When a trader decides to invest in crypto, the first choice is usually Bitcoin as it is the most commonly used. Yet, to feel confident about such a purchase, one needs to have at least a rough idea of how this asset works. We will explain that to you in simple words in our guide.
To start with, Bitcoin is a digital currency, it does not have any paper or metal counterparts. It is used in electronic form for executing online transactions mainly. In practice, such a coin is a system of symbols, which is included in the general network. It operates on a person-to-person basis. In other words, users can sell and buy this crypto directly without any intermediaries or regulatory bodies.
Another important fact ― this network is created using blockchain. To explain the technology of Bitcoin for dummies, one can compare it with a ledger, where each record is a block. Every new entry in this chain is connected with a previous one with the help of crypto ciphers, which is why this asset is called a cryptocurrency. The system is decentralized, and every owner of such digital coins has a copy of a general ledger.
It is accessible to everyone and at any time. Its code is published publicly. Its participants keep on mining new coins via complex calculations on computers, but the overall number of such assets is limited to 21 million so that there is no risk of inflation.
Also, it is a well-known fact that this crypto constantly grows in price. As of 2021, its price is almost $70,000. For comparison, its initial price in July 2010 was around $0,08. Obviously, investors expect it to keep on increasing in value in the future.
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Here are 7 major pros of this asset:
- All information about an owner is confidential and untraceable. However, today, if you want to register on a legitimate crypto exchange, you will have to disclose and confirm your identity.
- The currency is decentralized and cannot be issued or expropriated by any governmental bodies or central banks.
- It is 100% protected from hacking and breaking.
- No inflation risks.
- You can use it to legally pay for diversified goods. And the list of countries, which plan to legalize this crypto, is constantly extended.
- Experienced traders often invest in it to diversify their portfolios, along with stocks and bonds.
- You can make decent profits from its price fluctuations (which are rather frequent).
So, where to buy it? We recommend the Binance and Coinbase exchanges as they offer a huge selection of coins, low trading fees, easy-to-use functionality, and advanced protection of your funds.
In sum, if you decide to extend your portfolio with crypto, Bitcoin is one of the safest choices as it possesses high liquidity and outstanding potential for further growth in price.