The purpose of this guide is as a primer for those interested in learning about blockchain technology and how it can solve problems as well as those that are also curious about investing in and trading Bitcoin and other cryptocurrencies and digital assets.
The first thing to do is to understand why Bitcoin, crypto and blockchains are so revolutionary and learn about the genesis of this new disruptive technology.
What is Bitcoin?
To put it in one sentence Bitcoin is a censorship-resistant, decentralized form of digital cash that requires no third-party trust.
The idea is to empower people with the tools to instantly transfer value to another person ANYWHERE in the world without needing any trusted third party to approve but there is a lot more to it when you dig beneath the surface.
BitCoin came to fame as the very first decentralized cryptocurrency in 2009 in the eye of the economic storm that we now refer to as the credit crunch or the global recession of 2008 as a way to take away the potential abuse of power by banks and governments and give it back to the people.
This paved a way for a series of other decentralized "cryptocurrencies" that soon followed which have become commonly known as "altcoins" short for alternative bitcoins.
Many alt coins share a lot of similarities and are in essence the same however we have seen a development in more advanced blockchain technology including smart contracts in cryptocurrencies like Ethereum that allows for more practical uses.
BitCoin is credited to a creator or group of creators that used the pseudonym Satoshi Nakamoto, the true identity of Satoshi has never been revealed however the word "Satoshi" is used to refer to the smallest fraction of a BitCoin that can be sent at the current time which is a hundredth of a millionth BTC / 0.00000001 BTC.
Decentralized control is managed by the blockchain transaction database in the role of a distributed public ledger. Banks, on the other hand, use centralized banking and electronic money.
This video from Scishow breaks down Bitcoin, Cryptocurrencies and a few of the more technical aspects of how a public ledger, blockchain, and mining all work.
- Limited Supply/Scarcity - There will only ever be 21 million Bitcoins. If there were only 21 million USD or GBP then how much would each unit be worth. This prevents institutions like governments and banks from printing new money and deflating the value of each unit. The rate that Bitcoins are mined is algorithmically tied to be similar to the rate we dig gold out of the earth.
- Bitcoin uses something called Blockchain technology, a large component of this is a public ledger making all wallets and transactions visible, preventing double spending.
- Bitcoin is not anonymous, but it is pseudonymous. Each wallet is just a series of numbers and letters and you can create as many wallet addresses as you want. However, if you attach your name to an address in a public place then you create a link that removes any anonymity.
- Bitcoin and most other cryptocurrencies consist of 8 decimal places, as opposed the 2 decimal places which we are used to with fiat currency, 100c = $1. In Bitcoin 100,000,000 (1 hundred million) Satoshi's make up 1BTC.
- Cryptocurrencies are mostly decentralized (with the exception of a few such as Ripple). Instead of banks processing transactions and taking fees (centralized) miners get paid their share of the reward for mining transactions. This is the purpose of Bitcoin mining and PoW (Proof of Work) in the cryptocurrency ecosystem. Miners secure the network by providing decentralized computer power that makes it difficult to hack or bring down whilst also processing transactions on the blockchain.
- Bitcoin has only ever had one security flaw and that happened in 2010 in the first two years and since it was fixed via a fork there have been no other incidents.
Who Created Bitcoin?
Nobody knows for sure but many have speculated over the years. All we have is a name, that name is "Satoshi Nakamoto" and this person or group of people wrote a whitepaper titled "Bitcoin: a Peer-to-Peer Electronic Cash System that was published on the 31st of October 2008 and the domain name bitcoin.org had been registered on the 18th of August 2008.
The whitepaper was initially shared out to a cryptography mailing list that just happened to have some of the most important cypherpunks as regular readers and contributors as a way to get general feedback from the community.
What are cypherpunks you ask? I will hand this one over to the brilliant Jameson Lopp who penned a fantastic article Bitcoin and the Rise of the Cypherpunks to explain the backstory behind the cypherpunk movement and crypto-anarchists.
On January the 3rd 2009 the bitcoin network was born with the release of the first open source Bitcoin client and the issuance of the first bitcoins, and Satoshi Nakamoto mined the first block of bitcoins ever to exist (commonly known as the genesis block), which included a reward of 50 bitcoins. Embedded in the coinbase of this block was the following text:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.
It is proposed that the above was included both as a way to prove the block was created at least on or after the written date and as a dig at the antiquated traditional financial systems that had failed the people.
The newspaper headline Satoshi included came from the UK based newspaper "The Times" leading some speculators to believe the author was British or perhaps living in Britain at the time.
Another clue that would seem to point to the same conclusion is the fact in analyzing his writing he adopts British English rather than American English using spellings such as "optimise" and "colour" and also uses a few phrases in emails and on forums that are typically British sayings "wet blanket" "bloody hard". You can actually read all of Satoshi's writing on an archive on the Nakamoto Institute website.
Satoshi remained in the public until April 2011 when he handed over the responsibility to a growing group of volunteer developers and cryptographers.
Bitcoin certainly wasn't the first digital cash system though and Satoshi can't take all of the credit, the cypherpunks mentioned in his whitepaper, some of which have been accused of being Satoshi himself all played their part.
