Bitcoin cryptocurrency for dummies: what you need to know

Bitcoin cryptocurrency for dummies: what you need to know

Bitcoin has gained immense popularity over the past few years, making it seem like everyone and their grandma are jumping on the cryptocurrency bandwagon. But what’s really going on? The truth is that Bitcoin cryptocurrency can be somewhat intimidating if you don’t have the right tools to wrap your head around the concept, but this introduction to Bitcoin will help you understand how it works and whether it’s right for you or not. Let’s dig in!

How does blockchain technology work?

A blockchain is a digital ledger made up of a chain of blocks. The way it works is that each block has information about previous blocks and thus builds a sequence. All current and past transactions are included in these blocks, providing a complete ledger for any given time. In other words, it’s an accounting method that's easy to verify because everyone involved has access to all of it at once.

Each block also has data related to Bitcoin cryptocurrency for dummies which are issued over time or given out as rewards for solving complex math problems as part of transaction verification. This creates scarcity, which makes currency valuable and bitcoins have been known to change hands for thousands of dollars per coin. What are bitcoins?

Bitcoins are units of Bitcoin cryptocurrency for dummies created by users through mining. Mining involves adding bitcoin transactions to a public ledger called Blockchain and processing them into new blocks. Bitcoins can be bought on exchanges with fiat currencies (dollars, euros, etc.) or generated through mining.

How does Bitcoin mining work?

The mining analogy is a good one, as it conjures up images of panning for gold. This works similarly, except instead of using a pickaxe and sieve, Bitcoins are mined by using computers to solve cryptographic puzzles. Every time a new puzzle is solved, a Bitcoin is generated but solving these increasingly complex puzzles requires more and more computational power.

As of July 2018, there were nearly 17 million bitcoins in circulation with an estimated market value over $100 billion USD; while that might seem like quite a lot relative to your bank account balance or 401(k), it's pretty meaningless when it comes to investing in cryptocurrency.

Just like any other currency, Bitcoin can be used to buy things online or off. But how do you acquire bitcoins? While some people choose to mine them (more on that below), most exchanges allow users to purchase bitcoins with their local currency. It’s important to note that not all exchanges support both buying and selling of bitcoins (with Coinbase being a notable exception).

Be sure to check out which currencies they accept before sending them any money! If you’re interested in getting started with Bitcoin, here’s a quick guide on how to get started using Bitcoin in 5 minutes .

The role of miners

If you’re new to Bitcoin, it’s helpful to understand that cryptocurrency is a system of digital currencies. Think about money as something physical, like gold or silver coins. Well, cryptocurrencies are like virtual gold and silver coins. There’s no hard cash involved just balances associated with public and private keys, which act as account numbers.

The public key functions much like an email address: you give it out freely so others can send Bitcoin currency over time to your balance. The public key also acts as a sort of bank account number on Bitcoin's blockchain network, where people store their Bitcoins securely. Every transaction made using Bitcoin has to be validated by miners before it gets added to Bitcoin's global blockchain ledger...

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