Bitcoin Basics

Bitcoin is a digital currency that facilitates peer-to-peer transactions. The Bitcoin network is maintained by miners who add blocks to the blockchain. Bitcoin’s supply is predetermined and cannot be changed.

Bitcoin can be purchased in a variety of ways using several different payment methods. Brokerages, exchanges, and peer-to-peer networks offer trade-offs between liquidity, security, and privacy.

Learning how to send and receive bitcoin is easy, and does not require a complete understanding of Bitcoin. Wallets and services allow users to easily send, receive, and store their bitcoin. You can also use your brokerage to send and receive bitcoin.

Bitcoin wallets store and protect the public and private keys, allowing you to send, receive, and store bitcoin. Bitcoin wallets can come in the form of software or hardware devices.

Filing taxes on bitcoin losses, gains, and any bitcoin earned income is necessary to avoid additional taxes or penalties by the IRS. Different bitcoin activities create different taxable events.

Bitcoin has been criticized as unfair from a few different angles. However, these accusations are based on inaccurate assumptions and poor measurement. Bitcoin’s monetary policy and initial distribution were as fair as possible for a new invention.

There will never be more than 21 million bitcoin. This rule, encoded in Bitcoin’s source code, cannot be changed thanks to Bitcoin’s decentralized nature. If it were possible, changing this hard cap would destroy the value proposition of Bitcoin.

Although the Bitcoin market and its institutional support have grown rapidly in recent years, negative perceptions of its core principles and utility have kept many potential users from participating.

Blockchain supports distributed networks, and its unique characteristics enable use-cases that were previously impossible. Blockchain allowed Bitcoin, a decentralized monetary system, to scale.

One bitcoin is divisible into 100 million satoshis. Satoshis give Bitcoin great divisibility and flexibility.

New bitcoin are released every 10 minutes by mining a new block. When a minor finds a new block, they receive the sum of the transaction fees and the block reward, known as the block subsidy.

Bitcoin transaction fees promote network security by allowing miners to remain profitable. Transaction fees increase in cost as transaction size, urgency, and network activity increase.

Money is a tool that helps people store value and conduct exchange. Some types of money are better forms of money than others. Dominant monies used in human history have been replaced when a better type of money was implemented.

Backing a currency is a method to control the value of its price by connecting it to another commodity. Bitcoin is not backed by any other asset. Gold and fiat currencies are not backed by anything either.

The Bitcoin price is determined through supply and demand. Because the market cap of bitcoin is small relative to the market capitalization of other currencies, small changes in demand or supply can produce price volatility greater than that of fiat currencies with theoretically unlimited supply.

The Double Spend problem describes the difficulty of ensuring digital money is not easily duplicated. Bitcoin offers a trustless solution to the double spend problem, and third parties such as banks attempt to solve it as well.

Bitcoin is a unique asset that can meet the specific needs and goals of an investor who is looking for diversification, flexibility, and increased purchasing power in the long-term.

As a new phenomenon, Bitcoin faces much skepticism. However, Bitcoin’s database, the blockchain, is practically impervious to attack or corruption. Individuals can still lose their bitcoin in a variety of ways.

When all bitcoin have been mined, miner revenue will depend entirely on transaction fees. The cost of transaction fees and purchasing power of bitcoin will likely adjust higher to the lack of new supply.

Learn what schemes exist to steal bitcoin, how to spot them, and how to protect yourself from becoming a victim. Recognizing these scams will help you avoid them and safeguard your bitcoin.

Bitcoin investors looking to pass their wealth on to future generations, while keeping their bitcoin private and secure, should consider investing bitcoin in a trust.

The demographic of bitcoin investors has shifted as more individuals and institutions look to bitcoin as a means of securing long-term value, moving away from centralized financial institutions, and capitalizing on current and emerging use-value.

The success of Bitcoin has generated many imitations and spin-offs. Some have genuinely attempted to recreate or extend Bitcoin’s innovation on money, while others have been nothing more than affinity scams, playing off of Bitcoin’s reputation to attract investors.