How to get started with Bitcoin? Here’s the guide you need!
March 6, 2023
Everyone, at least once, has heard about Bitcoin: from a friend who is a cryptocurrency ‘expert’, from the headlines or in some TV report. Maybe you’ve been intrigued and would like to learn more, but don’t know how to get started with Bitcoin. In this beginner’s guide we have collected some common questions to accompany your first steps.
Bitcoin: how to get started?
A definition is always a good starting point for thinking about the right questions. So, to understand how to get started with Bitcoin, we should first ask ourselves what a cryptocurrency is. In a nutshell, it is a digital currency that can be exchanged peer-to-peer, i.e. without intermediaries such as banks or other authorities; this is why Bitcoin is also referred to as a ‘decentralised currency’.
When sending BTC, the transactions are stored in a public ledger, called a blockchain. This technology, in practice, is used to track the ownership of cryptocurrencies, and is actually a chain of blocks, containing the information about the exchanges. In this regard, every transaction in Bitcoin is always final: once added to a blockchain, it cannot be reversed. This is why the blockchain is called immutable.
Who controls Bitcoin?
If there are no banks and central powers, who is ‘in charge’ of Bitcoin? Quite simply, no one: there is no individual or entity ruling over the entire system; when discussing how to get started with Bitcoin, this is a key aspect to remember. This is possible because its blockchain is managed by a network of independent nodes, which collaborate in compliance with certain ‘laws’, defined by Bitcoin’s own code and enforced through automated mechanisms.
Based on these rules, this distributed network must confirm Bitcoin transactions. In a nutshell, before adding information to a block, nodes compare themselves to each other to verify that it is true; if the majority agrees, the exchange is valid. Consensus is reached through a precise mechanism which, in the case of Bitcoin, consists of solving complex mathematical calculations to produce the blocks. One must, in practice, prove that one has found the solution to a ‘puzzle’, give ‘proof of the work’ done, which is why the consensus mechanism is called ‘Proof-of-Work‘.
However, there is no hardware so powerful that it is always the first to provide the solution. In a nutshell, this is why no one individually can control the Bitcoin system.
Who created Bitcoin?
If our goal is to understand how to get started with Bitcoin, however, it is not necessary to solve puzzles. It is enough to know that the rules were defined by Satoshi Nakamoto, the anonymous creator of the cryptocurrency, and applied from the very first blockchain, produced on 3 January 2009. Not even Nakamoto ‘governs’ the BTC network, it is the nodes that autonomously administer the blockchain’s operation. Satoshi, trivially, has no command box or ‘button’ to influence Bitcoin’s mechanisms. Moreover, his identity is still unknown and there has been no news of him for more than 10 years.
How is a Bitcoin produced?
The nodes that create the blocks of Bitcoin’s blockchain are called ‘miners‘. The latter, as mentioned above, perform the calculations necessary to add transactions to the blockchain. The mining process requires powerful hardware, which is very expensive and always connected to the network, thus in constant need of power. This has sparked debate about the pollution of BTC, even though (where possible) renewable energy sources are used.
Miners are incentivised to do this onerous work because the production of each block rewards them with new Bitcoins. In this way, the miners continue to engage in their essential task and, more importantly, more BTC are issued. This reward halves every 4 years, in an event called halving, until all BTC are released (mined): the maximum number has been set at 21 million. It is estimated that the last Bitcoin should be produced around the year 2140!
Is Bitcoin safe?
To understand how to get started with Bitcoin, you need to know one last rule: the code of BTC dictates that one block is produced every 10 minutes. However, miners buy more and more powerful computers, competing for rewards, and sometimes manage to solve calculations in less time. When this happens, the algorithm increases the difficulty of mining so as to re-establish the right interval between blocks.
This mechanism acts as a security measure: the more complicated it is to produce a blockchain, the less likely it is that a single node can control the system, because even more computing power would be needed. In short, it is very difficult (if not impossible) to hack Bitcoin, so much so that its network has remained operational more than 99.98% of the time.
Cryptography also makes the blockchain extremely secure: to send, receive and store BTC one uses two personal codes, a public and a private key, registered in one’s digital wallet. The latter has an address where Bitcoins are kept, which is derived from the cryptographic keys. Not even quantum computers could guess these secret codes, so complex is their cryptography. Thus, cryptocurrencies are protected from theft and unauthorised use. However, the keys are similar to passwords, so your Bitcoins are safe as long as you know how to manage them.
Security, therefore, is also an individual responsibility: discover how to recognise online scams.
Is Bitcoin real money?
At the beginning of this guide on how to get started with Bitcoin, we defined cryptocurrency as a new form of currency, virtual but with real value. Bitcoin is intangible, you can’t ‘see’ or ‘touch’ it, but that doesn’t make it any less tangible. In fact, many companies accept payments in BTC, a testament to the fact that it is real money.
In this regard, the quality of medium of exchange is precisely one of the three functions that define the nature of ‘currency‘, along with being a ‘store of value’ and ‘unit of account’. To support payments in Bitcoin, moreover, the Lightning Network has been developed: an additional layer to the basic blockchain, which allows instantaneous exchanges. Nevertheless, among cryptocurrencies, BTC is not the best option for making purchases; in fact, many prefer stablecoins, i.e. cryptos with a stable dollar price.
Bitcoin is also known as ‘Digital Gold‘ because its community compares it to gold as a store of value. This would still suggest that BTC is a currency, hence real money; however, the volatility of its price is often a hindrance.
Finally, Satoshi’s crypto can be considered a unit of account, at least in the blockchain world: it is the yardstick for all other cryptocurrencies, being the most capitalised on the market. For example, one might ask “how many Bitcoins does one Ethereum correspond to?“. Exchanges, such as Young Platform, in fact present BTC in many exchange pairs, so as to assess the price of other cryptocurrencies against Digital Gold.
In essence, the value of Bitcoin can be traded, stored and used as a yardstick: these characteristics make it real money, but it is not a universally accepted definition.
Is Bitcoin legal?
We know that Bitcoin is neither issued by a state nor controlled by a government. However, in some crypto-friendly countries it is a legal tender and Ukraine has received donations in BTC. Furthermore, the European Union is considering a system of laws to regulate cryptocurrencies, the so-called MiCA (Markets in Crypto Assets). These new rules are expected to be approved in 2024 and from the first versions it can be understood that Europe will not ban Bitcoin.
Where to buy Bitcoin?
Having answered the most common questions, we are left with one last question: where to buy BTC? A cryptocurrency exchange is definitely the easiest solution and on Young Platform you can buy Bitcoin in just 5 steps. Don’t worry though, you don’t have to buy a whole one! Cryptocurrencies can be divided into fractions and, in this case, the smallest one is called a Satoshi: you need 100 million of them to make up one BTC.So, you can start with Bitcoin on the small side and then continue to learn about the Academy and the Young Platform Blog, so you can become a real expert!