Bitcoin Explained (FAQ)

Bitcoin is the most dominant cryptocurrency by market cap, based on the current Bitcoin price.

Bitcoin is the first-ever form of peer-to-peer digital currency, created by the pseudonymous Satoshi Nakamoto. Over the more than a decade since it was created, it has grown and matured to become a respected financial asset and the most dominant blockchain network. Positive Bitcoin news and developments have proven the asset has staying power alongside stocks, gold, and other traditional investments.

The leading cryptocurrency trades under the Bitcoin ticker BTC. Derivatives contracts use the Bitcoin symbol XBT. Investors and traders, composed of buyers and sellers, trade the digital currency on a cryptocurrency exchange, which establishes the current Bitcoin price on the market.

The underlying Bitcoin blockchain is the largest factor behind what gives Bitcoin value. After buying Bitcoin, owners of the cryptocurrency can store or send the asset using a Bitcoin wallet, without the need for a third-party or intermediary such as a bank.

When BTC is sent, the transaction is broadcast over the network. Distributed ledger technology allows anyone to view details of the transaction using a Bitcoin block explorer. Bitcoin mining is the process that confirms transactions without the need for a third-party. Each block added is immutable and will forever be included in the Bitcoin history log of transactions on the Bitcoin blockchain.

The process of mining also contributes processing power to the Bitcoin hashrate, increasing the network’s security. Miners are incentivized to contribute energy in exchange for earning revenue in Bitcoin transaction fees and block rewards. The block reward is currently set to 6.25 BTC and is reduced by 50% at each recurring Bitcoin halving date.

Bitcoin value today is substantially higher than years ago due to the ongoing adoption of the underlying technology. Each day, more users are learning the Bitcoin definition, how to buy Bitcoin, or how to mine Bitcoin on their own and decide for themselves what is the best way to buy Bitcoin or which is the best Bitcoin wallet.

Despite the abundance of educational materials and information available about Bitcoin and cryptocurrencies, questions often remain. The below FAQ will provide answers to the most frequently asked questions related to Bitcoin and crypto.

Bitcoin FAQ

What is Bitcoin?

Bitcoin is the first-ever cryptocurrency, the first blockchain network, and a decentralized digital asset.

When was Bitcoin created?

Bitcoin was first created in 2008 after the creator registered the domain name and released the whitepaper titled: Bitcoin: A Peer-to-Peer Electronic Cash System.

Who created Bitcoin?

Bitcoin was created by a pseudonymous individual or group going by the alias Satoshi Nakamoto. The real identity of Satoshi Nakamoto is not known and is subject to heavy debate and speculation.

When did Bitcoin start?

The Bitcoin blockchain was started on January 2, 2009, with the “genesis block.” Satoshi Nakamoto famously included a newspaper excerpt from The Times referencing bank bailouts of the Great Recession.

What is Bitcoin mining?

Bitcoin mining is a process that utilizes a “proof-of-work” consensus algorithm to confirm blockchain transactions. Miners use powerful computers that complete complex mathematical equations that power and secure the network and receive a BTC block reward as an incentive.

How does Bitcoin work?

Bitcoin works by broadcasting transactions across the network, which is confirmed when miners process each block and add it to the blockchain. Users of the technology can interact with the blockchain using a block explorer or wallet interface.

When is Bitcoin halving?

Bitcoin includes a built-in block reward reduction mechanism called the halving. It recurs roughly every four years, slashing the supply of BTC miners receive as a reward in half. The next halving is scheduled for around May 2024.

How to buy Bitcoin?

Buying Bitcoin is easy and can be completed in just a few clicks on App, Coinbase, Binance, and several other platforms. Typically, a bank account, debit card, or other fiat funding source is required to connect to an account before purchasing BTC. Many platforms require a photo ID or other forms of identification. To learn more, read How To Buy Cryptocurrencies and Bitcoin.

How to use Bitcoin?

Once you have obtained Bitcoin, the easiest way to interact with the blockchain to store, send or receive assets is through a wallet interface such as Coinbase or Metamask.

How to send Bitcoin?

Sending Bitcoin through a wallet app or interface involves scanning a QR code or entering a BTC address. For more information, read How To Store, Send, and Receive Bitcoin and Cryptocurrencies.

How to make money with Bitcoin?

