Introduction to Bitcoin PDF

Lesson 1: Introduction to Bitcoin What is Bitcoin? Bitcoin is a decentralized digital currency that operates without the need for a central authority or intermediary, like a bank. It was introduced in 2009 by an anonymous entity known as Satoshi Nakamoto. Bitcoin relies on...

Lesson 1: Introduction to Bitcoin What is Bitcoin? Bitcoin is a decentralized digital currency that operates without the need for a central authority or intermediary, like a bank. It was introduced in 2009 by an anonymous entity known as Satoshi Nakamoto. Bitcoin relies on a technology called blockchain, which is a transparent and immutable ledger of transactions. Key concepts: ○ Decentralization: No single entity controls Bitcoin. ○ Peer-to-peer network: Transactions occur directly between users. How Bitcoin Works 1. Blockchain: ○ A blockchain is a distributed ledger where transactions are grouped into blocks and linked chronologically. ○ Each block contains a list of verified transactions and a reference to the previous block. 2. Mining: ○ Mining is the process by which transactions are validated and new Bitcoins are created. ○ Miners use computational power to solve cryptographic puzzles, adding blocks to the blockchain. ○ Rewards are given in Bitcoin to incentivize this process. 3. Bitcoin Wallets: ○ Hot Wallets: Online wallets connected to the internet (e.g., mobile apps). ○ Cold Wallets: Offline wallets, such as hardware wallets or paper wallets. 4. Keys: ○ Public Key: Shared with others to receive Bitcoin. ○ Private Key: Kept secret; used to access and send Bitcoin. Benefits and Risks of Bitcoin Benefits: ○ Transparency: Transactions are publicly recorded. ○ Security: Strong encryption protects the network. ○ Limited Supply: Only 21 million Bitcoins can ever exist, reducing the risk of inflation. ○ Borderless: Enables global transactions without intermediaries. Risks: ○ Volatility: Bitcoin's value can fluctuate significantly. ○ Scams: Users may fall victim to fraud or phishing. ○ Regulatory Uncertainty: Governments may impose restrictions. Lesson 2: Using Bitcoin Buying and Selling Bitcoin 1. Where to Buy Bitcoin: ○ Cryptocurrency exchanges (e.g., Coinbase, Binance). ○ Peer-to-peer platforms. 2. Payment Methods: ○ Bank transfers. ○ Credit/debit cards. ○ Other cryptocurrencies. 3. Storing Bitcoin: ○ Use wallets to keep your Bitcoin secure (Hot Wallet-Online / Cold Wallet-Offline) ○ Hardware wallets are considered the safest. Bitcoin Transactions 1. Sending and Receiving Bitcoin: ○ To send Bitcoin, you need the recipient's public key. ○ Transactions are broadcast to the network for verification. 2. Transaction Fees: ○ Users pay small fees to miners for processing transactions. 3. Confirmations: ○ A transaction is considered complete after a certain number of confirmations (blocks added to the chain after the transaction). Real-World Applications of Bitcoin Online purchases for goods and services. Investment: Many see Bitcoin as a "digital gold." Remittances: Sending money across borders with lower fees. Hedge against inflation in countries with unstable currencies.