Bitcoin is a new model of money, and as such it has attracted attention from all over the world. In this guide I will provide you with everything you need to know about investing in bitcoin, including how to buy bitcoins.
I have included a step-by-step guide on how to invest in bitcoin, along with a glossary of terms related to bitcoin so that you can fully understand everything this digital currency stands for.
In this guide I will explain what bitcoin is and what it stands for, and answer questions like:
Why should I invest in bitcoin? What is the best way to invest in bitcoin? How do I use bitcoins? What are bitcoins used for? How do I get bitcoins?
Bitcoin is the first digital currency, the first cryptocurrency, that really works. It’s not controlled by any government or company. It’s decentralized and open source. You can use it to buy things from anywhere in the world.
Bitcoin is still a young technology, so you should approach it with caution. But you can make money buying bitcoin, and even more money by investing early in bitcoin startups or mining bitcoins yourself.
In this guide I’ll show you how to buy some bitcoins, what they are good for, how to keep them safe, and where to trade them if you want to make a small fortune.
I have been watching bitcoin for a while, and I am convinced that this is the future. It’s important to understand what it is. Bitcoin is a new type of money. Current money is not just stored value: it makes payments. Modern money is electricity-based, or “fungible”, in the sense that it can be exchanged for something else with no loss of value.
Bitcoin is different. Bitcoin isn’t an asset you can buy or sell; it’s a way of making payments: a currency. It’s like playing a game where all the rules are written down in advance, but in this case the rules specify that whoever wins gets to keep every dollar they win. You don’t have to move your money around to make payments; you just send a message and someone else pays you in bitcoin.
Bitcoin doesn’t just define how new digital currencies should work; it’s also a way of standing up for everything else digital currencies want to stand for, like privacy and freedom from control by governments.
By the time it reached $1,000, Bitcoin’s price had been rising for more than a year. At that point it was still a niche activity. There were only three exchanges in the world where you could sell bitcoins for dollars: Mt. Gox in Japan, Bitstamp in Slovenia, and BTC-e in Russia. The U.S. government outlawed banks from doing business with Mt. Gox and Bitstamp, presumably because of fears of money laundering; BTC-e is now defunct as well.
But by then people who bought bitcoins were already a small community that knew each other well. They didn’t yet realize how the system would evolve, but they were all willing to take risks to get in early on what looked like a promising project. After all, it was just numbers they were buying. It wasn’t as if they thought they could make some kind of real money by holding them or selling them in the future; they knew that Bitcoin was supposed to be an alternative currency, not an investment like stocks or bonds or gold or dollars or yen or any other kind of currency people use every day.
Bitcoin is a digital currency that can be sent directly from person to person over the Internet. It is neither physical nor backed by a government, so it is not controlled by any one entity. The amount of bitcoin that can be in circulation is limited and the rule of law does not apply.
Bitcoin has several features that make it stand out from other digital currencies, such as being an open-source software project (you can look at the code, verify its security, edit it, or even fix bugs) and having a high degree of anonymity (the identities of owners are not revealed).
Because bitcoin is decentralized, no single entity has control over it or can manipulate its value. Bitcoin transactions are verified by network participants (called miners). These miners have special software that they run on their computers that helps them solve complex mathematical problems to verify transactions. The reward for solving these problems is bitcoins.
Bitcoin is not just a new way of paying people. It’s a new kind of economy, a whole new system of money and transactions, in which the whole world can participate.
Bitcoin was invented as a practical joke. More precisely it was invented by someone who admired both computers and economics, as a way to send money to his friends without the fees associated with conventional payment systems. That wasn’t an original idea. But Bitcoin is more than just an electronic alternative to PayPal or Western Union or any other payment system that already exists. It’s a completely new kind of transaction system that can be used to do things we have never done before.
Bitcoin is not just digital money; it’s digital gold. Because it uses cryptography, it can be used for more than just money transactions – indeed, for anything that can be done on computers. And because it follows the rules of economics, it can be used for more than just financial transactions – indeed, for anything where we want to make sure that everyone gets paid eventually and is able to exchange anything of value with anyone else, anywhere in the world.
The most obvious thing Bitcoin could do would be something like buying a cup of coffee or a pizza or some shirts from Amazon or eBay. But this is only the beginning:
So far, bitcoin has never been successfully used for anything except money. Which means it doesn’t exist outside the realm of speculation. It’s possible that one day it will be used as a currency, but there’s no reason to expect that at this stage.
Suppose you had the power to create a new currency that would be worth $1,000 today and $10,000 tomorrow. If you could do this today, how would you do it?
The obvious thing is to use something as widely circulated as the dollar or pound or euro or yen. You could print a new version of those currencies and introduce them into circulation.
But if you did this now, everyone would notice and start using their own version. That would be even worse than just creating new money out of thin air: people who had faith in your version would lose faith in yours and dump theirs for your currency. And there’s no guarantee that anyone would buy your currency at all; if everyone had an equal chance of getting your dollar for $1,000 or of getting their own dollar for $1,000, nobody would buy yours.