Bitcoin for beginners in 7 easy steps
December 10, 2020
So you’ve decided to enter the world of cryptocurrency and purchase crypto for the first time. That’s great … you’ve got in just on time. In this blog you will learn the basics about how to make money with cryptocurrency. But first of all we need to talk about what cryptocurrency actually is. A cryptocurrency is an exchange medium just like money that can be used to pay for goods and services online. It can also be traded for physical cash. It is a type of virtual currency or in the simplest sense, money that can be used online only. Digital coins are stored in digital wallets and transferred to other peoples’ digital wallets. No physical object ever exists. There are currently many types of cryptocurrencies online, with bitcoin being the first and most well known cryptocurrency.
1. History of Bitcoin
To truly understand what Bitcoin is and the value it can bring to our world, it is very important to know why it was created in the first place. Bitcoin first became available to the public in 2009 and is regarded as the first established cryptocurrency in the world. The creator of Bitcoin is an anonymous person or possibly a group of people, known as Satoshi Nakamoto. In Bitcoin’s whitepaper – an academic document with details about Bitcoin – Satoshi Nakamoto states that the goal of Bitcoin is to create a new “peer-to-peer electronic cash system” that is completely decentralised with no central authority. This is the link to Satoshis’ Whitepaper: https://bitcoin.org/bitcoin.pdf
Bitcoin was created in response to the global financial crisis in 2008 to put power back in the hands of normal people who suffered from the greed of large banks and central authorities who have far too much power.
2. What is Bitcoin?
Bitcoin transactions are recorded in a public log and users can remain anonymous in the network with encrypted keys. Transactions can be made with no middlemen – meaning there is no need to go through a bank. There is no government, financial institution or central authority needed. Bitcoin is not printed like paper money, they are “mined” using computers to solve complex math puzzles. At the time of creation, Satoshi Nakamoto decided there will only ever be 21 million Bitcoin.
3. Storing your Bitcoin
Bitcoin can be stored in a digital wallet. A wallet is simply a collection of addresses and the keys that unlock the funds within it. There are different types of wallets that users can have with varying levels of security. Individuals can choose from a variety of wallets which include web, desktop, mobile, hardware, and paper versions. Users have the option of selecting what works better for their needs with different security levels.
• A web and mobile wallet stores the entire history of Bitcoin transactions, manages the user’s wallets and can initiate transactions directly on the Bitcoin network. Binance is a good example of a web and mobile wallet where users are trusting the exchange to keep their funds safe. (Personally I trust no one with my coins. I prefer to use a hardware wallet).
• A desktop wallet enables software to be downloaded and installed on a laptop where users can store their coins. I recommend exodus.io because it gives you a option to a variety of coins and all the private keys.
• Hardware and paper wallets which store user’s private keys offline are thought to be the most secure way of storing Bitcoins. Common hardware wallets used today are Trezor or Ledger, which you can buy online. When buying a hardware wallet, always make sure to get it directly from the manufacturer and not from a third party.
• A paper wallet is a mechanism for storing bitcoin offline and is made by creating a brand new public address and private key onto paper. Users must keep that printed wallet with their private key details safely.
4. How to make money with bitcoin In 2021
There are multiple ways from making money with bitcoin. The first one is as a long term investment. HODL is cryptocurrency slang. It basically means: Hold (or keep). You are considered a HODL’er if you: Do not have the intention on selling your Bitcoin in the near future. The price of Bitcoin has a lot of room for growth, thus there are a lot of HODL’ers of Bitcoin. Many predict Bitcoin to reach $1 million per coin before 2030. Trading is another great way to make money with bitcoin. Trading basically means buying and selling. If you do not want to HODL Bitcoin, you can also decide to trade it with other cryptocurrencies. Trading is however a lot riskier than holding for the long term and cryptocurrency is extremely volatile. It is wise to just hold unless you have experience trading or a lot of time to commit to being consistently good at it. The safest way to enter the market is to dollar cost average, this is basically just putting your money in gradually to get an even entry price and reduce the risk of losing money due to volatility. For example if you had $100 to invest you could put $10 into Bitcoin every Friday for 10 weeks, this is the safest way to enter the market by far.
5. Always keep learning
The cryptocurrency market has only been around for 11 years and is still in its infancy when you compare it to other asset classes. It is for this reason that you can never stay idle in crypto, things are changing and evolving constantly so if you want to be up to date on what is going on on a day to day basis you have to put the work in. Crypto news websites, youtube, reddit and Instagram are a great way to stay in the know. Personally I enjoy listening to crypto podcasts or livestreams which you can have on in the background whilst doing other stuff. It is important to remember that no one is an expert as well, lots of people in crypto present their opinion as fact even though it is highly debatable. The best thing to do is gather lots of information yourself about independent projects and then decide whether you think it is a good investment or not, it is often wise to do the opposite of what the masses are doing in crypto. Keep learning, trust your instincts and you will go a long way in this space.
6. Trust No One
Following on from the last step about trusting your own instincts, you should always be wary of anyone trying to “help” you in crypto. Sadly, this space is riddled with scammers who’s entire existence revolves around trying to get coins out of your wallet into theirs. You should never enter your private key or any details about your wallet online, if someone is asking for them or claiming to be a help desk or support service for any wallet or exchange you should always take a step back and think about what you are doing. The whole point of cryptocurrency is that you are acting as your own bank and with this great power comes great responsibility as well, it can be easy to be led astray especially when you are new to things. It is also very important to not reveal your true identity or information about yourself to anyone you meet online in the crypto space as it can come back to bite you. Questioning and doubting everyone is the way forward in this space, as there is still very little clear regulation surrounding cryptocurrencies you are truly on your own if you lose your crypto to a hacker or scam. Be careful!
7. Take breaks
When I first discovered crypto back in 2016 I spent about a week straight locked in my room doing nothing but research, to say I was obsessed is an understatement. Becoming obsessed with crypto is absolutely fine at first when you are learning about this amazing technology however as time moves on it can become too much. Many people, despite the fact they are holding for the long term, check the prices 10 times a day and let it get in the way of their normal life and relationships. Crypto is volatile so for people who have no experience of prior investing it can be very stressful to see your investment drop 10% in a matter of minutes however this is part of the game and the main reason dollar cost averaging is the safest way to enter the market. If you are holding for the long term, which you should be, do yourself a favour and don’t become obsessed with short term price action. This asset class is still absolutely minuscule compared to precious metals, stocks, bonds, housing markets and so on, there is so much room to grow so just sit back and think about where you will be in 5-10 years not 5-10 days. If you are feeling really stressed or emotional about short term prices it is a sign you are over invested. As with all investments, you should never invest more than you are prepared to lose. On the flip side, volatility works both ways and more often than not the 10% loss will be replaced with a 20% gain the following day. Strap yourself in and enjoy the ride, this asset class is just getting started.
If you want to stay up to date on daily happenings in the crypto world feel free to follow my Instagram page: @everything_crypto