Bitcoin is a cryptocurrency that has stayed on the headlines of many reputable companies and websites in recent years. The price swing in cryptocurrency has attracted the attention of many investors and business owners.
The coin has become a speculative financial instrument as people can trade and use it like other fiat currencies.
However, it is wise to know some essentials about Bitcoin before you start trading and using it. Our experts have put together this article to guide you with everything you need to know as you use Bitcoin.
1. Know What It Is
Bitcoin is a cryptocurrency, not something you can handle as you do physical cash. It is a digital currency that is secured through codes that cannot be read without a key.
Bitcoin is not controlled by any central government as their supply is controlled by an algorithm. This is what dictates how much of bitcoin will be produced and added to the world yearly.
According to Harvey, a Bitcoin expert, Bitcoin has an algorithmic supply rule that is different from that of fiat currency which depends on the central bank to determine the amount to be printed. Bitcoin is attractive to people who do not rely on the regulatory system of their country’s currency to manage their money.
2. Bitcoin Uses Blockchain Technology
Blockchain technology is the bedrock of bitcoin and without it, the coin will be inexistent. Most people have even argued that blockchain technology is more important and disruptive in the world of finance than Bitcoin.
Blockchain technology is made of a database that contains all decentralized and immutable transactions. This means that the database is accessible and seen by everyone. So, no single person can try to change it for any bad reason.
According to Harvey, the blockchain can only be added to, not editable. The system is called blockchain because its transactions are joined in the form of block and then linked together by cryptographic chains. Find out more about this here.
So, if any of the blocks is broken, the system immediately detects it and assigns the right block as a substitute.
3. There are Fraudulent Marketers
Since bitcoin is a virtual currency, it is crucial that you know the dealer you are trading with. Most crypto traders do not grant access to their phone number and address. So, it is possible that you do not even know the whereabouts or the company you are exchanging crypto with.
Also have a contract or an agreement to incase the exchanger fails to deliver your order.
4. Price Changes
This is very important if you are buying Bitcoin. You have to understand that there various exchangers sell Bitcoin at various prices. This is because there is no central authority in charge of the market, making the price vary often.
So, it is important to understand the exchange rate before each purchase. Since you are investing your hard earned money, you have to know how the bitcoin price will determine the exchange rate.
You should have answers to questions like, will the transaction be affected once the exchange rate increases or decreases when trading? How much time do I have to spend to complete the transaction? Does the exchange rate have other underlying fees?
Ask as many questions on the platform to ensure that nothing takes you unawares.
5. Be Protective of Your Account
There are several risks associated with using Bitcoin, especially when you decide to use it to store your funds. This is because anyone can access your account when they get your password.
For instance, Bitcoin traders are a target of harkers and if someone gains access into your account, they can steal private information like your password and other information.
More so, when someone hacks your account and steals your Bitcoin, nobody can help you. This is not like the conventional bank where your bank account or credit card gets hacked and the bank helps you recover your funds. Bitcoin is operated by an independent party.
So, ensure you keep all your vital information safely, including your private key as anyone who has access to your private key can have access to your account. Find out more about this here.
6. Not Everyone Accepts Bitcoin
Although bitcoin has grown in popularity and awareness as both companies, businesses, online stores, and brick and mortar shops are accepting it. This doesn’t mean it is well accepted everywhere as a traditional currency.
So, if you intend to spend your bitcoin at any location, beforehand, ask if they accept it. It is also advisable to carry your debit card and some dollars as you leave your home to avoid getting stranded.
Although its lots of inherent properties makes it attractive to anyone, it is not something you should just venture in.
It is best for you to do a lot of research to know how this virtual coin works. Also ensure to protect your wallets when transacting business with Bitcoin.