Given the current dip in Bitcoin’s value, you must be looking into investing in the popular cryptocurrency. But, you have to be quick. If you don’t know, Bitcoin is extremely volatile. Its dips and peaks often last for a short time and quickly settle to a certain level, leaving a very small opening to buy. Here, we’ve compiled some things about Bitcoin that you need to know so that you can quickly get up to speed before trading and avoid its potential pitfalls.
1. No need to Buy a Whole Bitcoin
Many people become convinced that Bitcoin is a great cryptocurrency to invest in, only to find out that the price of one Bitcoin amounts to thousands of dollars. This discourages them from investing as it means they’ll have to part ways with their life savings in order to gain even one Bitcoin. You can buy or sell bitcoins through 5 coins to 5 million official website
Like how one-hundredth of a cent is the smallest unit for the dollar, the Satoshi, equivalent to 0.0000001 Bitcoin, is the smallest unit for a Bitcoin. It’s up to you how many Satoshis you want to purchase, but be aware, some exchanges may require you to buy a minimum amount.
2. Bitcoin is Completely Anonymous
Bitcoin works by collecting transaction records and compiling them on the blockchain – an online ledger that holds historical transaction information, just like how banks record the movement of money in their ledgers. However, you don’t have a name with your transaction record, rather, you have a private key. This makes many believe that Bitcoin offers anonymity by leaving out your name, but that’s partly true.
It’s pseudo-anonymous, meaning that law enforcement can still track you via other means if you partake in nefarious activities. They can track your private key to your wallet via the exchange you use and the vendor you send money to. As long as there is a middleman in your transaction, you can be sure that you aren’t completely anonymous.
3. Bitcoins Get Transferred Instantly
At the end of the day, Bitcoin’s blockchain is a service provider just like banks. Each record the movement of money that has some predetermined value. Compared to banks, transacting in Bitcoin is a much faster process but is by no means instant.
When you want to send or spend Bitcoin’s you start a transaction, and it gets noticed by nodes on the blockchain. Their job is to compile it into blocks of transactions and add them onto the blockchain. Until it becomes part of the blockchain, your transaction won’t be completed. It greatly depends on the fees you’ve allocated to entice the miners to take up and process your transaction.
4. It Requires Too Much Power
You must’ve heard the news going around that Bitcoin mining requires too much computational power, and miners have to rely on powerful machines like ASICs and GPUs to get the job done, which require too much electricity.
Mining is the process by which new Bitcoins come into circulation via a reward system. It’s regulated by the mechanics of Bitcoin and depends on the combined computational power of the nodes on the blockchain. The blockchain needs to control this so that a steady flow of bitcoins comes into circulation, increasing or decreasing the difficulty in mining. Otherwise, the process is random, but you get a higher chance of securing bitcoins if your node is capable of handling more computations.
It becomes unfeasible to mine Bitcoins using such machines as it requires more time to mine, using more electricity, and driving up costs when the blockchain’s difficulty is too high. The power demand then fluctuates up and down to cater to the network’s needs.