10 Advance Things You Need to Know About Bitcoin

The cryptocurrency industry has been explosive over the recent years, as more and more people have realized that it can be a great investment vehicle. If you’re already quite familiar with cryptocurrency, you might have most of your attention focused on Bitcoin or other huge names.

Bitcoin, in particular, is undeniably the most popular and highly valued cryptocurrency in the market. On top of that, it’s also slightly more stable than other notable cryptocurrencies given that it’s been around for more than a decade. However, investing in Bitcoin or any other cryptocurrencies isn’t like investing in stocks or real estate.

Many of those who buy Bitcoin treat it as a short-term investment. However, some people also view it as a long-term investment. Regardless of your approach or perspective when it comes to Bitcoin, there are a lot of advance things that you need to know about in order for you truly understand how it works. 

It’s an Extremely Powerful Network

Thanks to Bitcoin’s decentralized system and the countless number of different systems powering it, it’s generally regarded to be one of the most powerful networks out there. The Bitcoin system currently operates at a computing power of more than 80 million petaflops.  

This is considerably more powerful than the world’s fastest supercomputer, the Summit, which operates at around 122.3 petaflops. Although the majority of computing power that goes into Bitcoin’s network is used to verify and add blocks to the blockchain, it’s hard to overlook the staggering amount of power it has as an entire network.

Blockchain Technology

At first, blockchain technology is quite a complex and difficult concept to understand. However, In the case of Bitcoin, blockchain technology is a very straightforward concept. It’s generally utilized as a distributed ledger for all the transactions that takes place in the Bitcoin network. 

The main purpose of Blockchain technology is that it’s essentially part of the security that creates and verifies “blocks” of transaction data. Moreover, since there’s virtually no central authority to keep an eye on all Bitcoin transactions, miners or participants contribute to the security of these transactions.

Volatility

As an investor, it’s very important to remember that Bitcoin and other cryptocurrencies are still subject to severe value changes. Bitcoin is historically volatile given its price changes over the recent months. Even after hitting its record high on April 13, its value fell by nearly 15 percent only a week later.

Considering the purely speculative nature of its value, one might say that it’s very risky investing in Bitcoin. However, depending on your risk appetite and current knowledge about cryptocurrencies, Bitcoin can become a great investment vessel especially if you consider its high market demand and potential.

Limited Supply

The supply of Bitcoin that will only be available in circulation is limited to 21 Million. This is important to keep in mind especially if you’re considering Bitcoin mining. This was intended from the very beginning as it ensures that every Bitcoin appreciate in value over time.

In the early days of Bitcoin, miners were rewarded with 50 bitcoins. In 2012, the reward dropped to 25 bitcoins. As of this moment, miners are rewarded with 6.25 bitcoins for every new block mined. This protocol has allowed the inflation rate of Bitcoin to be effectively lowered in half every four years.

Public and Private Keys

Another integral part of Bitcoin and other cryptocurrencies that you need to know about are public and private keys. To put it simply, a public key enables you to receive Bitcoin from other parties. In contrast, a private key is needed in order to access your funds and spend it. This means that you should never share your private key with anyone.  

Moreover, there’s also the existence of Bitcoin wallet addresses. These are basically randomly generated set of numbers and letters which can be used to receive Bitcoin from other parties. A wallet address is basically a hashed version of your public key.

Transaction Fees

A growing number of small to large businesses are already adapting Bitcoin as payment for their services and products. That’s why physical and online transactions using Bitcoin are becoming more common these days.

However, it’s important to note that using Bitcoin for transactions is not completely free. According to Statista, the mean transaction fee for using Bitcoin as of August 8 is $2.25. However, this is bound to change since there are a few factors involved in determining the price of transaction fees.

Reusing Bitcoin Addresses

If you’re already quite familiar with transactions regarding Bitcoin or other form of cryptocurrencies, you should also be mindful of reusing Bitcoin addresses. The reason for this is because it can expose your identity, violate your privacy and the privacy of those you transact with.

Moreover, analysts might find it easier to know your spending patterns if you keep using the same address for different transactions. Needless to say, you should always generate a new address for each transaction since reusing one is a dangerous practice.

Irreversible Payments

Another thing that you might want to know about is that payments or transactions using Bitcoin cannot be reversed. Instead, it can only be refunded by the receiving party or person. Although Bitcoin can detect errors and typically won’t allow you to send payments to an invalid address, it’s always a great idea to be careful with your transactions.

It’s also important to point out that you should also be considerate as to who you transact with since some businesses or users are more trustworthy than others. 

Security Measures

You have to understand how Bitcoin really works especially with regards to how you can safeguard your Bitcoin wallet. A popular and common way of securing your cryptocurrency wallet is through the use of cold wallets or hardware wallets. This is perhaps the safest option since it enables you to hide your wallet in a physical location.

You might also want to consider securing your internet with the use of a reliable VPN. This can significantly help in keeping your browsing activity safe and private.

Bitcoin Mining

There are only three main ways to acquire Bitcoin. Apart from direct investment and trading, there’s also the option of mining bitcoins. However, because of the rising popularity of cryptocurrency and the limited supply, Bitcoin mining has become a difficult approach.

For instance, buying efficient mining hardware or ASIC miners is extremely hard since there is often a shortage of stocks from suppliers. From calculating the profitability of your plan to joining mining pools, Bitcoin mining is truly a hard thing to consider if you want to invest in Bitcoin.