024.
How much is a Bitcoin worth?
When Satoshi started running Bitcoin, each coin was worth zero. That’s right! The currency had no value at all.
So, the first recorded trading price of Bitcoin was noted on March 17, 2010. At that time, the bitcoinmarket.com trading platform was still in operation, and the value for one unit of BTC was USD $0.003.
However, in 2017, Bitcoin reached a value of almost 20,000 dollars, only to subsequently plummet in price. During this time, many people said that Bitcoin had died.
Bitcoin skeptics often say that it has no intrinsic value, no backing, that it’s highly volatile, produces nothing of value, and has no historical precedent to be considered a store of value. But, even government currencies don’t possess all these characteristics.
One of the coolest things is that Bitcoin doesn’t follow traditional valuation parameters. BTC is valuable because it takes what we consider valuable to another level.
Bitcoin is its own backing and guarantee. Its value lies in creating a currency with a limited supply and a record-keeping network that can’t be altered, destroyed, controlled, or corrupted by anyone. The most obvious way to use a system like this is for transferring value, in other words, as money.
Therefore, today even companies are starting to see Bitcoin differently and beginning to invest in it as a way to generate cash. Moreover, this was one of the reasons that made Bitcoin’s price skyrocket and reach its all-time high of USD 69,000 in November 2021.
So, did you get the idea of Bitcoin’s value, what it is, and its history?
We are living through what Satoshi mentioned in the genesis block once again:
- endless unbacked money printing by Central Banks;
- governments inflating markets;
- yet another crisis, this time caused by a pandemic and protests around the world against government violence.
It’s the perfect storm for Bitcoin to show its strength.
The next few years promise even more for Bitcoin, and it’s impossible to ignore an asset with such potential to transform the global economic landscape.
So, if there is true financial freedom, it lies in Bitcoin!
Where to buy Bitcoin?
Exchanges
The first option is through exchanges. They function like currency exchange houses, where you trade fiat currency (like dollars or euros) for bitcoin. Signing up takes just a few minutes, you open an account, transfer your funds and can instantly buy bitcoin.
P2P
You can also buy through P2P, or person-to-person.
In this case, there are no intermediaries, but you do need to trust the other party.
The process is simple: you deposit a fiat currency amount into the P2P seller’s account, and they transfer the equivalent in Bitcoin to your wallet, based on the current exchange rate.
PayPal
There’s also the option to buy Bitcoin through PayPal. However, we don’t recommend using these financial institutions for this purpose.
If you analyze this app, you’ll notice that you can only buy and sell Bitcoin. As of now, it’s not possible to withdraw to an external wallet. This raises doubts about whether these apps truly hold Bitcoin since you can’t verify transactions on the blockchain.
Furthermore, if you can’t withdraw, then your Bitcoin is locked within these financial institutions, and you have no freedom to transact with your coins.
Keep in mind that you can send Bitcoin to any wallet in the world, 24 hours a day, 7 days a week. However, these financial institutions allow you to do that. So, buy on platforms where you can immediately withdraw to your own wallet.
Funds and ETFs
Finally, there are funds and ETFs.
However, there’s a catch here. If you buy through funds or ETFs, you’re not actually buying Bitcoin; instead, you’re exposing yourself to its price fluctuations. Plus, you can’t withdraw to your own external wallet.
That’s why we don’t recommend buying in this way.
Is it worth investing in Bitcoin?
Bitcoin has appreciated a lot since its inception, and that leads many people to think of two things:
- It might not be worth it anymore; it’s too expensive.
- I wish I had gotten in earlier because it’s not going to appreciate as much now.
However, even with so much appreciation, Bitcoin has the potential to appreciate as much or even more than it has so far.
Remember that Bitcoin was the only cryptocurrency that appreciated 6 billion percent since its creation, and those who buy a “shitcoin” hope that it will pump so they can quickly convert it to fiat, like reals or dollars.
By definition, it’s price speculation, where the focus is to quickly convert to fiat when (and if) there’s appreciation.
People don’t aim to hold a “shitcoin” for the long term. With Bitcoin, the mindset is different. Bitcoin is an alternative store of value to traditional assets, and hodlers aim to hold BTC for the long term.
Understand the differences between Bitcoin and Cryptocurrencies.
These are people who increasingly have fewer economic incentives to convert their BTC to fiat, and that’s why over time, Bitcoin tends to appreciate much more than other cryptocurrencies.
Also, what seems expensive today might be a bargain tomorrow.