Investors commonly make money with Bitcoin by merely holding the asset and selling it when the price increases. Mining Bitcoin can also be profitable if energy costs are low enough. Trading Bitcoin is also a lucrative way to improve Bitcoin holdings but comes with some added risk.

How to cash out Bitcoin?

Cashing out Bitcoin involves sending the BTC to a cryptocurrency exchange that features a fiat on-ramp and selling the BTC into your local fiat currency or cash. After the Bitcoin has been exchanged for fiat, the fiat must be moved to a traditional bank account.

How to sell Bitcoin?

Selling Bitcoin requires a sell order to be placed on a cryptocurrency exchange that is filled by a corresponding buyer. Bitcoin can also be sold via peer-to-peer marketplaces such as LocalBitcoins.

How to trade Bitcoin?

Trading Bitcoin can be highly profitable but carries risk. Trading Bitcoin involves buying low and selling high or longing or shorting Bitcoin via a derivatives exchange platform. For more information, read the Introduction to Cryptocurrency Trading.

How to pay with Bitcoin?

Bitcoin can be used for payments by visiting a vendor’s website and completing the steps required to send BTC to any address associated with the transaction. Alternatively, users can send BTC themselves to make a payment from directly within their wallet interface of choice.

What can you buy with Bitcoins?

You can buy just about anything with Bitcoins that you can with traditional money. Luxury cars, real estate, fine art, more crypto, and more are possible to buy with BTC online.

How many satoshis in a Bitcoin?

Each Bitcoin is visible to eight decimal places. The smallest unit of measurement is called a satoshi, named after the asset’s creator. There are 100 million satoshi in each BTC.

How much is 1 Bitcoin worth?

The current Bitcoin price is [coinmc type=”price” coin=”bitcoin”].

Is Bitcoin a good investment?

Investors themselves must decide if Bitcoin is a good investment for them. The asset is highly volatile and can crash 80% of its value in months. But it is also the best performing financial asset in history.

Should I buy Bitcoin?

Buying Bitcoin is a vote with money for a new financial system, a way to protect wealth against inflation, and an insurance policy against uncertainty. Buying Bitcoin comes with risks, but not buying Bitcoin could be just as risky. The decision is ultimately yours.

Is Bitcoin safe?

Bitcoin is perfectly safe to own, store, send, and more. Some education is required for the proper handling of digital assets, but the benefits outweigh any cons.

Is Bitcoin legal?

Anyone can own BTC and participate in the Bitcoin network without restriction. However, because it is a financial asset, it is recommended you check with local laws in your jurisdiction to understand its legality.

How is Bitcoin Price Determined?

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Bitcoin price today is [coinmc type=”price” coin=”bitcoin”], but is always changing. Buyers and sellers exchange Bitcoin for cash or altcoins and vice versa. Watching Bitcoin price live, you can see the impact buyers and sellers have on how much the price rises or falls.

The dynamics of supply versus demand dictate the price of Bitcoin. As adoption takes place and demand for the cryptocurrency grows, the price of Bitcoin grows exponentially.

Bitcoin historical price action shows the greatest return on investment possible out of any financial asset ever to exist, growing from relatively worthless to mere pennies to [coinmc type=”price” coin=”bitcoin”] today. Bitcoin value history beats the performance of gold, stocks, commodities, and more.

Bitcoin price analysis and technical formations suggest that the growth cycle has a bubble-like effect closely related to the asset’s block reward halving mechanism. Every four years, the reward miners receive for securing the network is reduced by 50%. The abrupt change in supply causes an imbalance in the equilibrium of buyers and sellers and causes demand to overwhelm available supply. As is visible on the Bitcoin price chart, the price rises exponentially until demand is sufficiently met, and profit begins to be taken.

What is the price of Bitcoin today?

Bitcoin price is currently [coinmc type=”price” coin=”bitcoin”].

What affects or drives the Bitcoin price?

The natural push and pull “tug-of-war” between buyers and sellers dictate the price of any asset, including Bitcoin.

What price did Bitcoin start at?

Bitcoin started without a price. During its first public sale in 2008, $1 would have bought 1309 BTC. By 2010, 1 BTC was $0.50.

How to predict Bitcoin price?

Bitcoin price is predicted to rise every four years after each block reward mechanism halving. On shorter-term timeframes, tools such as technical analysis and fundamental analysis can be used to predict price action.

Why is Bitcoin price dropping?

