What is the Blockchain?
Before we can get started with cryptocurrency, we need to understand the underlying technology that acts as a fundamental instrument that makes this all possible. Where Bitcoin is the implementation, the Blockchain is the concept.
It is commonly referred as a ‘Distributed Public Ledger’ where everyone that participates in the network has a copy of the ledger, in other words, a copy of all the transactions – ordered and timestamped – that ever happend within the network. This system solves the double spending issue and makes it impossible for potential attackers to modify previous transaction records, which makes the Blockchain a safe and secure network to store unique pieces of data.
IBM made a great animated video quickly explaining how Blockchain technology works:
Prefer reading material instead? We’ve made a selection of guides and books that can get you up and running about the Blockchain technology:
Blockchain.org Developer GuideA technical guide about the Blockchain
What is Blockchain Technology?by Coindesk
What Are the Applications and Use Cases of Blockchains?by Coindesk
What Can a Blockchain Do? (book)by Coindesk
Blockchain Fast and Simple (book)What It Is, How It Works, Why It Matters.
Blockchain Basics (book)A Non-Technical Introduction in 25 Steps
Blockchain (book)The Beginners Guide To Understanding The Technology Behind Bitcoin & Cryptocurrency
Bitcoin, which is also commonly known as the digital gold or virtual money, is one of the many (but first of it’s kind) applications that utilises the Blockchain technology. It’s a revolutionary way to spend digital money and enables users to make instant payment to anyone in the world.
While it’s similar to many other payment systems – such as bank transfers and credit cards – it has a few characteristics that makes it very unique. Bitcoin uses peer-to-peer technology and therefore operates with no central authority. Meaning that there’s no single person or entity (such as a bank) that controls or monitors the network, so everything from transactions to money issuance is handled collectively by the network, making it a decentralised currency.
It is worth noting that Bitcoin has a very fascinating origin story involving a mysterious person or group that goes by the name Satoshi Nakamoto. Nakamoto himself has claimed to be a man born in 1975 residing in Japan. But his identity has never actually been confirmed, even up until this day.
There are many speculations and possible identities, but no official disclosures that pinpoints the real identity of the person that invented the currency of the future. Nakamoto was actively developing Bitcoin and involved with the cryptography community until December 2010, when he decided to disappear from public eye. The only breadcrumb he left is a whitepaper that he published in 2008 which laid the foundation for the piece of technology that we now know as Bitcoin.
Want to learn more about Bitcoin and how it works? Read the selected material below:
Official Bitcoin WhitepaperBy Satoshi Nakamoto
Bitcoin WikiA public resource for the community of Bitcoin users, developers, and businesses
What is Bitcoin?by Coindesk
Making MoneyBitcoin Explained (with Emoji) by Tess Rinearson
How Bitcoin works under the hood (video)An in-depth technical video about how Bitcoin works
We Use CoinsA website dedicated to explain Bitcoin
Buying, using and storing your Bitcoin
So what’s the use? Why utilise Bitcoin if you have your fiat currency sitting on the bank which can be used for the exact same things? At this point of time, there aren’t many reasons to convince someone to use Bitcoin instead of cash. There is an on-chain transaction limit and there’s a small transaction fee for each transaction you make. Just a few of many reasons that turns people off. However, there are people that have completely switched over to using cryptocurrency, but those people are a very very small minority and have found that they have very limited choice where they can spend their hard-earned Bitcoin.
There are (online) businesses and shops that accept Bitcoin as a form of payment and it’s also used to effortlessly transfer money to different parts of the world, but even then, Bitcoin is not nearly ready for mass adoption. However, there are plenty of reasons to incorporate Bitcoin into your life, especially as a form of commodity due to its decentralised nature and potential. Since its creation, it has raised from a meagre $0.03 cents to a skyrocketing price of almost $7400 at the time of writing. For the few lucky ones a return of investment of nearly 69.000%.
So where do you begin? First, it’s very important to educate yourself about Bitcoin and understand what kind of risks it brings and how it’s meant to be used. Because it’s decentralised, there are no organisations or institutes you can go to if you make a wrong transaction, are scammed or for some reason need some kind of refund. So if you still haven’t done your homework, we insist you scroll a bit back and read the selected readings before you begin.
Get your first wallet!
If you’re already aware of how it works, you can start looking for a wallet that suits your profile. There are different types of wallets that you can use and it’s important to select a wallet you can get familiar with. It is always possible to switch from wallet to wallet, but not recommended. Other than that, there are wallets that are purely mobile-based, web-based, but also hardware- and paper-based (also called cold storage or cold wallets).
Besides a Bitcoin address, you will also receive a private key and/or a mnemonic passphrase. It is essential that you save them in a safe spot where you don’t lose them. Preferably somewhere offline — write it down on a piece of paper for instance. This will be your only way to retrieve your wallet if you somehow can’t access it.
If you’re planning on purchasing and storing large amounts of Bitcoin, we strongly recommend to purchase a cold storage (Hardware-based) wallet over other types so you can store them offline and mak sure it’s safe and secure from any potential attackers.
We recommend the following wallets:
Ready to buy your first Bitcoins?
So you got your wallet setup, your wallet address ready, let’s begin by purchasing your first Bitcoin and sending it to your wallet. There are various of ways to purchase your Bitcoins and it depends on how you want to pay for it. The quickest way to purchase your first Bitcoins is by using your Credit Card at a reputable vendor/broker. However, depending on where you buy it from, it’s also possible to purchase by bank transfer, PayPal or even cash.
You’re not obligated to buy 1 whole Bitcoin, which at the current price of $7300,- is quite an expensive deal. You’re totally free on choosing how much you are willing to spend!
Looking for a vendor to purchase your first Bitcoins from? Check out our selection:
There are many other reputable vendors where you can purchase Bitcoins from, especially if you prefer to trade with a vendor from your own country. The official Bitcoin.org website has an extensive list of vendors categorised by country:
Prefer local vendors?
If you rather prefer purchasing Bitcoins from someone in your local area (with the possibility to meet up and do a face-to-face transaction in some cases) we recommend to checkout Localbitcoins.com. However, we do urge you remain vigilant and only trade with someone that you feel comfortable with and has a solid reputation on Localbitcoins.com.
When you got everything sorted out you’re probably wondering what to do next. There are many people that invest in Bitcoin and treat it like a commodity similar to gold and silver and play the long-term game. Suitable for people that want to invest in this new technology but don’t want to spend too much time into it.
But there are also many that purchase Bitcoin as a means to trade in other cryptocurrencies and tokens or invest in Dapps (Decentralised applications). A very risky venture due to its high volatility, but can offer you a very high return of investment if you trade the right coins and tokens.
Crypto has gained a lot of media attention over the last few years which has caused a surge of new fiat currencies entering the market, and we’re still at the beginning of the blockchain revolution. Many alternative cryptocurrencies, tokens en Dapps have grown at such a high rate making it a very interesting and lucrative opportunity for short-term traders or day-traders to start investing in crypto.
If you want to take a dab at trading your Bitcoins for something else, check out the following selection of exchanges. These are currently the most popular exchanges and can provide you with a safe and secure environment to start trading your first crypto:
We are working on an extensive guide for trading crypto to help you make the right decisions. Until then, you can visit our exchanges collection to see a curated overview of all crypto-related exchanges:
We hope that this guide has helped you gain a better understanding of what the Blockchain and Bitcoin exactly is. We will be working on other guides to help you make the world of crypto more accessible. If you have any questions or remark, do not hesitate to email us at firstname.lastname@example.org.