Bitcoin: A Complete Guide

Bitcoin can be a confusing concept if you don’t know the basics, that’s why at 7Bitcoins we have created a complete guide to help our readers understand the topic a bit better. As cryptocurrency experts at 7Bitcoins, we provide knowledgeable information about all things crypto. We regard ourselves as an authority in Bitcoin and we strive to help educate our readers on the subject of Bitcoin and all that it encompasses. This guide aims to give any beginner a good foundation for understanding Bitcoin and how it works. 

Who Started Bitcoin and When Was Bitcoin Started?

Bitcoin was created in 2008 when a group of people under the pseudonym, Satoshi Nakamoto published the Bitcoin white paper. The Bitcoin white paper was a document describing the functionality of the Bitcoin blockchain network. The following year, in 2009, the first block of the Bitcoin blockchain network was mined. Since then, Bitcoin trading and the crypto industry as a whole have evolved to new heights, with a global crypto ownership rate at an average of 4.2% and an estimated 420 million crypto users globally in 2023. It has also become the most recognised cryptocurrency in the world and its popularity has largely influenced the birth of many other cryptocurrencies.

What Is Bitcoin?

Bitcoin, also known as “BTC,” is the most volume-popular cryptocurrency due to its longevity and credibility. A  cryptocurrency is a digital asset created to serve as money and a form of payment independent of any single person, group, or entity, thus eliminating the need for third parties to be involved in financial transactions as outlined in the original whitepaper. Bitcoin is considered the most popular cryptocurrency around the world. Bitcoin is rewarded to blockchain miners for their work done to verify Bitcoin transactions. This cryptocurrency can be purchased on several different online exchanges.  

Bitcoin and Its Purpose

Bitcoin was started over ten years ago as a means of online money transfer. The goal was to offer a different form of payment that would function without centralised management but otherwise function similarly to traditional currencies. This was achieved through decentralisation – a means of eliminating third-party involvement in financial transactions, meaning no one person/entity such as a government or financial institution could control the transaction.

How Many Bitcoins Are There In the World and How Many Bitcoins Are Left?

Nakamoto put a cap of 21 million in the source code, indicating that no more may be created by mining or circulating. Although Nakamoto did not provide an explanation for choosing a 21 million limit, many people see it as a significant advantage for the oldest cryptocurrency in existence. They believe that the cryptocurrency’s scarcity and long-term price stability are maintained by its finite supply as well as a means of combatting inflation. This chart shows how many of the 21 million Bitcoins are already in circulation. In addition to this every 210,000 blocks,  Bitcoin implements halving events –  the process whereby the reward for mining new Bitcoin blocks is divided by two, meaning that Bitcoin miners receive 50% fewer Bitcoins for verifying transactions. Essentially, halving events are Bitcoin’s way of implementing a synthetic form of inflation that halves approximately every four years until all 21 million Bitcoins are in circulation. Here is a countdown to the next Bitcoin halving event. 

How Does Bitcoin Make Money?

Bitcoin generates income for miners by rewarding them for validating transactions. This is called Bitcoin mining – the process whereby new bitcoins are created by solving intricate mathematical algorithms that verify Bitcoin transactions. Once a Bitcoin has been successfully mined, the miner will receive a predetermined amount of Bitcoin as compensation for their work. The other way that bitcoin can generate a profit for people is if they invest in and trade with Bitcoin.

Proof of Work, also known as PoW, is a technique that Bitcoin and other cryptocurrencies employ to verify the accuracy of a new transaction. Bitcoin is decentralised and does not rely on a specific entity like the government or a bank to verify new data and transactions, instead, it relies on a distributed network of computers and miners. 

Proof of Work is a system algorithm that selects these miners. The network of miners is decided by the Proof of Work system to ensure some form of regulation when dealing with verifying new data. Essentially, miners need to compete with one another to solve the mathematical algorithm of a new block and the first to successfully verify the transaction is rewarded with a predetermined amount of Bitcoin. PoW was one of the first techniques created to validate blockchains, since then, it has led to the creation of new methods such as Proof of Stake. The Proof of Stake method, also known as “PoS”  allows crypto owners to stake coins and create their own validator nodes. 

Bitcoins – Ways To Obtain Them:

The two main ways to get Bitcoin are to buy Bitcoin or to earn Bitcoin. 

When buying Bitcoin,  you will exchange real-world money (called fiat currency) for cryptocurrency, in this case, Bitcoin. To buy bitcoin, there are a few channels you can use. Below is a list of ways to buy Bitcoin:

• Cryptocurrency Exchanges
• Investment Brokerage Firms
• Payment services like Paypal
• Offline services like Bitcoin ATMs 
• Peer-to-peer exchanges

Here is a list of our top-rated cryptocurrency exchanges. If you are a beginner or even an experienced trader that wants to make the most of your crypto trading journey with minimal effort and time, we would recommend using a crypto trading tool. Here is a list of our top crypto trading tools and their reviews. 

