Bitcoin - where do we even start?
Mesha Co-Founder, Tahem Verma gives us a (much-needed!) guide on all things Bitcoin
First, and probably most obvious question - What is bitcoin?
Bitcoin is a decentralized digital currency, so there’s no central bank or administrator somewhere controlling everything. One user can send it to another user on the peer-to-peer bitcoin network and cut out the middlemen. You don’t need a bank with bitcoin, you can directly send money yourself because the network has a way of making sure that it’s all done safely.
When did bitcoin begin?
A person (or people) called Satoshi Nakamoto created bitcoin and the first blockchain database in 2009. Central to Bitcoin’s thesis of privacy, Satoshi Nakamoto is a made-up name, and no one is 100% sure who Satoshi really is. It’s the presumed pseudonym of the person or persons who developed bitcoin.
How does Bitcoin work?
Bitcoin is a crypto currency that runs on a very secure, decentralized digital technology called blockchain. As a cryptocurrency, it performs the same functions as traditional money—making transactions, buying things—except it’s all online. When you want to make any kind of transaction, you can send bitcoins into the digital wallets of other users. As blockchain is a public ledger recording every single bitcoin transaction, there’s no one repository, institution, or government controlling it. For the same reason, there’s a great deal of control on fraud.
Are there lots of different types of Bitcoin?
Today, there are lots of different types of cryptocurrencies but there’s only one bitcoin. And more importantly, there’s a limit on how many bitcoins will be issued—from now till eternity. The number of tokens has been fixed at 21 million and 18.75 million are already out there in circulation. When there are 21 million bitcoins, no more will ever be created and you will only be able to exchange them.
Can anyone start trading Bitcoin or do you have to have a specific qualification?
Anyone can trade bitcoin but you should do your research, understand the technicals (helpful but not necessary), and only invest how much you’re comfortable with. Watch the news for anything that’s happening that could impact the price and changes in the industry.
If you buy into Bitcoin (is that even the right term?), do you have to know how to trade too?
You don’t have to trade bitcoin if you don’t want to. You can just keep it in your digital wallet but trading now is as simple as investing in stocks and if you’re an experienced trader, you can do a deep dive into a technical analysis of bitcoin for trading.
Why Bitcoin over actual coins?
The global economy is moving towards a digital ecosystem and cryptocurrencies are just a decentralized digital/ virtual currency that uses cryptography (code) for security. This protects it against counterfeit. Since it’s not issued by a central authority—no bank, no institution or government—no one can take it away from you. It’s immune to fraud because everything is stored in a public ledger, immune to identity theft because of technological accuracy, and as an added plus, it guarantees ownership and grants almost-universal access to users because it is on the internet.
What do you need to watch out for when trading Bitcoin?
Keep in mind that bitcoin is a volatile asset right now and has swings every day. So, avoid the hype (both negative and positive), don’t focus on the day-to-day ups and downs, and invest for the long term.
How can you reduce your risks when entering the Bitcoin market?
Do your research and be aware – that’s the first most important step. Only invest as much as you’re comfortable with, so, please be aware of your risk appetite. If you do make gains, know when you want to book a profit.