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Beginners’ Guide To Cryptocurrency, Bitcoin, and Bitcoin Mining

Beginners guide to cryptocurrency
8 Minute Read

Bitcoin has become a household term, so you’ve most likely heard about it from friends or read about it in the news. As a new investor (or an experienced one) looking for a more rewarding way to invest your money, Bitcoin should be at the top of your list. If you want to enjoy it more, then you need to learn about cryptocurrency, Bitcoin, and Bitcoin mining.

Because of the widespread adoption of trading platforms, exchanges, and online brokerages, Bitcoin is undoubtedly one of the most liquid investment assets. And, because of its high market demand, Bitcoin could be a good long-term investment. It’s a legitimate way to make a safe investment that pays out even if you don’t put in a lot of work.

Additionally, Bitcoin is the currency of the future due to the need for a quicker way to distribute money to people in both close and far areas. Read on to get the information you need to get started with cryptocurrency, Bitcoin, and what Bitcoin mining is all about.

An Overview of Cryptocurrency

Understanding how cryptocurrency differs from cash and other payment methods before using or investing in it is necessary. It will help you avoid cryptocurrency scams and identify potentially hacked bitcoin accounts.

What is Cryptocurrency?

You can define a cryptocurrency as a digital currency you can use to purchase goods and services secured by an online ledger and strong cryptography. It is simply a pattern of trading crypto-related currency with someone online via your phone or computer, without the use of a middleman such as a bank.

Cryptocurrencies are dependent on blockchain technology. Blockchain is a decentralized technology that is known for its high security because it is distributed among multiple computers that oversee and record transactions.

Although Bitcoins are the most well-known cryptocurrency, there are others.

Related: Future of Cryptocurrency

How You Can Get Cryptocurrency

You can purchase Cryptocurrency using an online trading platform. While certain cryptocurrencies, such as Bitcoin, can be purchased with real money, others require payment in bitcoins or another cryptocurrency. Let’s take a closer look at Bitcoins, which are a sort of cryptocurrency.

What is Bitcoin?

You can refer to Bitcoin as a digital currency, virtual currency, or cryptocurrency. Bitcoin is a high-risk, high-volatility investment that allows users to send and receive money without the involvement of a bank or other trusted third party.

Bitcoin is a high-risk, high-volatility investment that allows you to transfer and receive money without using a bank, monetary union, or affiliate. Bitcoin is decentralized digital money that eliminates the intermediary by relying on a peer-to-peer computer network to confirm transactions between users directly.

Bitcoin is not linked to any real currency, such as the US dollar or the Euro. On third-party websites such as Coinbase, Kraken.com, and Bitstamp.net, you can purchase or sell bitcoins for real money.

Bitcoin became the first cryptocurrency after its launch in 2009. The value of one bitcoin has risen dramatically over time. The cost was $1 in April 2011. It hit a record spot price of around $65,000 in April 2021 before reversing course. In early July, bitcoin was selling for between $32,000 and $35,000. However, by early September 2021, it had increased to $49,954.

Related: Investing in Stable Coins

What is the Purpose of Bitcoin?

Bitcoin was designed to allow you to transmit money to people you have never met in person. It is a decentralized network that provides an efficient means of sending money over the Internet. Again, It presents an alternative to central bank controlled fiat money by providing a transparent set of rules.

Also, it was designed to be a non-centralized alternative payment system that could be used in the same way that traditional currencies are.

How to Buy Bitcoin

You can purchase Bitcoin today from other Bitcoin owners and stockbrokers. Another way of buying Bitcoin may be through cryptocurrency exchanges like Coinbase and traditional brokers like Robinhood.

Investing in bitcoin and other cryptocurrencies could be a fascinating opportunity to try something new while investing. However, you should always proceed with caution while purchasing because it may jeopardize your financial well-being.  You should not buy when you can’t afford to lose.

You’ll need a secure location to store your Bitcoins. It is possible to utilize a hot wallet or a cold wallet. So, take into consideration where you’ll store your cryptocurrency.

