What Is Bitcoin? A Beginners Guide To Bitcoin

Posted on May 4th, 2021 by EM Search Consulting

Bitcoin is the first successful cryptocurrency. Like any currency, cryptocurrencies can be used to buy or sell goods and services. Unlike fiat currencies, like the US dollar (USD) and the euro (EUR), the Bitcoin network is both decentralized and digital. But what does that mean exactly?

Digital Currency

Let’s start with the digital part. Digital currencies can only be used via electronic devices like computers and smartphones*. This might sound like a completely foreign concept. But using a digital currency is somewhat similar to using a debit card.

Debit cards allow you to buy items without ever exchanging physical bills or coins. Instead, when you buy something with a debit card, funds from your bank account are digitally transferred into the seller’s bank account. Although these transactions are digital, they’re still transferring traditional fiat currency. And you can always go to a bank or ATM to withdraw physical cash with your debit card.

Digital currencies, like Bitcoin, have no physical component. Digital currencies are stored in a digital ledger. This ledger tracks all withdrawals, deposits, and the creation of new tokens.

Where does this ledger live? On thousands and thousands of computers all around the world. Each computer has a complete copy of the ledger so that if any (or many) of the computers crash, there’s always a backup somewhere.

What Is A Digital Wallet?

Unlike a wallet where you can store your dollar bills, a digital wallet does not hold any cryptocurrency. Instead, it acts very much like your debit card. The debit card contains a magnetic strip that has your account information. But only you know the PIN code required to transfer or withdraw funds.

Similarly, a digital wallet has a private and a public key. The public key is like your account number. It allows you to send or deposit money into the account. The private key is like your PIN code in that it’s impossible to withdraw funds from a digital wallet without it.

Deposit and withdrawal transactions are recorded and updated on the digital ledger across the globe using these two keys. These keys are managed using advanced mathematics called “cryptography,” which is an extremely secure way to process transactions. Since 2009, when Bitcoin was created, this cryptography has never been hacked or broken into.

Have people lost Bitcoin? Yes, but these losses have never been the result of the technology failing. Instead, user error is almost always to blame. If you leave your house keys in the front door of your home, it’s not reasonable to expect the lock to protect your property.

Making a purchase with Bitcoin is similar to sending an email. Digital wallets typically include a “send” section, like the “compose” section of an email client. Here, you type in the amount of Bitcoin you wish to send and the address to which you wish to send it. Finally, you click “send” and your transaction request is sent to the digital ledger. The ledger then updates to note the recipient as the new owner of the Bitcoins that were once yours.

From a digital perspective, cryptocurrency is one of THE safest ways to perform withdrawal and deposit transactions. To open a digital wallet of your own, download and install the RockItCoin app from the Apple App Store or the Android Play Store. You can also find a step-by-step guide to setting up your RockItCoin Wallet on our site.

Decentralized Currency

Decentralized currencies, like Bitcoin, exist outside of the traditional banking system. When you use a debit card, it sends a signal to your bank to transfer funds to another bank. The transaction takes place on the banks’ private computer networks.

Bitcoin transactions The blockchain is a kind of record-keeping technology, like a database. It’s the public ledger discussed above, stored on thousands of computers around the globe. Because the ledger isn’t stored on a single computer system, it’s considered decentralized.

While debit cards rely on banks’ private computers to validate transactions, Bitcoin transactions are validated by nodes and Bitcoin miners via peer-to-peer technology. A node is simply a program run on a computer that validates transactions.

The nodes communicate with one another to confirm the accuracy of every transaction. Currently, there are about 83,000 Bitcoin Core nodes
in operation. And anyone who wants to host a node may do so.

Bitcoin miners are groups or individuals who use powerful computers to validate transactions. The term cryptocurrency originates from the use of complex cryptography (codes) to keep transactions secure. When a miner’s computer processes this code, it confirms a block of transactions within the blockchain and they receive a small amount of Bitcoin as a reward.

No one entity validates and approves the transactions. Anyone can (and is encouraged to) run a node of their own or mine Bitcoins for themself. And the more people who do, the more secure and robust the blockchain will be.

Bitcoin transactions don’t require any sort of centralized solution (like traditional banking institutions). This system puts currency in the hands of the collective community. The worth of each Bitcoin via the concept of supply and demand. Each coin is worth exactly what individuals are willing to pay for them. No more, no less.

The value of fiat currencies is far more complicated. Among other things, the value of currencies like the USD is based on the confidence the world has in the government or entity that issues the currency. But that’s a far more complicated topic for the purposes of this post.

Who Invented Bitcoin?

Satoshi Nakamoto is the pseudonym that the inventor of Bitcoin chose to identify themself. But no one really knows their true identity. Numerous people have speculated about who the creator may be
, suggesting Nick Szabo, Dorian Nakamoto, and Craig Wright among others. However, given the decentralized nature of the currency, perhaps it’s better we never know.

How To Buy Bitcoin

Now that you know a little more about it, you might be wondering how you can buy Bitcoin. RockItCoin makes it easy to buy Bitcoin with cash from any of the 900+ RockItCoin machines conveniently located throughout the United States. You can also buy Bitcoin with a credit card right here on our site.

*It is possible to write down or print out the private key for your Bitcoin wallet and give that to a person. A private key is basically the password to your wallet. Anyone with the private key to a wallet has full access to all of the funds within the wallet, like having a bank account number, its pin, and any form of ID that the bank might require. However, to send coins over the Bitcoin network, you’ll still need a computer.