Bitcoin definition
While there are several different examples of cryptocurrencies, such as Ethereum, Litecoin, and Dogecoin, Bitcoin is undoubtedly the most talked-about one.
Bitcoin was the first cryptocurrency to gain widespread acceptance, and several retailers, restaurants, ecommerce platforms, banks, and governments, accept the digital asset nowadays. You can also purchase bitcoin from ATMs at small gas stations and convenience stores, in addition to online marketplaces across Canada and the United States.
What is a bitcoin, and how does it work?
Bitcoin is a type of digital currency. Unlike cash or coins, it only exists in cyberspace. Here is how it works:
Blockchain technology
Like any monetary system, Bitcoin utilizes a ledger for record-keeping. However, unlike conventional currencies, Bitcoin doesn’t use a physical or digital ledger controlled by an authority like a central bank.
Instead, the decentralized cryptocurrency leverages blockchain technology for security, privacy, and independence from traditional players in the financial world. So, what is blockchain technology then? In a nutshell, a blockchain is a system that maintains a record of transactions across a series of computers on a peer-to-peer network.
Bitcoin mining
Bitcoin miners use computer hardware to find bitcoin by solving complex puzzles. When a miner solves a block, the system adds it to the blockchain while rewarding the miner with bitcoin. The system releases bitcoin at a declining rate, with the number of bitcoins minted per block reducing by half periodically. In other words, miners require more computational power to mine the same value of bitcoin over time. You can check out Malwarebytes Labs to learn more about how cryptocurrency mining works.
How many bitcoins are there?
With a bitcoin minted very few minutes, it’s challenging to say how many bitcoins exist at the very moment you’re reading this article. For example, according to Statista, over 18.61 million bitcoins were in circulation in early 2021 and nearly 19 million in late 2021. Interestingly, the system will stop releasing bitcoin after 21 million.
Is a bitcoin a real coin?
By traditional definition, a bitcoin isn’t a real coin because it’s not a small piece of metal. It’s software and has no physical form. But just because you can’t touch it, feel it, or bite it, doesn’t mean that it’s not real.
How do you explain bitcoin to a child?
You can explain Bitcoin to a child that plays video games by talking about the items they buy in a gaming world from a merchant using the game’s currency. For example, in Animal Crossing, players buy items from stores, pay mortgages, and more with “bells.” While these bells may not exist physically in the real world, they hold value in the game’s universe. Some games even allow players to trade in-game currency for real money.
Similarly, Bitcoin is a type of digital currency, but for the real world. Unlike other conventional currencies in the real world, Bitcoin has no issuer like a bank. Instead, it relies on an independent system.
Bitcoin mining is also similar to a strategy game where you mine for finite resources. Eventually, the system will stop rewarding miners with bitcoin. Like any sought-after item with limited supply, bitcoin has high value. Compare this to rare in-demand skins in Fortnite that sell for higher prices on Fortnite marketplaces due to low supply.
Can you convert bitcoin to cash?
The most common way to convert bitcoin to cash is to use the services of a broker. An exchange like an online merchant or bitcoin ATM will convert your bitcoin for cash at the current market rate for a fee. Alternatively, you can sell bitcoin directly to a buyer.
Who made bitcoin?
An unknown person or group of people invented bitcoin in 2008 under the pseudonym Satoshi Nakamoto. No one really knows who is behind the identity. Over the years, some people have claimed to be the creator of the cryptocurrency, but time and again, a hyped “bitcoin Satoshi Nakamoto reveal” has proven to be a publicity stunt.
Is bitcoin safe?
Experts believe that Bitcoin is almost impossible to hack because its entire network constantly reviews its blockchain system. That’s why hackers target users and websites instead of the Bitcoin blockchain system.
Cybercriminals have taken off with millions by breaching a bitcoin platform’s digital defenses. They also steal entire investments by hacking into user accounts through social engineering attacks like phishing, spear-phishing, and SIM-swapping. The following steps may help mitigate your risk of losing bitcoin to a threat actor:
- Try using a cold wallet to store your cryptocurrency.
- Set complex passwords for all your accounts.
- Use hard-to-guess answers for security questions.
- Utilize two-factor authentication to protect your login credentials.
- Safeguard your system against computer viruses, Trojans, keyloggers, spyware, and other malware with intelligent anti-malware software.
- Learn how to identify social engineering attacks. You can read how bitcoin scammers phish for wallet recovery codes on Twitter to protect yourself.
- Call your mobile service provider to lock your phone number and set a security PIN to shield your account from SIM hacks.
Driving the rise of Bitcoin is a sophisticated piece of software and independence from conventional financial systems. With the supply of the cryptocurrency set to stagnate soon, it’s anyone’s guess what the future holds. One thing is for sure, Bitcoin has forever changed the way we think about financial technology.