Bitcoin and other cryptocurrencies can also be purchased in a Self-Directed IRA. When establishing a Crypto IRA, individuals can choose a pre-tax plan (traditional) or a Roth (after-tax). You may be wondering, what is Crypto IRA? A Crypto IRA is sometimes called a Bitcoin IRA. Despite the different terms, a Crypto IRA is simply a Self-Directed IRA that primarily consists of cryptocurrencies. However, individuals can also invest in other alternative assets, including gold, real-estate, and more. Regardless of how you purchase Bitcoins and other Cryptocurrencies, it is important to decide how you plan to store them.

Deciding How to Store Your Bitcoin

Bitcoins can be stored in either a hot or cold digital wallet. A hot wallet transaction is usually faster, while a cold wallet transaction may involve additional security steps that help keep your money safe but take longer. There are two keys in a bitcoin wallet: a public key and a private key. These keys operate together to allow the owner to start transactions and digitally sign them, showing authority.

Many hot wallet providers exist, each offering a different sort of wallet. Here are a few examples:

  • Coinbase
  • Electrum Blockchain
  • Mycelium
  • Binance
  • Gemini
  • Coinsmart

A cold wallet is a small, encrypted device that can be used to store and transport bitcoin. Although cold wallets can cost up to $100, they are significantly more secure than hot wallets.

Examples of Cold wallet providers include:

  • Trevor
  • Zengo
  • Ledger Nano
  • Spectrum
  • Trezor One
  • Trezor Model T.

*Due to the McNulty Case, individuals are not advised to hold Crypto in a cold wallet.

What is Bitcoin Mining?

Bitcoin mining is a key element of the blockchain ledger’s upkeep and development, as well as the act of bringing new bitcoins into circulation. The method of earning bitcoins in exchange for conducting the verification procedure that validates Bitcoin transactions is known as bitcoin mining.

Bitcoin Mining is a way you can earn cryptocurrencies without having to put any money down. It’s done with the help of cutting-edge computers that solve exceedingly tough computational arithmetic problems. The simplest method to get into bitcoin mining is to participate in cloud bitcoin micro mining.

Benefits of Bitcoin

  • Bitcoin payments are mobile and offer cheap transaction fees for international payments.
  • International transfers benefit greatly from Bitcoin transactions.
  • Following technology breakthroughs such as the Lightning Network, the ability to make payments with Bitcoin has improved.
  • To start trading with Bitcoin, you do not need to have access to a real bank account.
  • Bitcoin is a peer-to-peer payment system that allows anyone on the network to send and receive money from anywhere on the globe.
  • To mention a few items, you will not be paying account maintenance or minimum balance fees, no overdraft fees, and no penalties for returned deposits.

Every Bitcoin miner and user is aware of a Bitcoin halving. Bitcoin as well as other cryptocurrencies like Litecoin and Dogecoin halve. It’s not an exclusive case for BTC though. Halving is a common phenomenon in all cryptocurrencies that are mined or minted by solving cryptographic blocks.

If you are not aware of this phenomenon and don’t take action accordingly, then you could be exposing yourself to unnecessary risks. Bitcoin halving generally affects the most crypto investors because it is the largest cryptocurrency.

What is Bitcoin Halving?

Halving is the process wherein the miner or user who solves a cryptographic problem will be rewarded fewer bitcoins than previous miners or users. This phenomenon occurs roughly every four years and it is programmed into Bitcoin protocol. All cryptocurrencies that are mined or minted have this code.

When it comes to Bitcoin, this halving happens after every 210,000 blocks are mined. This has been predetermined by the Bitcoin core developer’s team. When this happens, miners who solved these cryptographic problems will be rewarded a certain number of Bitcoins. This amount is divided into two so the reward becomes half after every 210,000 blocks mined.

In simple words, halving cuts the miner’s reward in half. The cryptocurrency gets harder to mine over time because every four years it becomes more difficult to solve a cryptographic problem.

What can you expect when the next Bitcoin halving occurs?

When the next occurrence happens, we can expect some major changes. Here are some of the things that might happen during Bitcoin halving:

1. Low availability of Bitcoin:

We might get a situation where there will be low availability of Bitcoin on trading platforms. This means that users will have to bid higher prices in order to get their hands on the coin. On the contrary, we may get a situation where Bitcoin might become more affordable for users because of increased demand and limited supply.

2. Higher demand:

Since Bitcoin becomes more difficult to mine over time due to halving, people may start buying it in large numbers because of its scarcity. More demand would create an upward trend in Bitcoin price. This can also cause a price hike because of the limited supply.

