Introduction to Bitcoin
Bitcoin (BTC) is the first, and most widely accepted cryptocurrency used to facilitate transactions securely between individuals without the need for an intermediary institution.
Simply put, Bitcoin is money — digital money you can use to make payments, exchange for other currencies, and also use as a store of value. It serves virtually all of the functions of fiat money, except that it is not issued by the government. It is an open network of transactions that allows anyone with the internet to use or contribute to its operation.
This article will explain how and why it was created, and how you can acquire it for use on VIBRA.
To begin, what exactly is cryptocurrency?
Cryptocurrencies are digital currencies created by individuals on the internet and stored on the blockchain. Just as governments issue fiat currency for every country, there are already over 15,000 distinct cryptocurrencies in use, mostly as a store of value and a means of completing online payment transactions. Bitcoin, also known as BTC is the first and most valuable cryptocurrency.
Old Money, New Money
Money as a vital concept for human survival has evolved over time, from barter systems based on physical commodities such as cowrie shells, perishable goods, precious metals, and paper money to the more modern digital money. Digital money preceded cryptocurrency. Through the advancement of the internet, the banking system created digital representations of funds and stored them in bank-owned computer databases made accessible to their customers as bank accounts. Digital money enabled transfers and payments without physical cash.
The Origin of Bitcoin
Cryptocurrency was birthed out of the need to redistribute control over money — emphasising that money was controlled by government policies that had numerous flaws and disproportionately benefited the affluent. As a result, scientists began experimenting with the concept of money that can be controlled by its owner. Prior to Bitcoin’s success, a few other digital currencies, such as DigiCash and e-Gold, were created for this purpose but either failed or were shut down by the government.
Until 2008, a white paper was published by a pseudonymous programmer — Satoshi Nakamoto who proposed a mathematical solution that enables secure peer-to-peer transactions relying on cryptography.
An excerpt from the bitcoin whitepaper written by Satoshi Nakamoto
The first Bitcoin transaction was launched in January 2009, and thus began the era of decentralized digital currencies powered by blockchain technology, which makes it difficult for governments to shut down due to the lack of a central organization or single point of control.
How Bitcoin Works
Bitcoin is a digital currency built on the blockchain which serves as an operating system where data can be recorded, stored and tracked. For money to work, it needs a pivot to keep it secure, constantly produced, and properly documented — just as it has been with central bank-issued fiat currency.
The Bitcoin Blockchain
The blockchain is a digital ledger that records transactions chronologically and assigns unique identifiers to each transaction, ensuring that all data recorded is tamper-proof. Data is stored as files in a block, and all blocks are chained together in a way that each new block is connected to the previous block all the way from the genesis (or first) block. These blocks can include any type of data, in this case, bitcoin transactions.
This bitcoin database is distributed across many nodes to eliminate a single point of vulnerability. The blockchain makes it easy to record and store these transactions and serves as a public ledger for everyone on the blockchain. In that case, we can refer to the public records of bitcoin transactions as the Bitcoin blockchain.
Although bitcoin was the first application of the blockchain, since the creation of bitcoin, many developers have found different ways to apply the properties of the blockchain to other use cases for data storage.
How Bitcoin Is Created
Unlike fiat money, bitcoin cannot be printed or minted; instead, they are mined by individuals who use computers to solve complex mathematical puzzles needed to verify transactions. Bitcoin as a currency is generated to reward miners for the successful verification of transactions added as new blocks to the blockchain.
Bitcoin As a Store of Value
Bitcoin is often compared to gold as a better store of value, considering how well it has performed in the last 13 years. Despite its high volatility, bitcoin’s price has appreciated significantly and outperformed other asset classes in terms of return on investment (ROI). It is capable of tenfold growth in a short amount of time and can also sustain losses of the same magnitude. Bitcoin's all-time ROI is presently at 32,313.5% and this remains one of its endearing features. Its annualised return peaked at 302.8% in 2020, while its annualized loss peaked at 70.2 % in 2017.
To qualify as a store of value, an item must appreciate in value over time and exhibit specific qualities that determine its value, such as durability, scarcity, exchangeability, fungibility, and divisibility.
Here is how bitcoin exhibits all features of a good store of value:
Durability: Bitcoin does not exist in a physical form and as such cannot wear or tear. It is also built on a decentralised network that is highly resistant to government control, therefore shutting it off will be very difficult.
Scarcity: Bitcoin is very scarce, with a total supply of only 21 million coins. Due to the limited quantity and great demand, bitcoin is extremely valuable and also acts as a deflationary hedge to control inflation.
Medium of exchange: Bitcoin was created to facilitate decentralised peer-to-peer transactions, which goes one step further than traditional money by eliminating middle agents such as banks and thus, reducing the cost of transactions.
Fungibility: Bitcoin currency can be used seamlessly as a means of transaction since each unit of BTC can be exchanged for another i.e. one BTC is equal to the value of another BTC.
Divisibility: Bitcoin is more divisible than the cash we spend today and can be divided up into eight decimal places. The smallest divisible unit of BTC is called a Satoshi. The satoshi represents one hundred millionths of a bitcoin.
Additionally, bitcoin is rapidly becoming the preferred method of funds transfer, particularly for cross-border transactions, due to its low cost, speed, and resistance to international trade barriers. Because every bitcoin transaction is traceable and publicly available on the blockchain, it is the most transparent, secure, and verifiable form of asset storage.
How To Buy BTC
Unlike government-issued fiat money, bitcoin is not created in physical paper notes. It is digital money that can be obtained on exchanges like VIBRA Africa or between peers, and it requires a digital storage location known as a crypto wallet.
VIBRA is a safe and secure wallet app that facilitates the exchange of cryptocurrency between peers easily. You can buy BTC and many other crypto assets directly with cash from your local bank account and have it deposited into your VIBRA wallet in minutes.
To buy BTC on VIBRA app follow these steps:
Download VIBRA Africa app from the app store (iOs or Android)
Complete the sign-up process and verify your account
On the homepage, tap Buy
Select BTC and choose from a list of verified sellers
Follow the guidelines to buy and make payments from your bank account.
You will receive your desired amount of BTC instantly in your VIBRA wallet once the seller confirms your payment
Note: To buy BTC on VIBRA, you have to complete identity verification up to KYC L1.
VIBRA is positioned to become the easiest, safest and profitable way for peer-to-peer crypto trading in Africa, starting with Nigeria. For more insights on how we plan to do this, follow our Medium page and social media channels.