Bitcoin for Newbies

 

It’s been a long time since I’ve posted anything. I’m not going to start this blog post saying “I’m going to start posting more often” as I usually do, cause it’s probably not going to happen.

Regardless, a lot has happened since we last “talked”. But I’m not here to tell you about that. Instead, I’m here to explain (finally) what a lot of you guys have been asking me.

A lot of friends/relatives have heard of a term called “Bitcoin” and have approached me to see whether I knew what it was. People usually relate Bitcoin with earning money and, you know, people tend to go crazy when they hear the word money.

Funny, right? Everyone wants the money without even caring about where it’s coming from or how it’s being produced. Most people wont even ask me about why a Bitcoin is worth so much. They just “heard somewhere” that it’s value is increasing exponentially and they want to be part of this group of people who seem to be getting a really nice return on investment.

What is Bitcoin?

So… What is Bitcoin? More specifically, what is “a bitcoin” (considering that there will be 21 million of them at one point)?

If we break down the word bitcoin into two, you’ll be able to deduce what it is…

“Bit” – Smallest unit of data in a computer system.

“Coin” – A form of currency.

Merge them together and you’ll find your answer, it’s a computerized currency. It’s commonly known as a “virtual”, “digital” or “crypto” currency.

Why is it so valuable?

I’ve been following Bitcoin since early this year when I started working for another crypto currency called VIVA. Ever since I started following Bitcoin, it’s value has been multiplied by 16.

This means that if you purchased 1000 dollars worth of Bitcoin early this year, you have managed to multiply your investment by 16 and you currently have 16,000 dollars worth of Bitcoin. If you purchased $1000 worth of bitcoin back when it was worth 10 cents a few years ago… Well, have fun in paradise.

Now, let’s get to what really makes Bitcoin valuable.

Think about Bitcoin as being gold or silver.

What makes gold so valuable? Think about this for a second.

There are a few parts to this answer:

There is only so much gold in this world. There’s a limited amount of it and we’ve all agreed that this makes it a valuable item.

It’s hard to get. You have to hire miners, look for it, mine it… It’s a difficult process.

Most importantly, the whole world recognizes gold as a valuable thing. This is what makes it valuable. Forget about it being limited or hard to get. If the whole world didn’t agree that gold was valuable, we wouldn’t value it so much. But, regardless of your location in planet Earth, you will always have someone trying to get their hands on your gold.

So, how does Bitcoin relate to gold at all and why is it so valuable?

Well, allow me to break this down into a few parts.

There will only be 21 million Bitcoins. Ever. It is estimated that we will have minted all Bitcoins by the year 2140. This means that if you’re reading this post shortly after I’ve published it, chances are you won’t see the last Bitcoin be minted. And if you do, please tell my great grand kids how you managed to live so long. What I mean with this is that there are only so many bitcoins. There will only be so many bitcoins. And, if for some reason we decide that more Bitcoins should be created, that will be for future generations to decide.

It’s a new, better and more efficient form of currency than our traditional version of paper money. Why? Well, to start off, Bitcoins have a real value. Paper money is not real. It’s value isn’t real. Most people get excited when they get a $100 bill because they think they now have something valuable, but this idea is delusional. Sure, you can buy clothes, a few video games, food. But the only reason why you can do this is because the cashier at Walmart and the cashier at GameStop haven’t yet realized that a piece of paper isn’t valuable. You might be thinking that I’m crazy, but I’m really not. This is, however, something I might discuss in another blog post. As of right now, let’s just say that Bitcoin is a more efficient currency because:

• It is actually worth something without having millions of people lied to their faces like banks do with paper money.
• It uses the power of the Blockchain to become a decentralized currency. We, the people, are in charge of the economy and no longer depend on what speculative entities do.
• It’s fast, if not instant. Forget about having your family in Tijuana, Mexico wait a few days to receive the money that you’re sending them through Western Union. Bitcoin transfers can be completed in a matter of seconds.
• It’s cheap! If you were to send $1000 to Mexico through a banking institution, be prepared to pay around $20 (if not more) for basically having someone press a few buttons… Bitcoin does this at a minimal fee, and sometimes even for free.
• Inflation isn’t a concern anymore. There’s no such thing as “let’s create more Bitcoins” like banks do with fiat (traditional) currencies.

There are many more reasons why Bitcoin is the future. In fact, let me rephrase this. I’m not sure if Bitcoin will be the future. But cryptocurrencies are, indeed, the future.