Bitcoin price is dropping as part of the asset’s normal market cycles and corrections. The common term “HODL” was coined to help investors cope with the asset’s notorious volatility. 

How often does Bitcoin price change?

Bitcoin price can change every second at any time of the day or night, weekends or holidays included. The crypto market never stops, and every trade between a buyer and seller can cause the price of Bitcoin to fluctuate.

Bitcoin (BTC) technical analysis

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Bitcoin technical analysis can provide insight into where the price of BTC might go next. Analysts rely on chart patterns, technical indicators, and various signals in order to attempt to predict when trends are about to change or how far prices might climb or fall.

Bitcoin analysis goes far deeper than merely Bitcoin price analysis, with fundamental focused analysis taking into consideration network activity, total BTC held in wallets, and how much BTC is stored on each exchange.

Using all of these strategies combined can provide some investors with an edge on the cryptocurrency market.

Bitcoin (BTC) wallets

Each and every Bitcoin wallet consists of a cryptographic private key and a public key that acts as the Bitcoin wallet address. Bitcoin wallets commonly come in two variations: hot and cold wallets. 

Hot wallets, also called web wallets, are connected to the internet in some way and therefore exposed to any threats that exist online. Cold storage wallets are hardware wallets not connected to the internet that store a private key behind a secure element. Paper wallets are an old way of doing things and are no longer recommended due to how often investors lost their private keys in the past.

Bitcoin Wallets FAQ

What Is a Bitcoin Wallet?

A Bitcoin wallet can either be a Bitcoin paper wallet, a “hot” web wallet like an app or exchange, or cold storage wallet.

How to get a Bitcoin wallet?

You can get Bitcoin wallets from a variety of places online and in the app store for each type of smartphone.

How to create a Bitcoin wallet?

The easiest way to create a wallet is by using a Bitcoin wallet app. 

How to set up a Bitcoin wallet?

Setting up a Bitcoin can be done online in a few clicks, either by using an app or through a cryptocurrency exchange.

What is the best Bitcoin wallet?

The best Bitcoin wallet is also going to be the safest Bitcoin wallet and most secure Bitcoin wallet. Typically, this means a Bitcoin hardware wallet such as Trezor or Ledger. Trezor Bitcoin wallets are a USB-powered device that stores privacy keys securely. Ledger Bitcoin wallet works the same but recently suffered a leak of personal customer details and cannot be recommended any longer.

How to add money to Bitcoin wallet?

Adding money to a Bitcoin wallet requires buying BTC from an exchange and sending it to a wallet you own the private keys of.

How to add Bitcoin to wallet?

Adding Bitcoin to a wallet works by sending the BTC address a sum of Bitcoin. The BTC will appear in the wallet after several network confirmations.

How to recover Bitcoin wallet?

Bitcoin wallets are difficult to recover. If you have the private key or seed phrase, a new wallet can be generated. Without the private key or seed phrase, BTC can be lost forever and cannot be recovered.

How to find a Bitcoin wallet address?

Using a Bitcoin wallet lookup tool or blockchain explorer, you can find information related to any Bitcoin wallet. Many wallet interfaces or apps will offer a QR code or a way to copy your wallet’s BTC address easily.

How to backup a Bitcoin wallet?

You can back up a Bitcoin wallet by writing down the seed phrase and storing it in a safe location. You can also make backups of hardware wallets in case of loss.

How to choose a Bitcoin wallet?

When looking for the best Bitcoin wallet app or solution for you, or for niche needs like finding the best Bitcoin wallet for Android or iPhone, consider reading online Bitcoin wallet reviews. Several free Bitcoin wallet services exist that are reputable, such as the Exodus Bitcoin wallet, which lets you create Bitcoin wallets in a few clicks.

How to send Bitcoin from paper wallet?

Paper wallets are the most anonymous Bitcoin wallets possible, with virtually no trace of the assets existing outside of the piece of paper the private key is written on. However, to use the paper wallet to send BTC, you must import the seed phrase and private key to a wallet interface or app, then use the wallet as you would normally. Using paper wallets has fallen out of favor due to lost Bitcoins.

Bitcoin (BTC) mining

Not everyone who gets into Bitcoin does so by buying it online or trading it. All of the BTC in circulation at one point or another was unlocked by the process of mining. 

