What Is Bitcoin and How Does It Work?

Bitcoin is a digital currency that allows peer to peer transactions, although it has been used as an investment vehicle in the more recent times. You can trade a Bitcoin CFD with a broker, this way you won’t be needing a wallet, and you can short it.

We define Bitcoin in the world of crypto along with the advantages, how mining works and what the future holds for Bitcoin.

What Is Bitcoin?

Bitcoin is a digital currency created in January of 2009 by a person or group of people under the pseudonym of Satoshi Nakamoto, right after the economic crisis of that year. 

Bitcoin is not issued by a central bank, government or company but it’s produced based on a blockchain technology, a decentralized public ledger enforced by thousands of computers, maintained by people who “lend” their machines’ ability to create bitcoins and record all transactions made. 

Bitcoin was established to fulfill the need of transferring cash online without an intermediary, using only peer to peer technology. 

Since the cryptocurrency has become very popular among traders, many see the asset as an investment instrument more than an actual currency for peer to peer transactions, although that was the intention when it was created.

How to Invest in Bitcoin?

To invest in Bitcoin, you need to set-up a digital wallet to buy the digital coin online and store it. Furthermore it’s not possible to short sell Bitcoins through crypto or bitcoin exchanges.

However, when you trade Bitcoin at Baxia Markets, you’re actually trading a Bitcoin CFD, a derivative product of the underlying asset that you can make a profit from by speculating on the change in the underlying asset price. At Baxia Markets, Bitcoin is quoted against the major currencies as US Dollar, Euro and other cryptocurrencies as well.  This means that when you trade the BTCUSD pair, for example, you’re buying Bitcoin and you’re selling USD.

what is bitcoin demonstrated with coins on table

What Are the Advantages of Trading Bitcoin CFD?

The main advantages of trading Bitcoin CFD is to be able to open a buy or sell position on Bitcoin. Here, you don’t have to actually own a Bitcoin to benefit from a potential bear or bull market. Moreover, you’ll benefit from the leverage available. This allows you to open a larger position with a smaller deposit. You won’t need thousands of dollars to be able to make profits with Bitcoin. 

Open an account with us and start trading Bitcoin today. There is no commission.

What Is Bitcoin Mining?

Bitcoin was not the first digital currency but it was the first to use a blockchain to secure and record the transactions. 

New Bitcoin is created by a process known as “mining.” As transactions occur, they are handled by the miners who package them into blocks. This helps to keep the network running, and as compensation for using their computing power, they are awarded Bitcoin.

At the time of its launch, the reward was 50 Bitcoin per block processed. However, the award is cut in half every 210,000 blocks mined. Users also do not have to worry about the Bitcoin price getting diluted by too many coins being released on the market. Not only does it take time and effort to mine Bitcoin, the software has a limit of 21,000,000 coins. That means that the maximum number of Bitcoin that can exist is capped at 21,000,000.

Bitcoin has managed to create a global community and give birth to an entirely new industry of millions of enthusiasts who create, invest in, trade and use Bitcoin and other cryptocurrencies in their everyday lives. 

Bitcoin has not been premined, meaning that no coins have been mined and/or distributed between the founders before it became available to the public. However, during the first few years of BTC’s existence, the competition between miners was relatively low, allowing the earliest network participants to accumulate significant amounts of coins via regular mining: Satoshi Nakamoto alone is believed to own over a million Bitcoin.

What Is the Future of Bitcoin?

Many crypto enthusiasts and economists believe that high-scale adoption of the top currency will lead us to a new modern financial world where transaction amounts will be denominated in smaller units.

The top crypto is considered a store of value, like gold, for many rather than a currency. This idea of the first cryptocurrency as a store of value, instead of a payment method, means that many people buy the crypto and hold onto it long-term rather than spending it on items like you would typically spend a dollar treating it as digital gold.

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We hope that the information provided in this article was interesting to you and mostly that you can use this information to improve your trading skills. We strive to present this information in a way that is easy for you to digest. If you enjoyed this article make sure to visit our resources page to find more information that can help you become a better trader and test those strategies on a trading account.

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