Should I invest in Bitcoin?

As I’m writing this blog post, the price of one Bitcoin is around $15,000. With this said, let me give you a few arguments of whether you should invest or not invest in Bitcoin.

If you’ve managed to read this far, you’re one step closer to being ready to invest in crypto. However, this blog post covers some basic concepts of what Bitcoin is and why I think the Blockchain is our future. I truly encourage you to do more research on not only Bitcoin, but the power of the Blockchain and cryptocurrencies too. Once you’ve done this and you believe in the idea behind this new economic system, feel free to invest. Do not invest in something just because people tell you to do so. If Bitcoin ends up disappointing and crashing, you will hate yourself for trusting your money to other people. This is a good lesson in life overall. Put your money where you think it should be placed.

Overall, in my opinion, crypto and the Blockchain are the future. Bitcoin is, right now, the strongest cryptocurrency out there. This has its pros and cons.

Pros: Those who already own bitcoins and purchased them at a cheaper price are generating some good revenue from its increase in value.

Cons: Those who just found out about Bitcoin aren’t going to be so lucky. A lot of people have approached me and asked me: “Hey, I mean… I can’t buy a Bitcoin but I can put $100 in there and let it grow, right?” Sure, go ahead, but if we’re completely honest, there’s no way you’re going to see those $100 generate you any kind of “interesting” revenue any time soon. Let’s do the math, if one Bitcoin is worth $15,000 and it magically grows to be worth $30,000 in the next year you will have made a $100 profit. It’s simply not that great of an investment if you’re not willing to invest big. If you want to see big numbers when it comes to your ROI I believe, in my modest opinion, that you need to at least own 50% of a Bitcoin.

What do I suggest?

Bitcoin is an extremely volatile currency. I’ve seen it go worth from $4000 to $8000, back to $5000 in less than a month. I suggest that you wait till Bitcoin has one of these downturns. Trust me, it will. Right now we’re experiencing an unusual wave. Bitcoin has increased its value exponentially in the last month like we’ve never seen before. But this should correct itself and decrease it’s value somewhat in the upcoming weeks. Again, this is just my opinion from what I’ve observed in this past year.

I truly believe that if you don’t have the money to buy at least 50% of a Bitcoin anymore, look at other alternatives. There are many other cryptocurrencies with great ideas behind them. The price of one Ethereum, the second strongest cryptocurrency out there, is around $500 as I’m typing. This number keeps growing as days go by and is a real alternative to Bitcoin.

Again, do your research. Learn. Gain knowledge. Once you know what you’re doing the risk of making a bad choice will be minimum.

How do I invest in Bitcoin?

This is one of the most common questions that I receive. How do I start investing in bitcoin? It’s easier than it might seem at first.

I typically suggest setting up an account in coinbase. It’s easy and wont take you too long. Follow the instructions (they’re self-explanatory). Also, coinbase seems to set higher prices than anyone else for some reason. When Bitcoin reached it’s peak of 17K in every market, coinbase had its value set at 19K for some reason… I thought that was funny.

How do transactions work?

So, how does it work?

It’s easy. Once you own X amount of Bitcoin(s) you will need to set up a Bitcoin wallet. To make it easy for you to understand, you will download a “program” to your computer where you’ll be able to store your bitcoins in a safe place. Again, this might sound like a scary process, but e-wallets today are very intuitive an user-interface friendly.

You can also keep your Bitcoins in the same exact trading platform where you purchased them from. However, I don’t typically recommend this as there have been cases of trading platforms that closed down leaving all of their customers with their pockets empty.

Once you have download this wallet, you will be given two keys. One is your public key, the one you will be giving to people in order to receive Bitcoins, and the other one is your secret key. You will need your secret key in order to be able to send Bitcoins. Without this key, you’re lost. This has it’s pros and cons. You really need to store this key in an extremely safe place. I recommend keeping it in a piece of paper somewhere safe where you can access it in case your computer dies for some reason. The process of retrieving a secret key can me extremely painful and often times it is even impossible to retrieve someone’s secret key. When this happens, the amount of Bitcoins inside that “lost” wallet will be lost forever.

 

I hope this blog post has helped you understand not only what Bitcoin is but also why cryptocurrencies are meant to bring some good to this world. Hopefully I’ll get to write about everything that’s wrong with today’s current paper money system. It’s such a mess and people are so ignorant about it that I really feel like you might find it an interesting read.

 

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