My Bitcoin Journey: A Simple Introduction to the World of Cryptocurrency
Aleksandra Kiebdoj
Strategic leader who drives digital transformation and business impact
Have you ever wondered what Bitcoin is and why it's making headlines? If you're new to the world of cryptocurrency like I was, I wrote this blog is for you. My beginner-friendly overview of understanding Bitcoin, hopefully will allow you to get good grasp on how cryptocurrencies are changing the way we think about money and technology.
The Basics of Bitcoin
At its core, Bitcoin is a digital form of money. Just like how you have dollars or euros in your wallet, Bitcoin exists purely in a digital format. Practically, today we really even use physical dollars or euros, so the digital aspect of money should be quite straight forward, right...Now, what makes cryptocurrency unique is that it′s decentralized- and that is important. Which means it isn't controlled by any government or institution. Instead, it operates on a technology called blockchain, a digital ledger that records all Bitcoin transactions in a secure and transparent way.
My Personal Bitcoin Story
I remember stumbling upon Bitcoin a few months ago while browsing online. It felt like stepping into a whole new world, one where money was reimagined as lines of code and transactions were verified by a network of computers. It intrigued me, but as someone with no financial background, I felt a bit overwhelmed.
As I delved deeper, I realized that understanding Bitcoin didn't require a degree in finance. It was about grasping the basic concepts and seeing the potential it held for the future. First I started with some youtube tutorials, Udemy courses and Binance Academy (which I highly recommend). I went to some blockchain conferences and workshops and finally, I came across the incredible Web3 Talents platform.
Here are my first knowledge sources
Inspiration from Web3 Talents
Browsing through the profiles of talented individuals on Web3 Talents, I saw a diverse community of people embracing the world of blockchain and cryptocurrencies. It is inspiring to see how both program participant, mentors and guest speakers are leveraging their skills and passions in this innovative space.
I decided to join the platform myself and connect with like-minded individuals. I was very excited to be selected. I started absorbing resources, attending webinars, and engaging in conversations. Slowly but surely, I am now unraveling the mysteries of Bitcoin and blockchain technology.
Digital Scarcity and Limited Supply
Think of Bitcoin as digital gold. Just as gold has value because people believe in its scarcity and uniqueness, Bitcoin gains value from its limited supply. There will only ever be 21 million Bitcoins, making it a "digital scarcity."
Another way to think about it is if you imagine you have a limited edition collectible toy or stamps that only a few people own. Because it's rare and not everyone can have it, its value goes up. Bitcoin operates on a similar principle of scarcity, except it's entirely digital. Just as gold is scarce and valuable because it can't be endlessly produced, there will only ever be 21 million Bitcoins. This limited supply sets the foundation for Bitcoin's value proposition.
Traditional currencies like dollars or euros can be printed in unlimited quantities by governments, which can lead to inflation. Bitcoin, on the other hand, is immune to such inflation because its supply is strictly capped. This scarcity is what has caught the attention of investors and enthusiasts, driving its value over time.
Security and Immutability of Bitcoin Transactions
When you send someone Bitcoin, you're essentially creating a digital transaction that's recorded on the blockchain—a public ledger. Think of the blockchain as a digital history book that can't be altered. Once a transaction is recorded, it's there forever, forming an unchangeable and transparent record.
Imagine writing your name on a whiteboard and taking a photo of it. Even if you erase the whiteboard, the photo preserves your name. Similarly, even though you might not have a physical Bitcoin, the blockchain maintains a record of your ownership.
The process of recording transactions on the blockchain involves complex cryptography, which ensures that transactions are secure and cannot be easily tampered with. This cryptography also involves "private keys" and "public keys." Your private key acts like a password that gives you access to your Bitcoin, while your public key is like your Bitcoin address, visible to others for receiving funds.
The irreversible nature of Bitcoin transactions adds to its security. Once a transaction is confirmed and added to a block on the blockchain, it's virtually impossible to reverse or alter it. This provides a level of trust and certainty that traditional financial systems might lack. Hence bitcoin transactions are secure and irreversible, so when you send someone Bitcoin, it's like sending them a unique digital code that only they can access. The blockchain ensures that the transaction is recorded and can't be tampered with.
I have also made the list of basic concepts and easy to understand explanation.
I know it can be overwhelming at first to grast bitcoin and blockchain concepts, and what I can see to that is start learning by doing...
Register on any trading platform, make a small (fiat) deposit and see what happen...
Slowly you will naturally start digging into deeper understanding of some basic concepts of digital currencies and Bitcoin transactions. As you continue your journey into the world of Bitcoin, these concepts will serve as a solid foundation to explore more advanced topics and applications within the cryptocurrency space. Remember that while the technology might seem complex at first, the core principles are rooted in logic and can be grasped by anyone willing to learn.
Here is a list of basic concepts related to Bitcoin that can help you understand its fundamental principles:
1. Bitcoin:
Bitcoin is a decentralized digital currency that operates on a peer-to-peer network without the need for intermediaries like banks. It's often referred to as "digital gold" due to its limited supply and potential store of value.
2. Blockchain:
The blockchain is a public digital ledger that records all Bitcoin transactions in a secure and transparent manner. It consists of a chain of blocks, with each block containing a group of transactions.
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3. Cryptocurrency:
Cryptocurrency is a digital or virtual currency that uses cryptography for secure transactions. Bitcoin is the first and most well-known cryptocurrency.
4. Decentralization:
Bitcoin is decentralized, meaning it's not controlled by any single entity like a government or bank. Instead, it's maintained by a distributed network of participants (miners and nodes).
5. Mining:
Mining is the process by which new Bitcoins are created and transactions are validated and added to the blockchain. Miners solve complex mathematical problems using computational power to compete for rewards.
6. Wallet:
A wallet is a digital tool that allows you to store, send, and receive Bitcoins. It contains a pair of cryptographic keys: a public key (like an address) and a private key (a secret password).
7. Public Key and Private Key:
The public key is an alphanumeric address that others can use to send you Bitcoins. The private key is a secret code that proves ownership and is used to access and control your Bitcoins.
8. Address:
An address is a unique identifier generated from your public key. It's used to receive Bitcoins and is safe to share publicly.
9. Transaction:
A transaction is a record of value transfer between Bitcoin addresses. Transactions are added to blocks in the blockchain after being validated by miners.
10. Confirmation:
Confirmations represent the number of times a transaction has been added to the blockchain. The more confirmations, the more secure and irreversible the transaction becomes.
11. Satoshi:
The smallest unit of Bitcoin is called a Satoshi. One Bitcoin is equivalent to 100 million Satoshis.
12. Halving:
Bitcoin undergoes a halving event approximately every four years. During a halving, the reward given to miners for validating transactions is cut in half. This event is designed to control the rate of new Bitcoin issuance.
13. Fiat Currency:
Fiat currency is government-issued currency that isn't backed by a physical commodity. Traditional currencies like the US Dollar or Euro are examples of fiat currency.
14. Exchange:
Bitcoin exchanges are platforms where you can buy, sell, and trade Bitcoin for other cryptocurrencies or fiat currency.
15. Market Cap:
Market capitalization represents the total value of all Bitcoins in circulation. It's calculated by multiplying the current price of Bitcoin by the total number of coins.
I am also attaching my first assignment from the Web3 Bitcoin Talent program where the basic concept are explained in more details.
I will be happy to hear your thought about your personal journey so far with bitcoin and other crypto currencies.