3. Rewards are halved:

This will have a direct effect on the total supply of Bitcoin. This is because miners who solve cryptographic problems in order to get rewards would be receiving fewer Bitcoins than they used to before. As the reward diminishes over time, it becomes harder for miners to keep mining and earn their share.

4. It can cause inflation:

Since Bitcoin becomes increasingly difficult to mine over time, there will be less Bitcoin in circulation which in turn may cause inflation. This is because the limited supply of Bitcoin may create more demand than its actual availability in the market. Also, the price of Bitcoin tends to go up because of inflation which can cause a snowball effect.

The History of Bitcoin Halving

As of now, Bitcoin has gone through 3 halvings. During each, the price of Bitcoin has seen a significant rise. But we should not focus only on the price, we should also consider the production rate. Here’s what happened during the last 3 Bitcoin halvings:

First Bitcoin halving: The first Bitcoin halving took place in 2012. Around then, the price of each Bitcoin was $11 and it rose to $12. After the year, the price increased to $1,100.

Second Bitcoin halving: The second Bitcoin halving took place in 2016 after the mining of 420,000 blocks. At that time, one unit of BTC was worth around $500-$1,000. However, within a year the price rose to an astonishing $20,000.

Third Bitcoin halving: The third Bitcoin halving took place in May 2020. At that point, 630,000 blocks were mined and the price of Bitcoin crossed the $30k mark.

As you can see, every time the Bitcoin halving occurs, the price of Bitcoin rises exponentially. There is no set pattern as to why this happens, but it can be expected to see a similar rise in the price of Bitcoin during the next halving.

What Might Happen in the Next Bitcoin Halving?

As said earlier, Bitcoin halving occurs approximately every 4 years, which means the next one will occur somewhere in 2024. In 2024, 840,000 Bitcoin blocks will be mined and the reward for each block will decrease to 6.25 Bitcoin (this amount is subject to change until then).

It is hard to predict what might happen during Bitcoin halving because multiple factors may play a role, such as Bitcoin regulation and its acceptance in various markets. However, we can expect some volatility and a few significant changes. On the other hand, since Bitcoin has reached its peak in the year 2019, many people believe that there won’t be a significant rise in the next halving.

How Do I Prepare for the Next Bitcoin Halving?

There are several things that you can do to prepare for the next one.

1. Keep your Bitcoins safe:

Make sure that you have a backup plan and that your Bitcoins are safely stored in a wallet where only you have access to it. This way, even if something happens during the halving, your money will remain safe.

2. Have an alternative plan:

You must have some form of alternative sources of income just in case the price of Bitcoin drops dramatically. There are several other cryptocurrencies available in the market which can be traded during tough times. You can also find a second job or start your own business to fall back on when the need arises.

3. Have a long term investment plan:

Bitcoin halving is something that you should look forward to because it means that you are making more money in the future, but keep your eyes on the market too before investing large amounts of money. Before you invest in Bitcoin, make sure to do your own research and find out about the pros and cons of having bitcoins. Also, do not invest more money than you are prepared to lose just in case the price of Bitcoin drops after halving.

4. Spread your risks:

When you buy or mine Bitcoins it is always a good idea to keep some money on other cryptocurrencies as well because if something goes wrong with one currency, there are other options available for you to take advantage of.

5. Watch the market:

Keep track of the market and crypto price movement until the halving occurs. The next Bitcoin halving is expected to take place somewhere in 2024, so it’s not too early or too late to prepare for this change.

Learn More:

Giving Crypto as a Gift

How you can Hold Crypto Private Keys in a Self-Directed IRA

Crypto Buying Power

Conclusion

For some of their big investments and transactional processes, many corporations throughout the world have turned to Bitcoin and other cryptocurrencies. Making it one of the best ways you can trade with foreign companies.

Again, it’s logical that as the price of cryptocurrencies, particularly Bitcoin, has soared in recent years, so has an interest in Bitcoin mining.

The majority of individuals, however, do not see Bitcoin mining as a viable option because of its complexity and hefty expenses. But it still can be a better way to get started with Bitcoin.

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[10:44 PM] Valerie Marszalek-Boik