Digital currency is not a new concept. Many prominent entrepreneurs are investing in digital currencies as they do not work as Fiat currency. Since any regulated body does not regulate them, they are very volatile. There are various forms of digital currency, and the most popular and the oldest currency is Bitcoin.
In simple words, Bitcoin is a form of decentralized currency, also known as electronic cash.
- You do not need any third party to regulate it.
- You can transfer such coins through a blockchain network without the need for intermediaries.
- It is an online form of cash.
You can use this currency to buy any product or service provided it is acceptable for transactions. Remember that you cannot deal in Bitcoins if your country has prohibited its use.
Before you get to know how Bitcoin works, you need to understand the blockchain network. What it is and how it does work.
Basic information of blockchain technology
If you would like to understand it in simple terms, the best way to define is it is a chain of blocks. Here block refers to digital information, and the chain refers to the public database. So, you can say blocks are stored in a public database. Blocks consist of different pieces of information, for instance, date and time of the transaction made.
Blocks also store information about participants in making transactions. Although the ledger stores all information under the same roof, there will be no disclosure of your personal information like your name. Information is recorded with a unique digital signature and a username.
Each block has a different identity from the other one. Each block stores a unique code called hash that allows you to distinguish blocks from each other. Blockchain network uses unique algorithms to create such cryptographic codes.
Now that you have got to know the basic terms about the blockchain network. The next step is to know about it in terms of transactions. The blockchain is an ingenious way of passing information from one person to another while making transactions most safely. You can initiate the transaction by creating a block that is verified by millions of computers across the internet. Once the block is confirmed, it is added to the chain.
One of the significant advantages of the blockchain network is it helps you save your money on transaction cost. Since there is no intermediary to process the transactions, you can easily do it without incurring the cost.
How a Bitcoin transaction works
If you want to purchase or sell anything using Bitcoin, you will need a Bitcoin wallet. A Bitcoin wallet keeps the record of all transactions made by you. Before you make a purchase, you must know how much money you have in your wallet. Miners play the role in adding blocks, so you will need to pay a nominal amount of fees.
Once you click “send” to process the transaction, the entire network will get to know about it within seconds. The other party will have a pending status until minors add the transaction to the blockchain. Once the blocks are added to the ledger, the transaction will be confirmed immediately. It means the transaction cannot be reversed once it is recorded in the blockchain network.
How to buy Bitcoins
You will have to follow a couple of steps to buy Bitcoins:
- First off, you will need a wallet. You will have to decide whether you want to purchase Bitcoins or Bitcoin cash.
- The next step is to open an account at an exchange. There are hundreds of Bitcoin exchanges with different degrees of liquidity and security. You must do enough research before picking a cryptocurrency exchange. It will be better if you choose the one that is more reliable.
- Some platforms will help you introduce to people who are willing to offer Bitcoins in exchange for cash. Some online platforms can direct you to a bank branch that can allow you to have cash deposit so that you can exchange it for Bitcoins.
- Now the next step is to open your wallet and click “Buy” or select “Buy with credit card”.
- Select the amount in USD/EUR and accept the term of use to continue. Do not forget to note your order ID.
- The next step is to fill out the billing information. Do not forget to verify your email address and phone number if it is your first purchase.
- You will have to enter payment details to complete the purchase. Once you have done it, you will own Bitcoins.
However, you will have to remember that the cryptocurrency world is extremely volatile. There is a considerable risk of losing money. Make sure that you are well aware of how it works. Though it can help you invest the Irish capital, it is subject to the risk. Do not underestimate the volatility of the market.