Look at this tweet from a guy who, in 2011, was lamenting that he bought Bitcoin at 6 cents, sold at 30!
He regretted that he could have waited because, at that moment, BTC had gone to 8 dollars!
The truth is that with each new cycle, we have a new price discovery of Bitcoin by the market, and those with diamond hands accumulate more appreciation through the overlapping of appreciation cycles.
So, although Bitcoin at USD 30,000 may seem expensive, the same price might seem absurdly cheap in a few years, as Bitcoin adoption continues to grow worldwide.
But is it worth investing or not?
Is it still worth buying Bitcoin? Bitcoin is a long-term asset, not a short-term one. It’s a process that can take decades. So, those who can hold for longer will benefit the most, and it’s essential to keep that in mind.
Therefore, start thinking about an investment of years, not weeks or months. When you turn that key, you’ll see significant drops as significant opportunities to accumulate more satoshis at a lower price.
Think that if your plan is to accumulate Bitcoin for 5, 10, or 20 years, it won’t make a big difference if you bought Bitcoin for $40,000, $45,000, or $50,000, as you’ll be buying consistently every week or month.
In 5, 10, or 20 years, Bitcoin is expected to be worth much more, and then the amount of BTC you managed to accumulate will really matter.
How to know if Bitcoin will go up?
Bitcoin’s price fluctuates a lot because it’s the raw law of supply and demand.
So, if the number of people wanting to buy is higher than those who want to sell, the prices will rise.
In recent years, several theories have been created to try to predict Bitcoin’s price, such as the Rainbow Chart and Stock-to-Flow, but these are just theories that still need to prove themselves over time. Therefore, it’s not something to follow strictly as investment guidance.
The truth is that there’s no crystal ball, and nobody knows when Bitcoin will go up and what its price will be in 6 months, 1 year, or more.
What we can analyze is its past and observe that there’s an upward trend, both in its trajectory and its features.
So, what’s the best strategy to invest in Bitcoin?
There’s a low-risk strategy for buying Bitcoin without having to obsessively follow the market called DCA, which stands for Dollar Cost Averaging.
DCA is the process of buying an asset at a fixed amount over a long period of time, for example, $1,000 monthly.
Trying to time the right moment to buy Bitcoin can be very difficult, as there’s a lot of price fluctuation. Moreover, this strategy of consistent purchases over time has proven profitable for most investors.
Check out the top 10 questions about investing in Bitcoin!
How to get Bitcoin for free
Yes, that’s right! There are ways to have Bitcoin without having to buy it directly.
Here are some alternatives:
1. Accepting Bitcoin as payment
You can receive Bitcoin in exchange for your services or selling your products.
On our platform, for example, students can pay for courses in Bitcoin. If you want more information on this topic, read our post: Is it worth accepting Bitcoin as payment?
2. Playing on your phone
There are several play and earn games today that reward sats (satoshis) every time you play.
Discover 4 mobile games to earn free Bitcoin
3. Mining
Nowadays, mining requires a significant investment.
In the early days of the network, anyone could mine Bitcoin from their home computer. However, it has become an industry, and miners usually operate in warehouses that house hundreds of specialized machines for mining. These powerful machines are called ASICs.
An ASIC today costs around 30,000 reais, which is expensive, right?! Additionally, you need to import this machine from abroad, install it in your home, and start running it.
But what are the downsides?
- initial cost,
- energy cost,
- maintenance.
In most countries, this becomes very expensive. However, it’s worth calculating. Depending on your situation, mining may be a great way to accumulate satoshis without KYC in the long run.
Regardless of how you acquire Bitcoin, you need to know how to securely store Bitcoin. For this, encrypted digital wallets are used to custody your coins.
How does Bitcoin mining work?
The process of creating new units of Bitcoin is very similar to gold mining, hence the concept of Bitcoin mining.
In gold mining, miners dig through ore until they find the precious metal. In the Bitcoin network, miners perform probability calculations until they find the correct answer and close each block of information.
These solved blocks are lined up so that one block of information is linked to the next, creating the so-called blockchain.
After finding the correct answer, miners present the calculation (the closed block) to the entire network to verify if everything is correct. If everything checks out, the network moves forward by adding the next block to the chain of information.
This entire process is called proof of work, where the whole network follows the calculations of each block and checks if the account is correct and if there was any cheating.
This is how a blockchain achieves consensus on what is processed in the network.
