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What Are Bitcoins?

What are Bitcoins

Since it was founded in 2009 by the alias of Satoshi Nakamoto many skeptics have not put much interest into bitcoins and preferred with the usual currency we have like the US/Euro and other worldwide currencies.

According to wikipedia the ever noted first transaction of bitcoins was 10,000BTC in exchange of two pizzas at Papa John's.

A year later there was vulnerability found where it was exploited before the bug was fixed.

By 2011 some non-profit groups began accepting bitcoins while others as donations before 2013 that an estimate of worth $1 million of bitcoins at a price of $22 per bitcoin was sold from Coinbase.
Sooner or later bitcoins have garnered supporters and contributors before it totally went viral as more users came and got interested so as the price started to pump.

These led to the emergence of other cryptocurrencies after almost 2 years when bitcoin was founded. So what are bitcoins actually? It is a form of digital currency that does not take any physical form like our typical fiat money.

You may term it as well as virtual money, digital cash that you transfer from one to another electronically, it will only become tangible when you convert them and exchange them in your preferred currency such as dollars.
Since it is digital it is by means of a computer that can be produced through what they call as "mining" which needs hardware/software plus the consumption of electricity and by which bitcoins is also by then electronically stored from computers.

With these, online platform services began to arise where people can start to buy/sell and even store cryptocurrencies like bitcoins as peer to peer transactions if you may call it also.

If you are aware of online payment processors like Paypal, Payza, Skrill , Payoneer, etc where you use to receive and send payments online same goes with bitcoins through these cryptocurrency payment processors/exchange sites platforms that supports cryptocurrencies.

So far Payza  was one of the first online payment processors who embraced bitcoins as part of their currency online while most of the trading or exchanges of bitcoins are found from bitcoin exchange sites like Coinbase, Poloniex, Localbitcoins, Kraken, etc.

Now that you had some rough idea on how bitcoin came about, the question now comes how do I get one?

Before you can start to use bitcoins you need to have a wallet address, and this wallet address typically consists of 34 characters. Sample below is how it looks like when generating one.

3JPU674DUCWHUr4h7GyDR7pVFtAQBaEEir

So since its a wallet it literally means it is where you will receive your bitcoins from other users and same goes with another user you need to know what is their bitcoin wallet address before you can transfer/send bitcoins from them.

Due to incidents of hacking or unauthorized access since it is digital, some online cryptocurrency providers have set some security measures by providing you with random bitcoin wallet addresses that you may use to receive bitcoins so you will not be vulnerable.

Even to the point that you will no longer use your previous wallet address and if someone still uses that address to pay you it will still be credited to your own account.

Take note that even using these online platforms there is still tendency that your bitcoins can still be stolen, take for an example of those who uses Bitfinex bitcoin exchange platforms that was hacked last 2016.

To avoid such security breach some advise to make use of cold storage wallets where your private keys are stored offline, these can be done in the form of a paper wallet, hardware wallet, on a usb drive/desktop, or a physical bitcoin.

Just to make a quick list where you can obtain the ff:
a. Paper wallet

b. Hardware wallet

The only disadvantage of these cold wallets for my own take is that when you lost them or your computer got infected with malware exposing your private key etc then say good bye to your bitcoins.

The other alternative to store your bitcoins is via hot storage wallet which is also may termed as online wallet which is by the term itself is connected to the internet which is best described as your exchange platform services or other software platforms for digital assets like Blockchain.info

Best practice when using this hot wallet is not to put all your bitcoins for precautionary measures as we never know since they are in control of your private keys (unlike from cold wallets) which of course a high risk when entrusting your bitcoins with them.

The only good thing about online wallets would be they do all the security measures for you especially when you are not that tech savvy to store your bitcoins downloading the software from your computer but as mentioned earlier they are in control of your bitcoins.

So with all the jargon regarding understanding bitcoins may be quite hard for new to cryptocurrency users to digest well all the information.

Just take it this way, I know most of you already are exposed to the use of online payment processor like Paypal being the most widely used except for some countries that does not support it.

In Paypal you need your email address to receive your payments in contrast to bitcoins you need a bitcoin wallet address and when you access your Paypal account you can freely send payment as long as you have the funds or funded with your credit card or linked bank account.

Whereas in bitcoins you must have an online wallet (like Blockchain, Coinbase, Xapo, Coins.ph etc) where you can proceed in sending your payments to another bitcoin wallet address.

If you are a risk taker you can simply use an online wallet and keep your bitcoins from there and if you wish to make some transfers or payments you simply access your online wallet to do so, so its just like using a typical online payment processors.

The only thing is you are given an option to create an offline wallet where you can stock and transfer some of your bitcoins and keep them safe away from hackers compared to Paypal or other processors your funds are with them and have no option to make an offline Paypal account.

Now that you get the point that you use bitcoins as a form of sending/receiving payments from other users bitcoins can also be traded to other currency as well like dollars/euro etc and other cryptocurrencies like ethereum, litecoin and so on.

Final say is bitcoins are newly used digital currency which can only be received/transferred via online transactions not unlike from widely used currencies like dollars can be received/transferred both online and offline transactions.

Next post let us discuss how you will be going to fund your bitcoin wallet so bookmark and save this site for more information.

Feel free to drop your comments below and share this to your friends.

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