he digital currency bitcoin has come a long way in the past five years. In that time, its value has grown from around 10 cents to over $1,200 today. But what if you don’t want to trade bitcoins or hold them as an investment? What if you just want to own them like everyone else? To help answer that question, let’s take a quick look at the history of bitcoin and how it has changed since its inception.
How Does Bitcoin Work?
In simple terms, bitcoins are a type of digital currency. They are created and controlled by users who use special software to solve a complex technological problem. The creation of bitcoins is based on a mathematical process similar to that of making money. Like most currencies, the value of Bitcoin changes depending on several factors including demand, the current exchange rate, and the amount of supply. By using a “mining” process, computers solve complex algorithms worth additional computing power. As a result, the creation of new bitcoins increases exponentially with the amount of computing power used to solve the algorithms. The more computing power that is used to solve the algorithms, the more coins are released as an outcome. The supply of coins is regulated by a process called “mining.” When a new block of bitcoins is discovered, the miner is rewarded with newly created coins. However, the reward drops by half every four years. Because of this, most of the computing power used to solve the algorithms is used to “mine” new coins and is therefore not currently necessary to maintain the value of the currency.
What is Bitcoin?
As mentioned above, bitcoin is a type of digital currency. The value of bitcoin is determined by demand for the currency and the amount of supply available. This supply and demand equation is known as the “mining” process and it is the basis for all other transactions involving the currency.
How to Buy Bitcoin
When someone wants to buy bitcoins, they can either buy them directly from a bitcoin exchange or use an online brokerage to trade funds for the currency. You can find dozens of online trading platforms, or you can use an brokerage. Brokerages tend to have lower trading fees than exchanges, but be careful about trading funds through a brokerage. Many times, the funds will not be properly protected and could lose value due to high trading costs and potential fraud. To buy bitcoins, you will need to provide your name, address, and the dollar amount you want to buy. You will then need to fill out a few information requests and provide a few documents. If you are buying a small amount, you can usually conduct the buying process over the phone or via email.
Pros of Buying with Bitcoin
No matter how you decide to buy bitcoins, there are a few things to keep in mind. No Transfers of Funds: You won’t lose any money by buying with cash or carrying a balance at a bank. When you buy the coins with cash, you are directly paying for the item. When you use a brokerage, you are financing the transaction by borrowing money from a third party. This is called “selling” the coins and is a common practice in the financial industry. No downside risk: You won’t lose any money if the price goes down. When you buy bitcoins with a brokerage, you are taking a big risk. The price may go down and you could lose money if the price goes down too far.
Cons of Buying with Bitcoin
If the price goes up: Yes, it is possible that the price could go up. When someone wants to sell their coins, they are typically offering them for a higher price. This may happen if the demand for the coins increases and the price goes up. No Liquidity: There’s no way you can sell or trade your bitcoins once you buy them. You can only hold them as an investment or as a speculative bet.
To sum it all up, buying bitcoins with a brokerage is probably not a good idea. You will need to secure your investment and be able to sell your coins at a later date. If you want to buy bitcoins with cash, you can always hold onto them as an investment or use them to buy other goods and services. Additionally, if you have some extra money lying around and want to try to get in on the ground floor of a new technology, bitcoin might be right for you.