Bitcoin was the first fully-established cryptocurrency out of the hundreds available today, developed by Japanese programmer Satoshi Nakamoto in 2009. This peer-to-peer digital currency is decentralised from monetary authorities and underpinned by blockchain, allowing for anonymous, untaxable transactions.
Today, bitcoin is traded both as a currency and as a commodity, due to its sharp rise in value since 2017. In 2011, you could buy one BTC for as little as ten cents. Now, you’re looking at thousands of dollars per bitcoin.
We have sourced and tested the best and most reliable cryptocurrency exchanges where you can invest in bitcoin today to help you make the best choice for your needs
Back in 2009, a Japanese programmer that goes by the alias Satoshi Nakamoto developed the world’s first cryptocurrency, bitcoin. Today, bitcoin can be used to purchase and sell items and services. An increasing number of companies are accepting bitcoin as a payment method. As with all other cryptocurrencies, bitcoin doesn’t exist as a physical currency. If you choose to invest in bitcoin, you won’t physically own any bitcoin coins or notes. Bitcoins merely exist in digital format.
Unlike national or "fiat" currencies such as the Great British pound or the U.S. dollar, which are overseen by a central bank such as the Bank of England or the US Federal Reserve, bitcoin is decentralised and not regulated by any country or state. Monetary policy controls such as quantitative easing aren’t in play. This means that any fluctuations in the value of bitcoin and price, are merely due to supply and demand.
Bitcoin has proven to be particularly popular with individuals that don’t like the level of control governments and banks have over their finances. With an open bitcoin network maintained only by volunteer coders, the legitimacy and transparency of each bitcoin transaction is maintained by the public ledger underpinned by blockchain technology.
The owners of each bitcoin within the network are 100% anonymous. There are no account names, numbers or National Insurance numbers to identify the owner of each bitcoin. Its anonymity is one of the main attractions to cryptocurrency investors. Bitcoin utilises blockchain technology and cryptography to link bitcoin buyers and sellers. Each transaction made is a transfer of value between e-wallets and is recorded on the blockchain. E-wallets hold a private key used to digitally sign each transaction, providing unmistakable proof that they have been received by the e-wallet’s owner.
At the time of writing, some 16 million bitcoins are in existence. The developers of bitcoin capped the number of bitcoins allowed to be in use at 21 million, leaving just five million left available to be mined. Bitcoin mining is the process of creating each new bitcoin for circulation. The process of mining depends on high-powered computers being able to resolve difficult mathematical problems that become progressively harder. Each time a problem is cracked, one block of the bitcoin is processed and the successful miner receives a brand-new bitcoin.
In the eyes of some cryptocurrency investors, bitcoin is a digital currency that can do no wrong. However, there’s no doubt that bitcoin does have its flaws and limitations, which we will explore below.
- It is the most free and flexible form of payment. You can send and receive bitcoin anywhere in the world 24/7.
- As a decentralised cryptocurrency, bitcoin owners are in complete control of their finances.
- Due to the anonymity and protection of bitcoin user data, bitcoin guards against the threat of identity theft.
- Each completed bitcoin transaction is recorded on the blockchain for 100% transparency, without disclosing personal data regarding the buyer or seller.
- Bitcoin payment fees are either dirt cheap or non-existent, benefiting the merchants as well as bitcoin owners.
- The number of merchants that accept bitcoin is relatively small in comparison with fiat currencies.
- Global awareness of bitcoin is rising but is still not widespread.
- The value of bitcoin is volatile, making it a high-risk investment for any portfolio.
- Some governments have taken a dim view of bitcoin and opted to ban its use in any shape or form within their nation’s borders - notably China.
Did you know? Just 12 months after Satoshi Nakamoto developed bitcoin, someone bought two takeaway pizzas for BTC 10,000 to test the system. Had that individual held on to those 10,000 bitcoins, they would be worth over £60 million in 2018!
As we’ve already noted, BTC is currently a highly volatile currency to trade on cryptocurrency exchanges. Anyone considering buying bitcoin must accept that they could potentially lose their initial investment. Cryptocurrency experts and financial economists disagree on bitcoin’s long-term future. The former believes the value of bitcoin will continue to soar as more governments and businesses adopt the currency as legal tender. However, some economists have moved to label bitcoin a ‘bubble’. A bubble is a commodity whose true value is entirely unknown to investors, leading to the threat of its collapse in the market.
It’s difficult to say whether bitcoin’s price is going to rise in the coming months, but it’s certainly an investment that could pay huge dividends if the market continues to mature. We have also seen more and more interest in bitcoin in the past few years, which makes us rather optimistic.
Although bitcoin remains the flagship cryptocurrency on the Bitcoin exchanges, there are a number of similar crypto coins that investors may want to consider as an alternative, due to their cheaper values:
A fall-out in the community of bitcoin miners led to a small percentage of miners leaving the network and forming a new cryptocurrency called Bitcoin Cash.
Created as a fork from bitcoin, Litecoin’s unique selling point is its ability to complete transactions in less than two-and-a-half minutes, compared with ten minutes for bitcoin. Litecoin is already available to trade on mainstream cryptocurrency exchanges.
Like bitcoin, Dash was created as a secure digital payment method for goods and services. It is alleged that Dash is quicker and cheaper than bitcoin.
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The easiest way to buy Bitcoin online is via exchange sites such as Coinbase or escrow services like LocalBitcoins. The exchanges mentioned will explain how to buy cryptocurrency in a simple manner.
You need an internet connection to be able to use these services. Once you’ve purchased Bitcoin, however, you can store coins in an offline wallet for added security.
You can do this by storing the private keys which relate to the coins on either a paper wallet or a hardware wallet.
If you’re looking to buy large quantities of Bitcoin, you can use OTC (Over the Counter) exchanges. OTCs specialize in fulfilling large orders and, as such, can usually execute your order a lot faster than traditional exchanges can.
With OTC exchanges, you can essentially buy Bitcoin offline because you either phone up or more likely visit the offices in person.
As we've previously mentioned, bitcoin is not controlled by any individual or authority. As a decentralised cryptocurrency, bitcoin is essentially controlled by those that own it or spend it.
The identity of both bitcoin buyers and sellers remains totally anonymous, although there is a digital audit trail of each transaction on the public ledger within the blockchain network.
Although bitcoin is not considered a fiat currency, there are tax liabilities that accrue in a variety of jurisdictions worldwide. These can derive from personal income, capital gains or sales of cryptocurrency. You should check your local legislation for this, as each country is different.
It’s not possible to lose any bitcoins stored securely in your e-wallet. However, if you happen to lose access to your e-wallet, the bitcoins within the wallet will be taken out of circulation as no-one else will have the private key needed to gain access to the lost wallet.
In some countries, the use of bitcoin has been legalised. For instance, Japan passed a 2017 bill in government which recognised bitcoin as legal tender. However, stories of legalisation are few and far between at present, with some nations such as Russia and China taking a dim view of the cryptocurrency, prohibiting its use within its borders.
Supply and demand is the primary influencer of bitcoin’s price. As demand rises, the price does too. When demand drops, the price falls simultaneously. Once the market cap of 21 million bitcoins is reached, the impact of supply and demand will be even more influential to the value of bitcoin.