David Chaum and Stefan Brands had created the ecash protocols. Adam back developed hashcash, a proof of work scheme for email spam control that's ultimately the same idea behind the fees for Bitcoin transactions to disincentivize spam transactions.
Wei Dai and Nick Szabo both independently created the first proposals for distributed digital scarcity based cryptocurrencies in the form of b-money and bit gold respectively and the late great Hal Finney developed RPOW (reusable proof of work) using hashcash.
All of these cryptographers contributed to the birth of what is now considered the first cryptocurrency, Bitcoin.
What are Cryptocurrencies?
It helps to understand cryptocurrencies to help you better understand how to buy Bitcoin. Cryptocurrencies are best described as digital assets that are designed to work in the same way physical currency does but with many improvements, most notably the fact no physical version needs to exist, be minted or printed by banks or the federal reserve.
Firstly cryptography is used to secure the transactions while limiting and controlling the creation of new units of currency which prevents external interference & state-controlled inflation.
The rate at which new units of currency are produced is determined when the blockchain system is created and this information is publicly available.
The ledgers security and accuracy is based on the assumption that the majority of those mining the currency are trying to maintain the ledger due to the financial incentive of mining cryptocurrencies as it's reward system.
A Cryptocurrency is classified as a subset of digital & virtual currencies as currencies used in digital games have been used or many years prior to BitCoin.
A playlist of talks by Andreas Antonopoulos aka Bitcoin Jesus
Buying your first Bitcoin or Cryptocurrencies
I recommend using Coinbase for your first purchase because it's currently the easiest way to buy, that said there are fees so you ultimately want to explore more advanced ways to purchase crypto.
Want to learn more? Read our guide on how to buy bitcoin.
Cryptocurrency Use Case Scenarios
One unique thing about cryptocurrencies is the variety of use case scenarios that different tokens and coins offer. Some are designed to be used like a traditional currency for buying and selling goods or services while other tokens have a unique purpose like utility tokens, tokenized securities and smart contracts to name a few in this ever-growing space. Many of these features are largely thanks to smart contract technology.
Currencies: Bitcoin, Litecoin, Dash, RaiBlocks, Vertcoin etc
Developer Tools / Smart Contracts: Ethereum, NEO, QTum, EOS, IOTA
Utility Tokens: Bitshares, Steem, Storj, Mystereum, Decentraland
Gaming / Gambling: FunFair, Edgeless, Stoxx
Payment Solutions / Cards: MonacoCard, TenX, WireX, Centra, OmiseGo
Privacy Coins: Monero, PivX, Verge, NAV, Cloak
The list is growing though with different industries such as the energy sector, medical world, and advertising are also being disrupted through the use of blockchain technology and the philosophy decentralization.
Here are some essential articles to read.
- Best Crypto Trading Exchanges
- Best YouTube Channels
- Best Cryptocurrency Wallets
- Cryptocurrency Security Guide
- How to Research Cryptocurrencies
- ICO Investing Guide
- Crypto Portfolio Trackers
- Common Questions
- Bitcoin Whitepaper by Satoshi Nakamoto
- BlockGeeks - Beginners Guide to Cryptocurrency Investing
- Understanding the Difference Between Utility Tokens, Tokenized Securities etc.
- How to Earn Bitcoin
Best Websites for News & Research
Reddit / Cryptocurrency
NewsNow - Cryptocurrencies
Websites & Resources
CoinMarketCap - The best site for comparing the top 100 or more cryptocurrencies and looking at their current price, market cap, daily volume, circulating supply, max supply and other important information.
ICO Alerts - A good website for checking the launch dates of upcoming ICO's or ITO's (initial coin offerings and initial token offerings).
TradingView - One of the best sites for cryptocurrency charting and doing your own technical analysis, they offer free and paid versions of their service. You can also use TradingView charts with Bittrex with the Bittrex Enhanced Chrome extension.
BlockExplorer - Explore every aspect of the Bitcoin blockchain.
Blockchain.info - A simple website for checking on transaction confirmations and other aspects of the blockchains public ledger.
There are lots of communities worth being aware of and joining though they may not all be to everyone's taste. The typical tools, apps and websites used for these communities are.
Slack - Slack is one of the most popular services for crypto communities. Pretty much every coin or token has an official slack channel where investors can communicate and share a direct line with the devs. Slack is good for following these projects but not as ideal for general communities due to spam issues.
Telegram - Telegram is popular for communities and signal groups where people share what they are investing in and which prices to buy and sell. Many coins and ICO's also have official Telegram groups.
Discord - Discord is my favourite of the apps and websites used for Cryptocurrencies, check the DataDash Discord channel and the OneX Capital channels for large high-quality communities to engage in and learn from.
YouTube - A lot of communities center around certain YouTube channels, I have put together an article covering some of the best channels here.
Facebook - As expected Facebook is also a breeding ground for crypto enthusiasts and there are 100's of different groups though this doesn't seem to be the preferred tool for most it's another great place to network with other people interested in the space.
The Bitcoin Phenomenon
Trust Disrupted: Bitcoin and the Blockchain
Bitcoin: The End of Money As We Know It
The Deep Web (NetFlix)
The Rise & Rise of Bitcoin (Netflix)
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