Bitcoin; Its basics and how it works in Nigeria

Like humans, money itself evolves and has been evolving from the time of cowries to barter (exchange by barter) and to Gold, from Gold to paper currency and now, what we are experiencing is digital currencies and prominent among this is Bitcoin.

But what is this bitcoin? How does it come into existence, who created it and how does it work, is it safe or dangerous and how can you acquire it here in Nigeria, Ghana, or elsewhere in the world? These are all what, I will be looking into in this short articles for you to have an insight about bitcoin before getting involved.

What is Bitcoin

Bitcoin is a type of cryptocurrency or digital currency that was created by the mysterious ‘Satoshi Nakamoto, whose true identity has yet to be verified.

Read Also: How to invest in cryptocurrency in Nigeria

Unlike the traditional online payment mechanisms, Bitcoin offers a tiny transaction fee and is operated by a decentralized authority, unlike the government-issued currencies, like central banks.  Bitcoin does not exist in the physical, i.e there are no physical bitcoins only balances are kept in your wallet. Bitcoin is not backed or issued by any banks or governments, and despite it not being legal tender, it charts high on popularity and has currently triggered the launch of other virtual currencies collectively referred to as Altcoins.

Related: How to invest $1 and make up to $1000 Electroneum Coin 

How it Began

On August 18, 2008, the domain name bitcoin.org was registered with “whoisguard protected” meaning the identity of the person that registered it is not disclosed to the public.

On 31, 2008 Someone with the name Satoshi Nakamoto makes a public announcement on the cryptography mailing list at metzdowd.com that he has been working on a new electronic cash system that is fully peer to peer with no trusted third party. It’s available on this link, “http://www.bitcoin.org/bitcoin.pdf

How does it work

As a new user, you can begin with Bitcoin without understanding the specialized subtle elements. When you have registered or installed a Bitcoin wallet on your PC or cell phone, it will produce your first Bitcoin address and you can make more at whatever point you require one. You can uncover your addresses to your companions with the goal that they can pay you or the other way around. Truth be told, this is quite how email functions, aside from that Bitcoin address should just be utilized once.

Blockchain (Balances)

The Blockchain is a common open record on which the whole Bitcoin network depends. Every single affirmed transaction is incorporated into the blockchain. Along these lines, Bitcoin wallets can compute their spendable balance and a new transaction can be verified to be spending bitcoins that are really possessed by the spender. The trustworthiness and the sequential request or chronological order of the blockchain is authorized with cryptography.

Transaction (private keys)

A transfer is an exchange of significant worth of Bitcoins between Bitcoin wallets that gets incorporated into the Blockchain. Bitcoin wallets keep a secret piece of information called a “private key” (A private key is a secret bit of information that proves your entitlement to spend bitcoins from a particular wallet through a cryptographic signature. Your private key(s) are put away in your PC on the off chance that you utilize a product wallet; they are put away on some remote servers in the event that you utilize a web wallet. Private keys should never be uncovered as they enable you to spend bitcoins for their individual Bitcoin wallet.) or seed, which is utilized to sign transactions, giving a mathematical proof that they have originated from the owner of the wallet. The “Signature” (A cryptographic signature is a mathematical mechanism that allows someone to prove ownership. In the case of Bitcoin, a Bitcoin wallet and its private key(s) are linked by some mathematical magic. When your Bitcoin software signs a transaction with the appropriate private key, the whole network can see that the signature matches the bitcoins being spent. However, there is no way for the world to guess your private key to steal your hard-earned bitcoins.)Additionally, keeps the exchange from being adjusted by anyone once it has been issued. All transaction is communicated amongst users and usually begins to be confirmed by the network in the following 10 minutes through a process called “mining”.

Processing (mining)

Mining is a distrusted consensus system in Bitcoin that is used to confirm waiting transactions by including them in the blockchain. Mining enforces the chronological order in the blockchain, protect network neutrality and allows several different computers to agree on the state of the system.  To be confirmed, all transactions must be packed in a block (A block is a record in the blockchain that contains and confirms many waiting transactions. Roughly every 10 minutes, on average, a new block including transactions is appended to the blockchain through mining) that fits very strict cryptographic rules that will be verified by the network.

Investing in Bitcoins

There are many bitcoins supporters who believe that digital currency is the future, that it facilitates a much faster, no-fee payment system for transactions across the globe. Although it not backed by any government bitcoin can be exchanged for traditional currencies, in fact, its exchange rate against the dollar attracts potential investors and traders interested in currency plays.

How to invest in Bitcoin

There are several ways to invest in bitcoin and make money; these include buying and re-selling, bitcoin mining and store of value.

As a newbie to bitcoin, the best way to invest is to buy and store it with the hope of it increasing in value. Well, this can be volatile but had everybody knew the value bitcoin now, some years back, most people would have been rich.

Risk of Bitcoin

Like every other investment, bitcoin carries a significant amount of risks due to it fluctuating nature. A proper research and study on bitcoin would be advisable before investing in bitcoin. 

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