Bitcoin For Beginners: The Complete Guide [Updated For 2020]

What is Bitcoin
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Note: This is the first article in a four-part series covering some of the ambiguous topics related to Bitcoin (BTC).

Bitcoin Comic - The Joy of Tech
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Source: The Joy of Tech

  • What is Bitcoin?
  • Is Bitcoin a scam?
  • Should you invest in Bitcoin?

I would help you get answer to all these questions.

But before that..

Ever since the barter system was originally introduced by the Mesopotamia tribes around 6000 BC, we have witnessed different types of goods/currency exchange.

Paper cash quickly came into place at the onset of the 18th century.

With the commencement of the Internet age, various efforts have been made to take the currency exchange into a digital form. It has to be said that those efforts have been well converted and now over 95% of the entire cash in the world is digital, leaving only physical cash to be a mere 5% of the entire money in the world!

Although there have been many companies to have tried their hand at developing a new source of the digital currency exchange system, it is fair to say that PayPal holds a major share in this regards.

One of the fairly recent additions to these networks in digital currency exchange is Bitcoin. A lot has been said and written on the Internet about Bitcoins and it is still one of the most mysterious types of currency exchange, which people have a tough time holding a grasp of. Hence, our topic of interest and let’s dive deep right into the nuances of Bitcoin and clear some of the benefits and uses of this new digital form of currency exchange.

What is Bitcoin?

What is Bitcoin
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Even though we have claimed Bitcoin to be a fairly new form of digital currency, it has been in operations since 2009.

Invented originally by someone under the alias of Satoshi Nakamoto, it is still unclear who is the exact founder of Bitcoin. Various news outlets including The New York Times, Newsweek, Forbes, and Gizmodo have made different headlines claiming distinct people as being the founder of Bitcoin. Now that we understand that the origins of the creator of Bitcoin are pretty bleak, lets learn what exactly does a Bitcoin do and how is it different from other forms of digital online currency exchange services?

To begin with, if you have ever made use of digital online currency exchange, you must be aware of the transaction fees charged by these middlemen.

One of the distinctive features of digital currency exchange services is their transaction fees and other charges. The most important aspect of Bitcoins that differentiates it from other digital currency exchange services is that it does not charge any kind of transaction fees.

Bitcoin is an open-source Peer-to-Peer payment service that has done away with any kinds of middlemen transaction fees. You can make use of these Bitcoins to buy anything online and many merchants are beginning to accept this new form of digital currency. Many networks like Purse to buy Amazon products, WordPress eBay, Zappos, Microsoft, Dell, Shopify and more already accept Bitcoins as a form of payment.

Another most important factor of the Bitcoin system is that using Bitcoin allows payment allows users to handle their payments completely anonymously.

How Exactly Does Bitcoin Currency exchange work?

How Bitcoin Works
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While Bitcoin seems an amazing form of digital currency with its startling strengths, how does it exactly work?

Bitcoin is a decentralized form of currency, as deemed by the U.S. Treasury. Bitcoin does not base upon a central authority or a bank and instead is carried out by the network of its entire community (Decentralized network).

Considering Bitcoins as a form of digital currency, these could be bought at different Bitcoin currency exchange networks. These networks allow users to buy and sell Bitcoins from their chosen form of currency including USD, Euros, INR and more.

These newly bought Bitcoins are now stored in your digital wallet, which could be accessed over mobile or desktop devices. You can also send or receive Bitcoins from other users with a simple tap of the button.

The Bitcoins could also be used to make purchases online at outlets which currently accept them. This is a simple explanation of how the Bitcoin works.

Now, how exactly are these Bitcoins generated and managed and issued if there is no involvement of a central agency or banks?

For the purpose of understanding how the Bitcoin network is managed, we now have to introduce a new sect of people known as ‘Miners’ on the network.

What is Bitcoin Mining?

Miners are individual groups of people who lend their computing power and capacity to the community and to keep the integrity of transactions on the network in check. These Miners verify the transactions on the network and are rewarded with the newly generated Bitcoins for their efforts.

A transparent publicly maintained ledger is then updated with transactions on the Bitcoin network. Often known as a form of ‘cryptocurrency‘, Bitcoin is the largest form of digital currency of its kind.

Is Bitcoin Legal?

It is fair to say that Bitcoin operates off the physical grid and doesn’t involve any kind of central agency or the banks, is it still legal?

The answer would be, it depends on user location.

The legality of Bitcoin depends primarily on your location of interest and the purpose accordingly. Given that Bitcoin is a form of decentralized digital currency, it is illegal to use Bitcoins in many countries and some governments allow its use.

  • The United States, for example, have now declared it as a commodity.
  • Indian Deputy Governor of the Reserve Bank of India has stated that they have no plans to legalize Bitcoins in India.
  • Bangladesh government has stated that “anybody caught using the virtual currency could be jailed under the country’s strict anti-money laundering laws”.
  • Some other countries are particularly neutral about the usage of Bitcoins.
  • Japan has started accepting Bitcoin as a payment option.

So, it makes sense that you double-check your local government laws pertaining to Bitcoins before making use of them.

How are people using Bitcoins across the Globe?

homeless bitcoin
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Now that you have a good understanding of what Bitcoin exactly is and how it works, how are people around the world making use of Bitcoins?

Well, one of the primary ways people are making use of Bitcoins is by exchanging them across different users. People are making use of Bitcoins to share and exchange money between friends, to avoid the transaction and credit card fees.

Some other Bitcoin users are making use of the currency exchange network to make purchases online, including to buy things like Pizzas, clothing, games, electronics, accessories and much more.

While there are individuals on one side making the most of the Bitcoin currency exchange system, there are also small businesses using the service. Again, for the same reasons of waived transaction fees and instant transfers, many small businesses are now making use of the Bitcoin currency exchange services.

