Before we start talking about Bitcoin, let us first understand what a cryptocurrency is.
As the name suggests, it is virtual cash exchanged over the internet.
So how safe is it?
It uses cryptography to secure and verify transactions as well as to control the creation of new units or in crypto parlance, mint coin, of a particular cryptocurrency. Essentially, cryptocurrencies are limited entries in a database that no one can change unless specific conditions are fulfilled.
Bitcoin is a part of the cryptocurrency universe. In fact, truth be told, Bitcoin is the universe. First appearing in 2009, after Satoshi Nakamoto, created it, Bitcoin has since been spreading its wings, at a rapid pace.
It started with a valuation of less than 1 cent. Bitcoin is the first of cryptocurrencies had the novelty factor and in 2017, touched a high of $20000.
However, the euphoria did not last for long, and the second quarter if 2017, saw Bitcoin crashing, losing 75% of its valuation. It is currently being traded at a shade below $6000.
In spite, of its fall what makes Bitcoin the darling of the cryptocurrencies?
The primary reason for this being, Bitcoin covers more than 50% in the valuation of the entire cryptocurrency universe. Also, despite the crash, Bitcoin has shown a 4000% return from the time of its inception. That is an incredible carrot to be hanged in front of the ambitious investor.
However, certain precautions need to be taken whilst dealing with Bitcoin or any other cryptocurrency.
Cryptocurrencies are based on blockchain technology, which suggests that every transaction has a ledger attached to it. Also, the transactions are made through wallets. It is these wallets which become the target of hackers. These wallets, which are connected to the internet and can be easily accessed, are called hot wallets.
The cold ones are not connected to the world wide web and hence safe from any external machinations.
Some examples of cold wallets are:
And the ubiquitous chit of paper.
The last option is the safest. However, for cold wallets, the responsibility absolutely lies with the owner, unlike the hot wallets which are taken care of by the exchanges itself.
Where to find Bitcoins?
Quite a few options here:
Crypto ATMs, though still at a nascent stage, the idea is catching up
Exchanges which have to government-approved
Bitcoin is the brightest star in the crypto constellation and would remain so for some time to come.