An Overview of How to Buy Bitcoin

By October 28, 2020Bitcoin Business
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Bitcoin

Bitcoin is both one of the most valuable and one of the most volatile individual assets on the market. At the time of writing a single bitcoin was valued at more than $13,650, up from a low of $5,000 six months earlier and down from its heights of nearly $20,000. For investors interested in this borderline unique asset, either as a currency or as an investment, bitcoins can be bought online, at an ATM and even in person. Here’s what you need to know about each of these options.

But first, a quick introduction to Bitcoin. It’s a virtual money or cryptocurrency that is created and exchanged independent of the banking system or government authority. Bitcoins are made through a process called “mining” that involves the use of computers to solve extremely difficult mathematical equations. Once the problem has been solved, the computer generates a specific number sequence that’s assigned to the bitcoin. Bitcoins get their value – which can vary drastically – based on supply and demand.

What Is Buying a Bitcoin?

A bitcoin is built on a database that uses a coding format called “blockchain.” Blockchain databases allow the user to store information in a secure manner that supports both public and private information. Put in other words, one of the unusual features of a blockchain database is that third parties can see the information stored in the database without being able to change that data.

A single bitcoin is known as a token. This token is not a physical asset. Rather, the Bitcoin database has recorded that a specific number of tokens exist. When you buy a token, the database then adds an entry to indicate that you now own this given token. So, for example, if you were to buy token ABC123, the database would then update so its record read:

  • Token ABC123 Owned by Previous Owner

  • Token ABC123 Previous Owner Transfers to New Owner

  • Token ABC123 Owned by New Owner

Everyone in the world can see who owns Token ABC123, but the Bitcoin database will only allow the token’s current owner to transfer it (again, by editing the ownership information). When you buy a bitcoin token what you receive is that token’s private key. This is an alphanumeric string that allows you to access and edit the ownership of a bitcoin token. Like cash, whoever holds the private key of a bitcoin token functionally holds the token itself. If the key is stolen, you can’t stop someone from spending that token any more than you could stop them from spending a stolen $100 bill.

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