Purse
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Purse.io is a great peer-to-peer bitcoin exchange service that offers discounts for purchases using Bitcoins.

You can buy your first bitcoin from any of these popular two sites:

  • CEX: You can buy Bitcoin using a debit/credit card.
  • Changelly: Another popular website to buy Bitcoin or other cryptocurrencies instantly.
  • Binance: One of the popular exchange to get other cryptocurrencies using Bitcoin or vice-versa.

If you are from India, you can find a list of Indian exchanges here.

Here you can find a list of top Cryptocurrency exchanges in the world.

Expedia has also recently begun accepting Bitcoins as a form of payment for hotel and travel bookings.

Here are a few hand-picked videos that would help first-timers to understand more about Bitcoins without getting bored:

So, what do you make of this new form of Digital currency exchange without any intervention from a central system or banks?

Feel free to shout out your thoughts and comments below.

Stay tuned for more articles on Bitcoins, how to buy your first Bitcoins and how to secure your Bitcoins.

For further reading:

What is Bitcoin via CoinSutra

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Authored By
A Shouter whose articles got mentions from the likes of The New York Times, Kissmetrics and AllTopStories. He writes articles, novels and poems; spends most of his time reading everything he could get his hands on. Srikanth is currently pursuing his Masters from The University of Illinois and holds a Bachelors in Electronics Engineering from the University of Mumbai. He is a programmer, a motivational writer and speaker.

25 thoughts on “Bitcoin For Beginners: The Complete Guide [Updated For 2020]”

  1. nice information . but in India , the wallet services are already well established . still can it be a success in India?

  2. Thanks for the article.While talking about Bitcoin,it is interesting to gaze upon the interest in Bitcoin related Domain names. The biggest of such domain sales was BTC.com for $ 1 million followed by BitcoinWallet.com for $250K, both happened in the year 2014. From then on wards, the value of bitcoin/btc/coin names have increased and lot of people have invested in such names. A recent one I noticed is YouCoin.com which was purchased in Dec-2015 for $1,050 and sold in April-2016 for $79,100. What a big profit! Approx 75 times in 4 months!

  3. Vishwajeet Kumar

    Great Post Srikanth. I never Used or using bitcoin because it is volatile payment options and still have some drawbacks. I am still not want to give it a try.

  4. Sooner or later they will have to allow BitCoins in INDIA. That is like the most useful and easily available digitalized money in this Era. And moreover, we get a lot of discounts and stuff using BitCoin. So I think for the best there should be some sort of voting or something where people could choose whether they want bitcoin or not and then maybe ministry can take the decision of legalizing Bitcoin in India or not. What do you think?

  5. Alquileres Montevideo

    Good post! Here in Uruguay they’re not popular but talking about Bitcoins in spanish could be a very good niche for people in South America. Have a good one!

  6. Rocking Aryan

    Wow what a detailed Guide. But still I don’t think it will work in India as like other country. Informative post.

  7. akshaykattam

    I think this bitcoin gona rule the digital currency coming years, many digital currency users are worried of the charges they imply on and i am one of them, bitcoin would be the solution for that and the only disadvantage i see is that fluctuating price of bitcoin day- to – day, it has to be taken care of.

  8. honestly bitcoin i have been doing lots of research on to get the breakdown on how it works and when i saw ur article it did the magic that have been trying to about bitcoin all this while plus have been following your blog for about 6 months now and its what inspired me to get my own but its nothing like yours so i was wondering if you might be able to be of help with any article that can help increase Adsense IMPRESSION RPM

  9. Rahul Mehta

    Hey,thanks for sharing this amazing article on bitcoin mate but don’t you think this non regulated method make bitcoin very risky although i agree its a good alternative towards the digital money however this system need some more time to reach to mass.

  10. Great article !
    As you said, “Indian Deputy Governor of the Reserve Bank of India has stated that they have no plans to legalize Bitcoins in India.”
    This means that bitcoins is not allowed and an individual is not allowed to hold any coins? Is this also for other crypto currencies ?
    And I have even heard that people are making money out of bitcoins and other such cryptos. Any points on that?

  11. Bilal Tahir Khan

    Hi,
    Bitcoin is very Safe and Easy Method and Day by Day it will be popular.Nice post Thanks For sharing with us.keep up it.

  12. Siddharth Dhodapkar

    Very well explained. This can be the future of payments if the authorities make bring it under the legal framework.

  13. What do you think about using of Bitcoins? If it is not legalized in India, despite, we can use them as you have suggested some names of bitcoin exchange.

  14. Kishore krishna

    After watching the video “Thrive” I was shocked to know how we are controlled by a handful of people who control money .Bitcoins are a solution for it .Hope this works

  15. Hi bro
    Nice to see an article about Bitcoins here. I think it’s good to have such decentralized cryptocurrency. And mining bitcoins need lot of energy(computational power). And also the limit for bitcoins that can be mined is 21millions and by now I think around 14 to 15millions have already mined. In 2014 the craze for bitcoins has got so high as currency mafia was buying the bitcoins at extortionate rates, because it was thought to be the future digital currency of the world. And now its value is again increasing. Lets see how it changes the digital currency scenario of the world.

    Thank you

    Regards
    Basharath

  16. Qadir Shaikh

    Very Nice Information about bitcoin. This can be the future of payments if the authorities make bring it under the legal framework.

  17. very well detailed. Since the ownership of bitcoin is a bleak. Is it safe to use bitcoin, won’t we wake up one day and realise all our coins is gone

  18. Bitcoin is an interesting topic to explore. Although, it is not widely excepted yet but it will in near future.

    There are many Bitcoin exchanges which you can trade Bitcoins.

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