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What is Bitcoin and How does it work?
What is Bitcoin and How does it work? Bitcoin is the first cryptocurrency launched in 2009, enable user-to-user transactions without a bank or administrator. Bitcoin is the godfather of cryptocurrencies launched by Satoshi Nakamoto, who has been a mystery to date.
Bitcoin is not controlled by any central authority, and transactions and bitcoin cash flows are handled through a blockchain network. Although bitcoin is the first cryptocurrency to launch, hundreds of other digital currencies have sprung since its inception. The cryptos that have surged are often called “altcoins” and are meant to be employed as an alternative domain registry.
Bitcoin is the godfather of digital currencies since it was the first digital currency to launch. It is an open-source code, which means that anyone can download it. Every 10 minutes, there are 6.25 new bitcoins mines and circulated, and there are 21 million bitcoins that can be mines no more can be issued. The available bitcoins include the 17 million currently in circulation, and based bitcoin halving the last will be mined in 2140.
Most importantly, bitcoin is a decentralized currency, which means there is no central authority that controls its. Transactions can occur between users without the need for intermediaries, and the transactions will be recorded and confirmed by computers. Verification of the transactions is through bitcoin mi(computers).
Interestingly Bitcoin can be used as a commodity and a currency. Bitcoin has grown in popularity, and there are Bitcoin ATMs nowadays across the globe, and there are almost 2000 ATMs in the US. Equally, there are more than 23,000 bitcoin wallet address that holds over one million dollars' worth of bitcoin.
If you are looking to learn more check What is Crypto, Buy Bitcoin, or Local Bitcoin.
Traditional money system vs Bitcoin network
The traditional money system operates under the control of a centralized system, which means that a central bank or government will be responsible for its administration. When you need to send or receive money such as EUR or USD, you will need intermediaries like payment institutions and banks to complete the transaction and manage them. Mostly it is the central bank that vouches for the value of the fiat currency and trust in the conventional money system is vested on currency supply issued by the central bank.
The bitcoin network is decentralized, which implies that there is no central authority that controls the digital currency. Sending and receiving bitcoin doesn't require intermediaries, and transactions are confirmed by computers and recorded in blockchains. The process of confirmation of bitcoin transactions by computers is known as bitcoin mining.
Banks are not involved, and since there are no intermediaries, it is faster to send money on the bitcoin network than the conventional system. Typically it will take one minute to an hour to transact on bitcoin network compared to the three to seven days required to confirm banking transactions.
Check TOP 3 best and trusted exchanges to trade and buy Bitcoin
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Binance boasts around 12 million daily users and 26 million active monthly visits
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Its trading fees range from 0.1%-0.2%
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There is a Binance OTC trading option that allows trading of large crypto block trades.
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The exchange processes between 10 billion and 12 billion trades each day.
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Supports over 190 cryptocurrencies
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It is supported in more than 180 countries
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Interestingly when traders use the Binance native token (BNB), they enjoy a 25% discount on trading fees.
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The exchange boasts of more than 2.2 million daily users
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Trading fees on this platform are among the lowest in the industry, range from 0.42%-0.1%.
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OTC Kraken accommodates the execution of high volume trades of more than $100,000.
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Each day it processes between 100 million and 300 million trades
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Over 30 cryptos support a wide range of cryptocurrencies
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The exchange is available for traders from more than 180 countries globally
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Kraken is among the biggest bitcoin exchanges in terms of liquidity and euro volume that offers an advanced trading platform for crypto traders with OTC options and margin trading
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Highly TRUSTED
Former Okex trading platform CTO, Changpeng Zhao founded Binance in 2017 following a successful ICO that raised around $15 million. By January 2018, the exchange had grown to be the largest globally in terms of trust and trading volume. Currently, the exchange boasts around 12 million daily active users, with more than 26 million visits each month.
The exchange is supported in more than 180 countries, and it supports close to 180 cryptocurrencies. Binance has partnered with Simplex to offer brokerage services with the service helping to buy 17 different cryptos using accredit cards.
Investors who had invested in the Binance ICO received BNB whose value grew to almost $15 from the ICO price of $0.1. BNB's all-time high recorded is $39.57, and in return, the token has brought investors returns of over 16000%-39000%.
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Low trading fees ranging from 0.1% to 2%
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Customers using Binance's native token (BNB) can get 25% discounts on trading fees
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Enjoys large trading volumes of between 10 billion and 12 billion every day
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Trustworthy exchange with more than 20 million users
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Traders receive staking rewards for more than 23 different cryptocurrencies
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A wide range of cryptocurrencies (180+) supported
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Binance OTC portal allows high volume crypto block trades
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Holds more than 320,000 users bitcoins
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Its SAFU funds where it deposits 10% of trading profits offers protection for users should a hack occur.
