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- 1 Bitcoin (BTC) was created as an alternative to fiat currencies that are not controlled by a central body.
- 2 It is stored on crypto wallets that can retain or give you complete ownership of your private key.
Bitcoin is a cryptocurrency that was developed to be used as payment like fiat currencies. Although a third party can view its transaction record, its circulation is not controlled by a central body.
New Bitcoins can be minted by any network participant who has a computer and can run the Bitcoin software.
The Evolution of payment systems
Due to how flawed trade by barter was, the use of metals (like gold) and fiat currencies as payment methods were developed. These methods could represent the value of what you have but they were in the control of central authorities (banks and government). These authorities can manipulate their circulations to meet their needs.
The goal of the Bitcoin network is to create a payment method that was out of the control of the government. Traders transact directly with themselves without needing a third party.
Bitcoins transactions are confirmed through a Proof-of-Work consensus protocol and added to the blockchain. This ensures that a coin is not spent twice.
How do you store Bitcoin?
Bitcoin can be stored in a crypto wallet. Unlike physical wallets that store the actual currency, the crypto wallet stores private and public keys. These keys are used to verify that the user owns an amount of Bitcoin.
A public key is the address to which your Bitcoin is sent. It is used to initiate transactions (whether you want to buy or sell BTC, you will need your public address to receive or send the currency). Public keys can also be used to view wallet balances. The private key is used as your digital signature when performing transactions.
Crypto wallets are classified based on how your keys are kept and who controls them.
Custodial wallets retain ownership of your private key, they sign Bitcoin transactions on your behalf. Non-custodial wallets on the other hand give you complete ownership of your keys.
Hot wallets are crypto wallets that are constantly online. Hot custodial wallets backup your private keys and help you retrieve them in case you forget.
Cold wallets are crypto wallets that are offline. They require you to write your private key on a piece of paper or store it on hardware devices like flash drives.
How to buy Bitcoin
A popular method of buying BTC is through crypto exchanges. A crypto exchange is a platform where crypto traders can exchange Bitcoin for fiat currencies or swap it for another cryptocurrency.
Accepting Bitcoin as a payment option can help merchants who deal with international clients to reduce difficulty in trading. Bitcoin transactions cost less than fees charged on credit cards and banks. Payments are also processed faster. Bitcoin transactions are processed within an hour as opposed to international bank transfers which take an average of three days.
Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.
