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Like any significant life decision, uncertainty breeds fear, leading to a loss in direction. What then is our compass out of fear? Knowledge has proven many times and in diverse situations to be the liberator of the human mind. Even as we seek to navigate this highly volatile ecosystem of cryptocurrency, we must arm ourselves with adequate knowledge as opposed to an attitude of fear that some have fallen prey to in the past.
Let’s imagine a world where digital currencies like Bitcoin are the only medium existing for financial transactions; we would have no option, then we would realize how much we had lost to ignorance. But while the choice is still up, let’s learn the essentials.
What is Bitcoin?
Bitcoin is a modern currency that proves that money is not limited to physical currency but is a medium of exchange for something of value. Bitcoin, invented in 2009 by Satoshi Nakamoto, was developed as an alternative to overcome the limitations of the centralized banking system, which include lack of coincidence in scales, lack of coincidence in time frames, and lack of coincidence in location, as described in The Bitcoin Standard by Saifedean Ammous. It operates through blockchain technology to aid the transaction of digital currency across boundaries. Contrary to physical money, whose supply is limitless and controlled by central banking and financial institutions, Bitcoin’s supply is limited to only 21 million in circulation, and the value of the coins increases with the network effect by the owners, which makes it a precious currency.
Think of it this way; physical currency was invented as a medium of exchange over mediums like cowries and trade by barter due to shortcomings of value proposition and limitations to physical exchange. But if we look closely, we realize that centralized banking systems and physical currencies have also not eradicated the problems they created. It is time for the human race to move forward beyond the errors of central banking monetary policy.
What do you need to get started?
A Bitcoin wallet is a digital purse that keeps Bitcoin and from which Bitcoin can be sent to another Bitcoin wallet. This is akin to a bank account in the centralized banking system. Still, contrary to this, a Bitcoin wallet is managed and is in total custody of the owner or anyone that possesses the access code, not a financial institution. This translates into 24/7 financial transactions and also non-reversible transactions. In contrast, financial institutions serve to cushion and come in as an intermediary to verify and reverse incorrect or fraudulent transactions. The Bitcoin blockchain doesn’t give room for interference from a third party; instead, it makes transactions traceable and easily viewable on what is known as the meme pool hence the need for the common phrase “Don’t trust, but verify.” Popular Bitcoin warm & cold wallets include Exodus, Electrum, Ledger, and a host of others.
Four things to watch out for before selecting a wallet should include;
- Control and third party access: A good wallet should give complete control over your Bitcoin with no third party involved
- Privacy: A private wallet makes it hard to spy on transactions by rotating addresses.
- Fee flexibility: A wallet that allows full control over setting the fee to be paid to the Bitcoin network before making a transaction.
- Transaction device: Anyone can transact Bitcoin on mobile devices, computers, and cold storage. The choice of the device would influence the wallet that users can use.
A Bitcoin exchange is a digital marketplace where Bitcoin & other cryptocurrencies are traded in exchange for, vice versa, or even fiat government-issued money like the US Dollars. The value of Bitcoin is influenced by its value and the amount an individual is willing to pay at a given time. One Bitcoin has been valued as high as $67,567 and on the low end, around $18000 recently. Factors like the supply and demand rate, rules and regulations guiding the market, and competition influence the value of Bitcoin. Next up would be to choose a reliable exchange platform that works well in your jurisdiction. The factors to consider are closely similar to those for the wallet choice·
- High liquid exchange
- Ease of use
- Lightning network compatibility
- Transaction fees
- Location reach
As explained above, anyone can invest in bitcoin if you understand the precautions taken before leveraging this technology. Bitcoin is an appreciating asset that can be invested in convenience by leveraging time, patience & consistent buying techniques like Dollar Cost Averaging.
Now that we understand what Bitcoin is and the elements that make up this “digital gold,” it is essential to be up to date on current events in the world of finance and decentralized digital assets. Subscribe to Satoshi’s Journal to stay updated as you begin your journey towards understanding sound money.
This is a guest post by Oladimeji Tolulope. You can follow her on Twitter @ruth_oladimeji. Opinions expressed are entirely their own and do not necessarily reflect those of Satoshi’s Journal or Satoshi’s Entertainment Company.