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Credit/debit card buying of bitcoin is supported as well as Sepa transfers at competitive rates.
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Does not support fiat deposits and withdrawals which is challenging for novice traders
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Doesn’t support stock, forex and commodities trading
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Since it is a fast-growing firm, there are potential risks as anything could happen.
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The exchange was hacked, and 40 million worth of cryptocurrency lost. But it covered 100% damage to users from the SAFU funds.
Highly TRUSTED
Huobi Global is a centralized crypto exchange that focuses on Asian markets. It was established in 2013 in China, and in 2014, it raised $10 million through Sequoia Capital in a venture exchange. Huobi has partner exchanges and subsidiaries in 12 other countries, and some of the partner exchanges include Huobi US and Huobi Korea.
The company currently has more than 1,300 employees, and it boasts around 5 million users. Its Founder Leon Li is a former Oracle computer engineer before establishing Huobi. The exchange processes between 2-5 billion trades every day. Its native token, Huobi Token (HT), has significantly grown from the ICO price of $1.52 to over $4.
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The exchange supports buying of bitcoin through debit or credit card
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Offers a variety of cryptocurrencies of more than 235 to select from
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Boast over 5 million users
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Holds more than 420,000 users bitcoin
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Daily trading volume ranges from 2-5 billion
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Supported in more than 130 countries
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Has strong liquidity for most cryptocurrencies
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Supports margin trading with leverage of 5x
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Offers margin funding where users can lend crypto assets through the Huobi Global platform and earn interest on the loans
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Huobi platform is supported in mobile devices both Android and iOS
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Doesn’t offer staking rewards
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Complex KYC verification process
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Shortage of margin trading crypt currencies
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Sometimes there are restrictions on fiat currencies
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Trading fees are high compare to the industry average
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They charge 8% fee when purchasing bitcoin using a debit card
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Doesn't support the purchase of cryptocurrency through wire transfer
Highly TRUSTED
Kraken is currently among the top cryptocexchangs in the world. The exchange launched in 2013 in San Francisco after two years of development. Today the exchange boasts of 2.2 million users from over 180 countries. Kraken is an incredible platform where users can buy, sell, and trade cryptocurrencies. Trades on the exchange are held in CAD, USD, GBP, EUR, and Japanese yen. Deposits can be made through Swift, SEPA, and bank wire.
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Offers high liquidity and buy limits
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Supported in more than 180 countries
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Supports more than 34 cryptocurrencies
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Daily trades range from 100-300 million
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Kraken follows strict security protocols
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Traders can stake Tezos, EUR, Bitcoin, and Dollar
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Offers OTC portal with one-on-one service
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Kraken offers dark pool where traders place large orders without revealing interest to others
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Deposit and withdrawals can be made through SWIFT, SEPA, domestic and wire transfers
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SEPA deposits for fiat currencies are free which is convenient for those in SEPA regions
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Kraken doesn’t have a native token
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Supports very few cryptocurrencies
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Trading fees are relatively high compared to the industry average
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Limited to two languages English and Japanese
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Cryptocurrency Risks
Cryptocurrencies Are Highly Volatile
Cyber Thieves Target Crypto Exchange And Users’ Wallets
Some Providers Charge Unrealistic Fees
Cryptocurrency prices tend to fluctuate considerably depending on market conditions. The reason behind the volatility of crypto is that it is the market participants that determine the asset's value through transactions. It means that the price can rise or drop suddenly, which implies that when investor sentiment is low, the trading activity might plunge, resulting in an abrupt collapse of price. Bitcoin has previously seen the price drop by more than $1000 in an hour.
Since the bitcoin network is based on the internet, the industry has become a target for cyber thieves who target exchanges and users' wallets. There have been a series of hacks in recent times where billions of crypto have been lost. Therefore, it is essential to use 2-nd authentications like Google authentication, email, and SMS to keep private and account access keys safe. The best way of enhancing safety of the keys is having a second device that is always offline where the keys can be stored.
When buying cryptocurrency, it is important to be wary of small providers that might be charging exorbitant fees to buy bitcoin. Some rogue traders want to take advantage of new customers by selling bitcoin to 50% high compared to the average market price. Therefore it is essential to be on the lookout for such elements and always check on the fees that a provider charges before purchasing bitcoin.