Bitcoin for Beginners: 6 Things You Need to Know

Is Bitcoin’s popularity making you want to invest?

With the cryptocurrency’s current market value, it’s hard to resist its allure. Before investing, you should first understand how Bitcoin works. Learning about it allows you to develop the right attitude and skills to succeed.

Are you ready to learn more about Bitcoin basics? This is a guide about Bitcoin for beginners, so read on and find out more:

1. What Is Bitcoin?

Bitcoin is a type of cryptocurrency made in 2009. It’s a digital currency people around the world can exchange with others. You won’t have to worry about borders or restrictions when dealing with Bitcoin.

Cryptocurrency’s goal is to make a decentralized global digital currency. It means Bitcoin won’t rely on entities like banks and other private corporations. It can exist even without these.

You can exchange money and buy things around the world. The location won’t matter because of its digital nature.

However, it’s impossible to make more cryptocurrencies and change their value. It means it won’t work as the Federal Reserve. You also can’t print more bills.

2. Is It Possible to Make More Bitcoin?

It’s impossible to make more Bitcoin. Instead, you can only mine it using various complicated computer algorithms. There’s a hard limit to the number of Bitcoins everyone can mine.

Only 21 million Bitcoins exist in the world. Out of these, Bitcoin miners already mined 17 million. Once everyone mined the remaining 4 million, no one can make more.

The mining process is complex. It will take a long while before everyone exhausts the undiscovered Bitcoins. Regardless, understand that you have no way of exceeding this hard limit.

It’s what makes Bitcoin valuable. You can’t devalue it the same way you do with paper currency. As mentioned before, no entity can print more and accelerate inflation rates.

3. How to Make Profit Trading or Investing in Bitcoin

A good method of making money from Bitcoin is through trading and investing. Like every investment, it carries some risks. You have no guarantees when investing because of Bitcoin’s volatile prices.

Bitcoin prices can decrease or increase over a short duration. It’s a new concept, meaning it has a young economy. Sometimes, its markets suffer from illiquidity.

It’s why you must never invest your entire savings with Bitcoin. It’s a high-risk asset. Only store money you can afford to lose.

Understand the local laws and regulations surrounding cryptocurrencies. It determines the way you invest. At the same time, learn the latest news to keep your Bitcoin knowledge updated.

Trading Bitcoin and other cryptocurrencies are similar to foreign exchange market trading. It means making strategic Bitcoin purchases. Buy it while it’s cheap and wait until the value increases before selling it again.

4. How to Make Profit Lending Bitcoins

Another method of making money with Bitcoin is to become a bank. No big banks control cryptocurrencies. However, lots of businesses and people rely on them.

When these entities need more Bitcoin, becoming a Bitcoin lender is profitable. Fund their businesses using Bitcoin to kickstart them. After that, they’ll pay interest until they pay off their loans.

Unlike most bank loans, they will have a shorter term. In most cases, it will last between six months and two years. The profit comes from the interest charged on the Bitcoin loans.

The interest rates for these loans are high. It helps cover the investors’ financial risks.

Start your Bitcoin lending business with a lending platform. It helps business owners look for providers using their database. They can set the following criteria for their loan:

  • Currency used
  • Loan amount
  • Interest rates
  • Loan purpose

With these, you can decide whether you want to fund the loan. You can either fund a portion of the entire project. In the end, you have full control over your investment.

5. How Do Bitcoin Transactions Work?

Bitcoin uses a specialized wallet, enabling you to transfer currency anywhere. It’s easy to do, making it easy to control your money. However, these great features have some security concerns.

When used properly, Bitcoin gives high-security levels. It’s your responsibility to adopt good practices when protecting your investments.

Remember that Bitcoin transactions are irreversible. The only way to get them back is to ask the entity receiving your Bitcoin to return them. To avoid getting scammed, trade with trustworthy people and businesses with established reputations.

As for businesses, they must track their displayed payment requests. Bitcoin can detect typos, meaning transactions won’t go through if the address is invalid. However, it’s best to have safety and redundancy controls.

If you’re looking for privacy, Bitcoin isn’t the best choice. The currency stores hold all transactions publicly and permanently on their network. Everyone can see your balance and transaction history when viewing your Bitcoin address.

The only safety feature is hiding the user’s identity before making a direct transaction. It’s better to use Bitcoin addresses once. Otherwise, you run the risk of getting fraudulent activities.

6. What Are Some Drawbacks of Using Bitcoin?

The primary downside is the lack of total cryptocurrency acceptance in the world. Lots of businesses and individuals won’t accept Bitcoin as payment. Its value changes a lot, so it’s unlikely to become the norm for a long time.

Experts predict that acceptance levels may rise if a big company accepts Bitcoin. If big companies like Amazon accepts them, many will likely follow. 

Even after a decade of existence, the Bitcoin system is not perfect. It could have unexploited flaws most people won’t know about. The exploit may destroy the Bitcoin economy and make everyone lose money.

Since Bitcoin lacks a governing body, stolen or lost Bitcoins are almost unresolvable. Remember, all Bitcoin transactions are final as soon as they hit the blockchain. If you’re unwilling to accept these risks, it’s better to find another way to make investments.

Bitcoin for Beginners: Learn the Bitcoin Basics

Trading cryptocurrency like Bitcoin is a lucrative yet risky investment. Educate yourself with Bitcoin market trends to avoid losing money from investments. Note that cryptocurrency for beginners is something you should continuously learn about.

Are you looking for more Bitcoin for beginners’ guides? Read our other blog posts and learn more investment tips to bolster your success.

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