Bitcoin – How Does It Operate?

Bitcoin forms part of a blockchain as well as the network that is required to power the cryptocurrency. In summary,  a blockchain is a distributed digital ledger that serves as a shared database that stores information in a network of computers. The data in a blockchain gets secured via encryption. Blockchain gets its name from the blocks of codes it contains that are linked or “chained” together in chronological order, with each block having a record of transactions.

On the Bitcoin blockchain, when a new transaction occurs, the data from the previous block is copied to a new block along with the new data, it is then encrypted, finally, the transaction gets authorised by validators, known as “miners”, that are part of the network. Once the transaction has been verified, a new block is created thus creating a Bitcoin. Every transaction that takes place on the blockchain is publicly available for anyone to view. 

Who Owns Bitcoin?

Although Satoshi Nakamoto, the anonymous person/group of people that created Bitcoin, is its creator, no one actually owns the Bitcoin project. With that being said, there is a core team of developers that have taken the original Bitcoin code and continued to develop it into what it is today in accordance with the original Bitcoin whitepaper created by Nakamoto. The Bitcoin Core maintainer team consists of Wladimir Van Der Laan, the current leader of the team. He is accompanied by Pieter While, Marco Flake, Michael Ford, Jonas Schnelli, and Samuel Dobson. It is important to keep in mind that Bitcoin is a piece of software that is managed by a decentralised network- this means that no single entity is in charge of the software’s set of rules. These rules must be agreed upon by the network participants in order for them to make transactions. 

Banks and the Acceptance Of Bitcoin

Some banks and financial institutions around the world accept Bitcoin as a legitimate form of payment while others do not. Below is a list of some of the banks and financial institutions that accept Bitcoin:

• Quantic (United States of America)
• Bank of America 
• JPMorgan Chase 
• Goldman Sachs
• Morgan Stanley 
• Bankera (United Kingdom) – Available Globally, except for United States of America, Iran, North Korea, Belarus, and Russia.
• Nuri (Germany) – Available in European Economic Area, including Switzerland and United Kingdom. 
• Change (Estonia) – Available in European Economic Area, including Iceland, Liechtenstein, and Norway.
• Fidor Bank (Germany) – Available in European Economic Area/EU/EFTA
• Revolut (United Kingdom) – Available in European Economic Area, Australia, Singapore, Switzerland, Japan, the United Kingdom, and the United States of America
• Worldcore (Czech Republic) – Available in European Economic Area

Investing In Bitcoin

Bitcoin can be a good investment for anyone who wants to gain direct exposure to the demand for digital currency. With this being said, it is important to remember that, like any other investment, Bitcoin also has its risks and it is important to do your research before you invest. While the technology that Bitcoin consists of may be secure, the cryptocurrency market itself is inherently volatile and thus it poses risks. Essentially, Bitcoin, like many other investments, can be seen as high risk, high reward – meaning that the potential profit might be higher than with other investments, but at the same time, your money is at higher risk. 

To start the process of buying and investing in Bitcoin, you will need to select a trustworthy cryptocurrency exchange website and create an account. Once you have verified your account, you will be able to buy and invest in Bitcoin via various payment methods such as bank cards and wire transfers. Once you have selected and registered with a crypto exchange, you can begin trading Bitcoin. If you are a beginner, there are ways to help you ease into the world of crypto trading, there are even automated trading robots that can trade on your behalf. 

Can Bitcoin Suddenly Crash? 

In the same way that many other cryptocurrencies can fall, Bitcoin can suddenly crash as well because it isn’t linked to any real-world assets. With that being said, any cryptocurrency’s price could theoretically drop to zero, as it did with Terra Luna. But a lot of significant changes would need to take place for something as well-known and valued as Bitcoin to lose so much of its value. Even though certain factors could make Bitcoin’s value go down over time, it would require massive changes in the economy and government, as well as the destruction of the entire Bitcoin network, for Bitcoin’s value to crash to zero. One should keep in mind that  Bitcoin, just like any other commodity, has its value derived from what people are willing to pay for it, which can fluctuate as a result of different factors. Essentially, just like gold, silver, oil or lithium,  as long as Bitcoin continues to serve a purpose and has value, people will be willing to pay for it and it will maintain value. 

Is Bitcoin Illegal? 

Despite Bitcoin being the oldest and most well-known cryptocurrency in the world since it was created in 2008. Despite being the oldest cryptocurrency, t is still very young, as is the cryptocurrency industry as a whole. Bitcoin can be used to conduct cross-border transactions between any account holders globally without a third-party, such as a bank. This has led certain governments to flag the potential currency risks involved with Bitcoin and other cryptocurrencies. Some governments are afraid of crypto and its implications, that is the reason that some countries such as China and Egypt have made it illegal to trade with Bitcoin. 

Frequently Asked Questions About Bitcoin: