What Is Bitcoin? (For Beginners)
Bitcoin has become an increasingly popular asset over recent years and there are now more ways than ever to make money with it.
In this article, we'll discuss how to get started with using bitcoin as an investment vehicle and give you tips on how to maximize your profits in a simple and easy-to-understand manner. So, grab a cup of your favorite beverage, sit back and let's explore the various ways to make money with bitcoin.
What is Bitcoin?
Before you can start to make money with bitcoin, it's essential that you become familiar with its basic definition and purpose. So, what is bitcoin? Bitcoin (or BTC) is a decentralized digital currency that was created in 2009 by an anonymous computer programmer (or group of programmers) under the pseudonym Satoshi Nakamoto. All bitcoin transactions take place directly between users without any intermediaries, be it banks or governments.
What Are the Advantages of Bitcoin?
There are many reasons why most crypto investors choose to make money with bitcoin rather than with other cryptocurrencies. Some of the most common reasons are:
Security and Anonymity
One of bitcoin's main strengths lies in its security and anonymity. It employs powerful cryptography which makes it almost impossible for third parties to access user data or interfere with transactions.
Fast Transactions
With traditional payment methods such as bank transfers, transactions can often take days or even weeks to complete due to long processing times. In contrast, Bitcoin offers much faster transaction speeds averaging just 10 minutes per transaction.
Low Transaction Fees
Transaction fees associated with traditional banking institutions can often be costly for users, eating away at their profits over time. On the other hand, Bitcoin charges a low fee per transaction (approximately 0–1% depending on your wallet).
Decentralization
Unlike most traditional currencies that are controlled by a single entity (i.e., governments), bitcoin is decentralized meaning no single person or organization holds control over its value or direction. It is, instead, managed by a vast network of computers around the globe.
What are the Disadvantages of Bitcoin?
If you choose to make money with bitcoin, it is extremely important to also be aware of its disadvantages or the risks of investing in it. The most common disadvantages of bitcoin are:
Volatility
Bitcoin is highly volatile compared to traditional currencies making it much more unpredictable in terms of price movements. This can make it difficult for investors to forecast future returns and increase the risk associated with their investment decisions.
Limited Scalability
The number of transactions that the network can process per second is currently limited due to its design — meaning a backlog occurs when demand is high. This slows down transaction speeds as well as drives up costs due to increased competition for slots on the blockchain.
Excessive Energy Consumption
The proof-of-work consensus algorithm powering cryptocurrencies such as bitcoin requires an excessive amount of energy in order for miners to successfully create new blocks on their respective networks.
Lack Of Regulation
Since bitcoin operates outside of banking regulations, it can be difficult for governments and financial institutions to monitor or understand how transactions are made using cryptocurrencies like bitcoin. This lack of regulation may leave some users feeling uncomfortable as unregulated markets tend to carry higher levels of risk than regulated ones do.
Most Common Ways to Make Money With Bitcoin
Mining
Mining is the process of verifying transactions on the Bitcoin blockchain, which in turn rewards miners with newly minted bitcoins. Mining requires specialized hardware and consumes lots of electricity, but offers rewards higher than many other investment options available today — as long as your equipment remains up-to-date and costs remain manageable.
Trading
Trading is another popular method for generating an income using bitcoin. You can buy low, then sell high in order to capitalize on market fluctuations within any given trading window — or even automate your trades by setting predefined parameters which can be executed when certain conditions are met. This approach carries significant risks however, so make sure you’ve done your research first before committing any capital into trading activities.
Buy, Hold, and Sell
Buying and holding bitcoin is a popular investment strategy for those who believe in the long-term potential of the asset. By investing in bitcoin when prices are low, you can then hold on to it until the price increases - at which point you can sell or retain it.
This approach differs from short-term investments as there are no fast profits to be made. Rather, you may need to keep them for a while before seeing any return. That said, it’s important to know when the time is right to sell as waiting for too long could lead to missed opportunities or even losses.
How to use Bitcoin on Bake
Depending on your investing approach, financial situation, level of expertise or risk tolerance, these are the two Bake services that we recommend you to use to make money with bitcoin:
YieldVault
What is YieldVault?
YieldVault is an easy-to-use tool that enables users to effortlessly generate crypto rewards with just a few clicks, while also experiencing the benefits of greater transparency. For more information, click here.
Who is YieldVault for?
YieldVault is highly-recommended for beginners or intermediate users.
How to use YieldVault to make money with bitcoin?
Follow these simple steps to generate rewards on your bitcoin at around 5.27% APY.
YieldVault is only available on the Bake mobile app. To download the Bake mobile app, click here. For information on the advantages of using a mobile app, click here.
Liquidity Mining
What is Liquidity Mining?
Our Liquidity Mining service allows you to generate rewards on two types of cryptocurrencies in an easy, secure and transparent way. For more information, click here.
Who is our Liquidity Mining service for?
Our Liquidity Mining service is highly-recommended for advanced users.
How to use our Liquidity Mining service to make money with bitcoin?
Follow these simple steps to generate liquidity mining rewards on your bitcoin and Defichain (DFI) at around 11.56% APR.
1. Click here to go to our Liquidity mining page
2. Choose the BTC-DFI cryptocurrency pair.
3. Click “ADD LIQUIDITY” to allocate your bitcoin. If you don’t have any DFI, don’t worry. A portion of your bitcoin will be automatically converted into DFI and in the required amount.
And that’s it! For more information about our services, click here. Also, if you want to use our services to make money with bitcoin but haven’t signed up for a Bake account yet, click here.