When you hear cryptocurrency, Bitcoin always comes up in your head. It’s because bitcoin is the world’s first-ever cryptocurrency. And currently, its popularity is rapidly rising, thanks to its security, low transaction fees, and the absence of government involvement. If you want to know more about this crypto touted as the future of currencies, read on.

What is a Bitcoin?

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Also called a virtual or digital currency, a Bitcoin is a type of money that’s completely virtual. It is a decentralized currency, meaning you can buy, sell, and trade it without the need for an intermediary such as a bank or a governing body. In essence, Bitcoin is a digital or online version of cash.

Satoshi Nakamoto, Bitcoin’s creator, described it as the answer to the need for an electronic payment system that is dependent on cryptographic proof instead of trust. It was launched to the public in 2009, and since then, it has dramatically increased in value. In July 2010, it was priced at $0.0008 and peaked at $68,000 in November 2021.

People use Bitcoin to buy products and services, however, many shops still don’t accept them, and some countries have even banned its use. A public ledger records all Bitcoin transactions, which you can find copies of on servers around the globe. This is what makes Bitcoins safe, secure, and hard to fake.

How Does Bitcoin Work?

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Bitcoin is a peer-to-peer system. The idea behind bitcoin is that you can use it to send money directly to someone without going through third party entities like a bank or credit card company. Bitcoin works like this: 

First, you go to your Bitcoin wallet on your computer or smartphone and create a new account by giving it a name and password. You can also choose to have the wallet download the whole blockchain — all past transactions — so you don’t have to keep track of them yourself. Then you send bitcoins from your wallet to another user’s wallet just as if they were dollars sent through Western Union.

The other user will receive a receipt with their new balance in their Bitcoin wallet app or website. They can then spend their new Bitcoins however they want:

  • Sending them back to their original owner
  • Exchanging them for different currencies
  • Selling them in exchange for cash

Why Do People Buy Bitcoins?

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The reasons why people buy bitcoins are varied. Some want to use it as a payment method, others want to invest in it. Below is a list of the reasons people buy Bitcoins:

  • Financial freedom: buying Bitcoins can be a way to become your own boss and start earning money through the Internet without being tied down by banks and other institutions. Buying bitcoins gives you exposure to the entire cryptocurrency market, which is worth about $3 trillion today (and growing). That’s more than 3X more than all of the gold ever mined!
  • Investment: with its limited supply, Bitcoin is a hard asset that has been gaining value over time, so if you think it will go up in value, you can invest in it and benefit from its growth. It’s the same reason people buy shares in companies or real estate: they want to get a piece of something bigger than themselves.
  • Payment option: Bitcoin is not yet widely accepted as a payment method, but many companies take this cryptocurrency for their services or goods (such as Overstock).

How Do You Make Money from Bitcoin?

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Below are a few ways to earn money from Bitcoin:


This is where your computer performs computations that verify new transactions and add them to the public ledger of all bitcoin in circulation, known as the blockchain. At the same time, it helps secure the network so that no one can spend the same bitcoin twice.

You will require a lot of processing power to do this effectively and efficiently. The best way to get started is by joining a mining pool that allows you to join with other miners and split the rewards based on how much effort they contributed to solving complex calculations.

Day Trading

You can make money from Bitcoin by trading the same way you do stock and other securities. Day traders buy low and sell when the price gets high, thus creating a profit from the margins. 

Buy and HODL

This is probably the most popular way to earn from Bitcoin as it is the easiest. You buy a Bitcoin (or any other cryptocurrency) and wait for its value to rise. This is known as HODL (or hold on for dear life). Once it does, you sell them or hold on to them until they reach your desired price.

How Are New Bitcoins Created?

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The process of creating new Bitcoins is what’s known as mining. It is like a giant lottery where you compete with your mining hardware with everyone on the network to earn bitcoins. Faster Bitcoin mining hardware can attempt more tries per second to win this lottery.

All this while the Bitcoin network adjusts at around every two weeks to keep the rate of finding a winning block hash to every ten minutes. In the bigger picture, Bitcoin mining secures transactions recorded in Bitcoin’s public ledger, the blockchain. 

With the operation of a random lottery where electricity and specialized equipment are the key ingredients, the cost to disrupt the Bitcoin network goes up with the amount of hashing power spent by all mining participants.

Are Bitcoins Secure?

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As mentioned above, each Bitcoin transaction is recorded on a public ledger. This makes it difficult to fake, copy, or even spend those you don’t own. So, to answer this question, Bitcoins are generally safe and secure.

Although, like fiat currency, there is a possibility of you losing your Bitcoins forever. They are recoverable, but there are instances that they aren’t. Thefts, pump and dump schemes, lost cold storage devices, and many others are the culprits.

Final Thoughts

Bitcoin is a fascinating subject, one that continues to capture the imaginations of people all over the world. It is indeed a subject where many people would wonder how Bitcoin works. It can be confusing if you don’t know what you are doing, but once you understand it, it all starts to make sense. 

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