You've probably heard about Bitcoin before, but do you know what it is or how it works? Many people may have started investing in Bitcoin without understanding the technology behind it or its origin. There’s a fascinating world behind what’s now known as “digital gold.” That’s why, in this article from Hapi, we’ll explain, in simple terms, five key points to understanding Bitcoin and blockchain.

1. The basics of Bitcoin: What is it and how does it work?

Bitcoin is the first cryptocurrency. It is a decentralized digital currency that is not regulated by a central authority like a central bank. Bitcoin gives full control to users instead of financial institutions.

Over the years, Bitcoin has inspired thousands of new types of cryptocurrencies based on its technology. It has also become popular as an investment class due to the strong rises in its price.

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The Blockchain and Bitcoin mining

All Bitcoin transactions are recorded in what is known as blockchain.

The blockchain is a public ledger of all Bitcoin transactions. At this point, other Bitcoin users, referred to as miners, verify each and every transaction on the blockchain. This makes the transactions very difficult to reverse or counterfeit.

The owners are anonymous. That is, instead of using national identity documents, Bitcoin connects buyers and sellers through encryption keys. Additionally, it is not issued by a central authority like dollars or soles. In reality, Bitcoin is mined by powerful computers connected to the internet.

2. How did the technology behind Bitcoin come about?

Bitcoin was invented in 2009 by a person (or group) who went by the name Satoshi Nakamoto. The stated goal was to create a new electronic cash system that would be completely decentralized without a server or central authority.

After cultivating the concept and technology, in 2011, Nakamoto handed over the source code and domains to other members of the Bitcoin community and later disappeared. The protocol established by Satoshi Nakamoto sets a limit of 21 million bitcoins that can ever be mined (nearly 19 million have been mined so far), making it a limited supply like gold and other precious metals.

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3. What is it used for today?

• Bitcoin as an alternative investment: In the U.S., people generally use Bitcoin as an alternative investment, helping to diversify a portfolio beyond stocks and bonds. For some, Bitcoin is a store of value, similar to digital gold, because its fixed supply makes it scarce.
• Bitcoin's utility as a payment method: You can also use Bitcoin to make purchases. Bitcoin is an easy and low-cost way to transfer value due to its digital nature and often low transaction fees.
• Its role in inflationary economies: In certain countries, particularly those with less stable currencies, people sometimes use cryptocurrencies instead of their local currency. Bitcoin provides an opportunity for people to store value without relying on government-backed currency. It gives people the option to protect themselves in worst-case scenarios. We’re already seeing people in countries like Venezuela, Argentina, and Zimbabwe (countries with very high inflation) where Bitcoin is gaining significant traction.

4. Things to consider before investing

Is investing in Bitcoin legal?

Currently, Bitcoin is legal in the U.S., Japan, the UK, and most other developed countries. However, it is essential to review Bitcoin laws in specific countries concerning tax regulations.

How much to invest in Bitcoin?

Although Bitcoin's price is volatile, it’s worth considering an investment in this cryptocurrency. The key is to maintain a balanced and diversified portfolio. It’s also important to understand what you are investing in and have a clear investment strategy for Bitcoin based on your risk profile.

5. How to invest in this crypto asset in 2022?

A simple and straightforward option to invest in Bitcoin is to open an account with an exchange that offers that option. If you’re in Latin America, the processes to invest can be confusing and unreliable.

That’s why it’s important to choose an app for investing in cryptocurrencies built on a platform with high standards of quality and security, where crypto assets or other securities are available 24 hours a day, and which offers you various cryptocurrency options like Bitcoin, Ethereum, Dogecoin, among others.

But most importantly, it should be backed by recognized institutions like Y Combinator (the leading accelerator in Silicon Valley) and Apex Crypto LLC. Try Hapi here and find Bitcoin for your portfolio!