The miner who closes the block first receives Bitcoin as a reward. Today, this reward is 6.25 Bitcoin per block, and every four years, this reward is halved in an event called halving, which results in fewer Bitcoin on the market.
On average, a block is mined every 10 minutes, and with today’s reward for miners being 6.25 BTC per block, a total of 900 Bitcoin is created daily.
Understand everything about Bitcoin mining.
Can you mine Bitcoin on a PC or phone?
The simple answer is that it is indeed possible to mine Bitcoin on a smartphone, on both Android and iPhone devices, or even on a computer.
It’s important to remember that smartphones are computers and any computer can be used to calculate hashes.
Hash Functions
Hash functions are extremely important in blockchain technology because they allow for secure and fast data processing and entry into the distributed ledger.
A hash function is an algorithm used by the Bitcoin protocol to transform a large amount of information into a fixed-size hexadecimal numeric sequence. Each hash is created with the help of a double-SHA-256 algorithm, which generates a random 512-bit (or 64-byte) number.
Furthermore, hashes are essential in the use of block explorers, as they allow for the quick extraction of information about transactions and addresses. Data hashing is one of the most secure data transfer practices because none of the original information can be accessed without a hash key.
Now that you understand what a hash is, here’s a more complete answer.
PCs and smartphones are not suitable for Bitcoin mining work, as they compete with much more advanced and specialized computers for this purpose, which are ASIC machines, whose goal is to calculate the largest possible number of hashes with the best energy efficiency.
So even if you want to mine Bitcoin with a cell phone or home computer, you probably won’t be able to mine any blocks because ASIC machines are much faster and more efficient in this race for the prize.
What’s a digital wallet?
A digital wallet serves to send, receive, and store Bitcoin and other digital assets. These software applications focus entirely on security and utilize cryptographic technology for this purpose.
Many people think that Bitcoin is stored inside the wallet, like a file on a flash drive, but that’s not the case.
A digital wallet stores and protects your private keys, which are the same keys that grant access to your Bitcoin.
These coins are on the blockchain, and that’s why even if this device is not connected to the internet (because it’s safer for your keys to be offline), your wallet balance continues to fluctuate in price according to market variations.
Thus, there are two well-known types of wallets:
Hot Wallets
A hot wallet is a cryptocurrency wallet designed to store, send, and receive Bitcoin and digital currencies.
They are called hot wallets because they are always connected to the internet.
The most common are mobile wallets, which are like apps. However, since hot wallets are connected to the internet, they tend to be slightly more vulnerable to hacks and theft than cold wallets, which are offline.
For this reason, this type of wallet is recommended for everyday use. In other words, for those lower amounts intended for quick and practical transactions.
Below are some Hot Wallets:
Cold Wallets
Unlike mobile wallets, cold wallets are called this because they are offline, meaning they are disconnected from the internet.
This type of wallet can be paper or a physical device, similar to a flash drive.
They are the best wallet options for securely storing your Bitcoin in your own custody.
Remember that regardless of your choice, you should have access to your keys, and you should handle your own custody. Don’t leave your Bitcoin in the hands of third parties.
See below for some Cold Wallet options:
Are my Bitcoins at risk if I keep them on the exchange?
If you’re using the exchange as a wallet, you are indeed taking risks.
As we’ve mentioned, when you leave your balance on the exchange, it’s the exchange that has possession of your Bitcoin, not you.
The exchange could go bankrupt, disappear, or even fail, as happened with FTX, and when this occurs, customers’ balances are usually stuck in the exchange, making withdrawals impossible.
Moreover, in such cases, it can take years for the value to be returned, if it can be returned at all.
So always remember this: Bitcoin is only yours in your own custody.
Bitcoin Course
After understanding all of this and not taking action, you are choosing not to protect yourself, not to change your mentality, not to change your life, and to remain in the outdated financial system that dilutes, devalues, and wastes the energy you spent working to accumulate a little money.
The best investment for your future is to learn how to build your wealth and protect it.
Understanding Bitcoin is a game-changer in your financial, professional, and personal life.
It’s a paradigm shift, transforming your worldview through new knowledge.
That being said, the best Bitcoin course available today is Bitcoin Starter, a super comprehensive training on the best asset of the decade.
With over 20 hours of recorded classes, you will understand how Bitcoin works, the truth behind cryptocurrency projects, how to invest safely with the parabolic wallet method, how to store it properly, and gain access to various bonus content.
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Area Bitcoin is an educational Bitcoin school that aims to accelerate the financial and intellectual sovereignty of all individuals.
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