Bitcoin (BTC) was created and released in 2009, making it the first cryptocurrency. Many cryptocurrencies are based on Bitcoin and use the same peer-to-peer and blockchain technology. We will answer the most frequently asked questions about Bitcoin here.
How does Bitcoin work?
Usually, the word currency refers to means of payment issued and managed by states. These traditional means of payment require a central bank to process payment transactions. By contrast, Bitcoin has a completely decentralized structure and there is no central control or bank. This also distinguishes Bitcoin from previous centrally managed virtual currencies.
All Bitcoin transactions are stored in the so-called blockchain. These data are in turn stored on all computers supporting the Bitcoin network and can therefore not be changed afterwards. This decentralization is the revolutionary feature of Bitcoin technology.
Should I invest in Bitcoin?
We consider it extremely risky and advise against investing hard earned money in Bitcoin. Bitcoin and the underlying technology offers many possibilities of application and should be considered and used in this context. For an investment, it is too risky in our view. Apart from that, you should invest only in something that you fully understand, otherwise you can foresee sudden price changes and the like even worse.
How to get Bitcoins?
Buy Bitcoins
Bitcoins are traded on various websites, so-called Bitcoin exchanges. There are several types of Bitcoin exchanges. For example, CEX.IO and Kraken offer an exchange-like system in which supply and demand determine the current market price. In contrast, there are peer-to-peer platforms such as LocalBitcoins, where the transactions are made directly between the individual users.
If you purchase bitcoins through any of these exchanges, you will need a Bitcoin wallet to withdraw the bitcoins. An alternative that does not require a Bitcoin wallet is offered by eToro. Here you do not really use the Bitcoin technology, you just speculate on the price. The payout is only possible here in the currency that was deposited.
Earn Bitcoins
Bitcoin Forums
The largest and oldest Bitcoin forum bitcointalk.org offers a marketplace section where items and services can be exchanged for bitcoins.
However, there are some scammers in the crypto scene who try to exploit the ignorance and good faith of other users. These scammers also use the Bitcoin forums. That's why you should be extra careful here.
Bitcoin Mining
A few years ago, Bitcoin mining was a lucrative way to earn bitcoins. Bitcoin mining is about using computing power to solve complex computational tasks. If a task is solved, a new block is written to the blockchain and a reward is paid to the respective computer. This will generate new bitcoins up to a maximum total number.
However, as the difficulty of the tasks increases rapidly over time, more computing power is needed to solve a task. That's why Bitcoin mining is no longer worthwhile in many countries due to high electricity costs and is primarily practiced in countries with very low electricity costs.
How to store Bitcoins?
Online Wallet
Many users keep their bitcoins on a website, a so-called online wallet, so they do not have to install their own wallet. This simplifies the whole process, but there are some disadvantages compared to having your own wallet. With an online wallet, you are dependent on the security measures of the respective website. In case of insolvency of the website your bitcoins could be gone. Also, not all Bitcoin forks such as Bitcoin Cash are supported by these online wallets. As a result, you might miss significant additional revenue.
Software Wallet
The advantage of saving the bitcoins on your own computer is that only you are responsible for the security of your own bitcoins. However, depending on which client you use, you will need PC resources such as disk space.
Bitcoin Core Client
The default Bitcoin client is open source software and is called Bitcoin Core. This client is constantly being developed and improved by a large development team, the Bitcoin Core team. Bitcoin Core can be downloaded for Windows, Linux and macOS.
After installation, the entire blockchain must be downloaded from the Bitcoin network. This currently requires about 200 GB of disk space, which takes some time to download. However, this ensures the greatest possible security for the Bitcoin network. The high resource consumption is also the main disadvantage of the default Bitcoin client.
Electrum Bitcoin Wallet
If the requirements of the Bitcoin Core
client exceed your computing capacity, you can also use one of the streamlined alternatives. A very popular client is
Electrum. This client requires much less PC resources than the default
client. That's why Electrum is also suitable for slower and older computers.
Hardware Wallet
Another alternative is a so-called hardware wallet such as Trezor. The bitcoins are stored with the private key on a hardware device, which can usually be connected via USB. Depending on the manufacturer, the hardware wallets differ both in the hardware used and in the software. Therefore, no general statements about the security of hardware wallets can be made. The security depends on the hardware and software used.