Satoshi Nakamoto created a proof-of-work consensus algorithm to allow the network to function without the need for a third-party intermediary. It is a complex process involving expensive, specialized computers, but miners range from large companies and “farms” to hobbyists.

Bitcoin mining FAQ

What is Bitcoin mining?

This is the proof-of-work consensus algorithm that powers the Bitcoin network. Bitcoin miners receive a payout in BTC “block rewards” as an incentive.

What does Bitcoin mining mean?

Bitcoin mining involves contributing hash rate – a measure of computer processing power – to the blockchain network, keeping it secure and immutable.

What is a Bitcoin miner?

A Bitcoin miner refers to a Bitcoin mining pool or Bitcoin mining hardware itself. Bitcoin mining hardware is often called a Bitcoin mining rig.

Is Bitcoin mining profitable?

Bitcoin mining can be profitable with the right hardware and energy costs. Profitability calculators can help those interested in mining understand what is required to be profitable. 

How does Bitcoin mining work?

Bitcoin mining works by using specialized computers to solve complex mathematical equations that verify each block being added to the Bitcoin blockchain, keeping the network secure and accurate.

Is Bitcoin mining illegal?

Bitcoin mining is legal in most jurisdictions, and anywhere there are no restrictions on energy usage.

How to start Bitcoin mining?

Reading materials and websites online offer profitability calculators, access to information on Bitcoin mining rigs themselves, and other details involved in getting started. Alternative solutions such as Bitcoin cloud mining contracts provide a way to get into Bitcoin mining easily without the upfront costs.

What is cloud mining Bitcoin?

Cloud mining is on the same idea as cloud services for website servers. Rather than buying, running, and operating expensive mining machinery, larger companies offer what is essentially a rental of this equipment, allowing the user to mine for Bitcoins.

How to join a Bitcoin mining pool?

Bitcoin mining pools can be joined online. The combined hash power increases the success rate of unlocking BTC for those who mine Bitcoin.

How much money can you make mining Bitcoin?

How much money can be made mining for Bitcoin changes depending on how much energy costs, how much the hardware costs upfront, what the maintenance costs are, and much more. Miners must also take into account the constantly changing price of each Bitcoin.

How to invest in Bitcoin

The simplest and most direct way to get into Bitcoin is by merely buying Bitcoin. Early on, the only way to get BTC was to mine it, but today, hundreds of places exist that allow users to buy Bitcoin online.

But because there are so many, choosing the best Bitcoin exchange or the best place to buy Bitcoin isn’t always straightforward. Be sure to look for platforms that let you buy Bitcoin with credit cards or buy Bitcoin with a debit card instantly. Coinbase or Binance are great places to start considering their reputation.

Buying Bitcoin FAQ

How to purchase Bitcoin?

The easiest way to buy Bitcoin is using a debit or credit card online at one of the many cryptocurrency exchanges or apps, such as Coinbase.

How to buy Bitcoin?

You can buy Bitcoin instantly in just a few clicks online. Search for a reputable platform such as App, Coinbase, Binance, or Cash App. 

How to trade Bitcoin?

Many different trading platforms allow you to trade Bitcoin, such as FTX, Deribit, PrimeXBT, and BitMEX. For a detailed guide on how to trade Bitcoin, click here.

How to buy Bitcoin with credit card?

Buying Bitcoin with a credit card is offered by a variety of different cryptocurrency exchanges or websites. For a detailed guide on how to buy Bitcoin, click here.

Where can I buy Bitcoin?

You can buy Bitcoin at Coinbase, Binance, LocalBitcoins, and many other places.

Where to buy Bitcoin?

Bitcoin investment is easy once you select a reputable cryptocurrency exchange such as the many mentioned on this page.

How to buy Bitcoin with Cash App?

You can also invest in Bitcoin using the Cash App created by Square Inc. 

How to buy Bitcoin with cash?

You can buy Bitcoin instantly using cash at any Bitcoin ATM location. It is the fastest way to buy Bitcoin.

How to buy Bitcoin anonymously?

The best way to buy Bitcoin anonymously is through a mixer website or via a peer-to-peer marketplace. Keeping Bitcoin anonymous is becoming increasingly difficult. 

How to buy Bitcoin with PayPal?

Recently, the company revealed you can now buy Bitcoin with PayPal. Bitcoin is listed alongside three other cryptocurrencies on the payment app.