What is Bitcoin (BTC)? A Beginner’s Guide Before You Invest
- rachelbeautybar
- Aug 1
- 4 min read
Updated: Aug 2
Bitcoin (BTC) is the first and most well-known cryptocurrency in the world. Created in 2009 by the mysterious figure Satoshi Nakamoto, Bitcoin introduced the concept of decentralized digital money and laid the foundation for the entire crypto market we see today.
In this beginner-friendly guide, we will explain what Bitcoin is, how it works, why it has value, and the essential things you need to understand before investing in BTC.
What is Bitcoin?
Bitcoin is a form of digital currency built on blockchain technology. Unlike traditional money (USD, EUR, VND), Bitcoin operates without a central authority such as a bank or government. It uses a peer-to-peer network, which means transactions happen directly between users without intermediaries.
One of the unique aspects of Bitcoin is its limited supply. There will only ever be 21 million BTC in existence. This fixed supply makes Bitcoin similar to “digital gold,” as no one—including its creator—can change this number.
As of March 2024, around 19.6 million BTC have been mined, leaving roughly 1 million BTC yet to be created.
Bitcoin can be divided into smaller units called Satoshi (named after its creator).
1 BTC = 100,000,000 Satoshi (sts)
1 Satoshi = 0.00000001 BTC
How Does Bitcoin Work?
Bitcoin transactions are recorded on a public ledger known as the blockchain. When you send or receive BTC:
Your transaction is broadcast to the network.
Thousands of computers (nodes) around the world verify it using cryptographic signatures.
Once verified, the transaction is added to a “block.”
That block is linked to previous ones, forming a chain—hence the name blockchain.
How Bitcoin works
Bitcoin Mining
The process of verifying and adding transactions is called mining. Miners use powerful computers to solve complex mathematical problems. In return, they receive:
Transaction fees from users.
Block rewards, which are new BTC created and given to miners as an incentive.
This mechanism ensures Bitcoin’s security and prevents double-spending. Once a transaction is confirmed and added to the blockchain, it cannot be changed or reversed.
Why is Bitcoin Valuable?
Many beginners ask: “Why does Bitcoin have value if it’s just digital?”
The value of Bitcoin comes from several key factors:
Decentralization: No government or bank can control or shut down Bitcoin.
Scarcity: The fixed supply of 21 million BTC makes it a rare digital asset, similar to gold.
Security: Bitcoin’s blockchain is secured by thousands of miners worldwide and strong encryption (SHA-256 algorithm).
Portability: You can send BTC anywhere in the world in minutes without intermediaries.
Transparency: Every transaction is recorded publicly on the blockchain.
For many investors, Bitcoin is not just money—it’s a hedge against inflation and a store of value.
Key Features of Bitcoin
1. Decentralization
Bitcoin is not controlled by any government or central bank. The network is maintained by thousands of independent nodes worldwide.
2. Security
To hack Bitcoin, you would need to control more than 51% of the network’s computing power—a nearly impossible task. Experts estimate it would cost over $700,000 per hour to attempt such an attack.
3. Transparency
Unlike fiat currencies, all Bitcoin transactions are recorded on the blockchain, which anyone can view.
4. Low Transaction Fees
Compared to traditional international transfers, Bitcoin transactions are relatively cheap. Sending $10,000 internationally via a bank can cost over $100, while Bitcoin fees are often just a few dollars or less.
5. Limited Supply & Mining Difficulty
Bitcoin’s capped supply and increasing mining difficulty make it a scarce asset. Over time, mining becomes harder, which adds to its perceived value.
The Downsides of Bitcoin
Despite its popularity, Bitcoin has some limitations:
Slow transaction speed: ~7 transactions per second (compared to Visa’s thousands).
Block size limit: 1MB, which can cause network congestion.
No smart contracts: Unlike Ethereum, Bitcoin isn’t built for complex applications.
To address these issues, solutions like SegWit, Lightning Network, and Layer-2 scaling have been introduced.
How to Make Money with Bitcoin
1. Mining Bitcoin
You can become a miner, verify transactions, and earn BTC as a reward. However, mining requires expensive hardware and electricity.
2. Buying and Holding (HODLing)
Most beginners buy Bitcoin on exchanges and hold it long-term, hoping the price will rise. This strategy requires patience and belief in Bitcoin’s future.
3. Trading Bitcoin
Active traders buy and sell BTC frequently to profit from price fluctuations. This is riskier and requires market knowledge.
How to Store Bitcoin Safely
Exchange Wallets
You can keep BTC on centralized exchanges (CEX) like Binance, OKX, or Coinbase. However, storing large amounts on exchanges carries risks, as seen with the FTX collapse.
Non-Custodial Wallets
For maximum security, use a non-custodial wallet (e.g., Trust Wallet, Coin98 Super Wallet, Ledger). With these wallets:
You control your private key and passphrase.
No one else, not even the wallet provider, can access your funds.
Important: If you lose your private key or passphrase, you lose access to your BTC permanently.
Risks of Investing in Bitcoin
Market Volatility: Bitcoin’s price can swing dramatically.
Security Risks: If you don’t secure your wallet, hackers can steal your BTC.
Legal Uncertainty: Some countries ban or heavily regulate Bitcoin. Always check your local laws.
Why Bitcoin Was Created
Bitcoin was designed as an alternative to traditional money—a form of decentralized, borderless currency that anyone can use. Its value lies in being free from government control and limited in supply. For many investors, Bitcoin is “digital gold” and a hedge against inflation.
Conclusion
Bitcoin (BTC) is more than just a cryptocurrency; it’s a financial revolution. As the first decentralized digital currency, it offers a new way to store and transfer value without relying on traditional banks or governments.
If you’re a beginner, understanding what Bitcoin is, how it works, and why it has value is the first step before investing. Remember, while Bitcoin offers opportunities, it also carries risks, so always do your research and invest wisely.
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