Abbreviated as BTC, a bitcoin is a compound of the words bit and coin and describes a type of digital currency. This currency is transacted on the Internet using an open-source, peer-to-peer protocol, known as the bitcoin network.
Smartphones, websites, and applications can send and receive bitcoins through digital wallets, using ECDSA (Elliptic Curve Digital Signature Algorithm) digital signatures to verify the transactions. The bitcoin is not a standard currency, meaning it has no central bank to manage it like a standard currency does (i.e., the Federal Reserve for U.S. currency). For this reason, the equivalent dollar value can fluctuate greatly, resulting in criticism that it is not suited for use in the worldwide economy.
Bitcoin is a cryptocurrency introduced by Satoshi Nakamoto on January 3, 2009. However, Nakamoto is not the developer's real name and their real identity is unknown, despite many different investigations. As of July 2023, the equivalent dollar market cap value of the bitcoin is over $570 billion.
How is bitcoin created?
Bitcoins are created through bitcoin mining which is software that runs on a computer that solves complex math problems. If a computer can solve the math problem, it is rewarded a certain number of bitcoins in exchange for its work. In addition to mining, these computers help approve bitcoin transactions, and because there are so many computers mining, it helps improve and secure the bitcoin network.
In the early days of bitcoin mining, anyone could use a standard computer processor to help solve the bitcoin math problems. Today, people use video card GPUs, custom-made computers, and ASICs to solve the math problems more efficiently.
With so many advancements and the number of people participating in bitcoin mining today, it's increasingly difficult for an individual to be rewarded bitcoins. To help make it more viable for an individual to participate in bitcoin mining multiple people can work together in pooled mining to mine bitcoin. If successful, each person in the pool is rewarded with a fraction of the bitcoin based on how much work he/she contributed.
The electricity cost of running the computer generally outweighs the potential financial benefit of mining bitcoin. Therefore, it is not a good method of making money for the average individual. Also, realize that all bitcoin mining software is very demanding of your processing hardware, and cause your computer to generate a lot of heat. The process of bitcoin mining will "age" your hardware, shortening its functional lifetime. If your computer has insufficient cooling, these thermal effects may also physically damage the processing hardware.
Is bitcoin safe?
Yes, buying and using bitcoin and other digital currencies is safe. However, like everything with value, it is possible for a malicious person to steal your bitcoin if your digital wallet is not secure. Also, if you lose your digital wallet or the password to your digital wallet any currency (bitcoin) contained in that wallet is also lost.
How do I buy and sell bitcoin?
To buy and sell bitcoin or any cryptocurrency, you need a digital wallet that stores the digital currency. Many of these wallets also allow you to buy and sell cryptos.
There are many stories of people making a lot of real-life money through buying and selling cryptocurrency and although these stories may be true they're not typical. As with all investing there are risks, and there are many stories of people who lost money or broke even. We recommend you only buy (invest) what you can afford to lose.
Today, one popular and easy method for most people buying and selling bitcoin and other cryptocurrencies like Bitcoin Cash, Ethereum, and Litecoin is to use Coinbase. Coinbase is a digital wallet you can run on your phone and computer to buy, sell, and store cryptocurrency. To buy, sell, or store other cryptocurrencies you need to install a wallet capable of storing that particular cryptocurrency.
If you're interested in using CoinBase, use our Coinbase link to signup and you and Computer Hope get $10 of free bitcoin when you buy or sell your first $100 of digital currency.
To buy bitcoin you can use the wallet to transfer real-life money from your bank account, credit card (if supported), wire transfer, or from another cryptocurrency. When buying bitcoin, you'll purchase a fraction of a bitcoin known as a satoshi (0.00000001 of a bitcoin) because one bitcoin is worth several thousand dollars. So, if you were to spend $100, you'd be buying 0.01265759 BTC at this bitcoin value.
If you're buying bitcoin as an investment, you can wait until the value of your bitcoin reaches a point you're happy (or not happy) with and sell the bitcoin. When selling bitcoin, you are selling it at the current value of bitcoin. For example, if you bought one bitcoin on January 1, 2017 (worth $900.86) and sold at its peak on December 10, 2017 (worth $19,065.71) you would have made over $18,000. However, if you bought bitcoin at its peak, you would have lost a lot of money. Since its peak, bitcoin has lost more than half of its value and has not returned.
Remember that each time you buy, sell, or make a purchase with bitcoin that there are transaction fees. Also, realize as you're storing any digital currency that it will fluctuate in value every day and often fluctuates faster than any other type of investment. So, every hour your wallet value will gain or lose money. There may also be times where your wallet will gain/lose value for weeks or months at a time.
How to buy something using bitcoin
Once you have a digital wallet with bitcoin or any other digital currency, you may want to buy something using that money. To purchase a good or service, you need to find someone capable of making a bitcoin transaction. If supported, the store or person displays a bitcoin logo or mentions they accept bitcoin as a form of payment, much like a store who accepts credit cards.
If a person or place accepts bitcoin, they have a QR code that can be scanned to load their digital wallet code. For example, the picture shown here is the QR code of our digital wallet code (1G8FbYFctKFZ6oAH6tHLsAqxg9jkWPk5TP). Using your phone and wallet, you can scan the code to enter the digital wallet of where you want to send money. Once the wallet code is grabbed, you enter the amount of money you want to send and hit the send button. The transaction takes a little time to be sent and verified.
If you're buying a good or service, once someone verifies the transaction is in their wallet, they give you the good or service.
Why doesn't everyone accept bitcoin?
Many businesses don't like how much the value of digital currency, like bitcoin, can fluctuate. For example, if a good was sold for $10.00 worth of bitcoin, but the bitcoin value decreases to $9.50, the business would lose $0.50 on the purchase. Of course, it's also possible to fluctuate up where the business would make additional money on a purchase. However, it's an uncertainty that most businesses cannot deal with or wait to happen.
Also, the time to make a digital currency transaction is longer than a credit card transaction, especially if you're frequently needing to convert the digital currency to a real-life currency.
Finally, the technical hurdle for most businesses owners and their customers is often too difficult for them to participate in bitcoin and other digital currencies.
Where can I spend bitcoin?
Bitcoin can purchase Internet services including Reddit, WordPress, and Mega. Web hosting and domain name management can be purchased from some companies using the bitcoin, as well. More recently, several gambling businesses, like SatoshiDice, have offered services where users can gamble using the bitcoin. In the past, users could even purchase illegal drugs from a black market website called Silk Road.
Should I capitalize the "b" in bitcoin?
There is no defined standard of capitalization for the word "bitcoin," and the "b" can be either uppercase or lowercase. However, both the Oxford English Dictionary and The Wall Street Journal use the all-lowercase version of the word. Computer Hope has also chosen to use the lowercase version of bitcoin.