Written by Logan

On November 25, 2020

Bitcoin Basics – Your Questions, Answered in Simple Language

There’s a lot of excitement around Bitcoin, and there’s just as many questions. Whether you’re hearing about Bitcoin for the first time, wanting to brush up on the basics, or trying to introduce a friend to cryptocurrency, we hope this guide is a helpful resource for you. Keep reading to find out the answers to some of the basic questions surrounding Bitcoin – written in simple language.

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Is there an abbreviation for Bitcoin?

Bitcoin is often abbreviated as BTC – this is known as a “ticker,” much like how stocks in a company have tickers. All cryptocurrencies have their own ticker.

 

How does someone buy bitcoin?

The easiest way to buy bitcoin is to visit an online cryptocurrency exchange. These are websites where you can buy, sell, and trade cryptocurrencies using cash or other cryptocurrencies. Metal Pay is an app that allows you to do this on your phone, you can download Metal Pay here. There are lots of other cryptocurrency exchanges that you can use on your computer.

 

Do you have to buy an entire bitcoin?

Not at all. You can buy as little or as much bitcoin as you prefer. Most people start out by buying just a fraction of a bitcoin – sometimes as little as $10 worth to start. When you buy more bitcoin, it will build on the bitcoin you already own. For example, if you buy .0002 bitcoin today, and .0003 bitcoin next week, your total bitcoin will be .0005.

 

Where can I deposit my bitcoin?

Bitcoin can be deposited into something known as a “wallet.” Every wallet has its own “address” that can receive cryptocurrency at any time. There are many different types of wallets. The most commonly used wallet is the one that is connected to the cryptocurrency exchange where you buy bitcoin; this means that the bitcoin you buy stays in your account with that exchange. You can also move that bitcoin to a hardware wallet, which is a small computer that holds your bitcoin for you. Some people move their bitcoin to a software wallet, which is a program on your computer that holds your bitcoin for you. Others may use what’s called a “paper wallet,” which involves sending your bitcoin to an address that you’ve written on a piece of paper.

Every type of wallet comes with its own risks. For most people, they are comfortable using the exchange’s wallet, a software wallet, or a hardware wallet.

 

Do you get a certificate of ownership when you buy some bitcoin?

Unlock stocks and bonds, you do not receive an official certificate when buying bitcoin. However, the bitcoin you have is yours and yours alone; you can prove ownership by showing someone that you have it in your “wallet” at any time; people can also examine the public record of blockchain transactions to see that your “wallet” received some bitcoin.

 

How old do I have to be to buy Bitcoin?

In most places, you have to be 18 years or older to buy bitcoin.

 

What products can I buy with Bitcoin?

There is a growing list of vendors and stores that accept bitcoin for payment. A good resource for finding a store is here. In the past, some people have bought food, cars, clothes, computers, and even houses with bitcoin.

 

Is it illegal to own Bitcoin?

It is not illegal to own Bitcoin in the United States. Some countries prohibit the use of cryptocurrency, but this is not the case in the United States, Canada, or Europe.

 

What is backing Bitcoin? How does it stay valuable?

Unlike the US Dollar, Bitcoin has no official government body saying that it is worth something. Rather, Bitcoin has value due to the fact that there will only ever be 21 million bitcoins – a concept known as “scarcity.” Much like how gold is valuable because it is rare, Bitcoin is valuable because it is also very rare. Some people see Bitcoin as a “store of value” – somewhere they can put their money to protect it against inflation.

 

How are bitcoins created? Can someone create more?

Bitcoins are created through something called “mining,” where computers solve complex mathematical problems to keep track of every Bitcoin transaction. There is a strict algorithm that controls how often bitcoins are created; as time goes on, the amount of bitcoin being created each day will decrease until we reach a total supply of 21 million bitcoins.

 

Can you pass your Bitcoin down to your children? Can they be included in your will?

Bitcoin, like most investments and possessions, can be included in your will and passed on to somebody else. Doing so would require that this person receive the “keys” (a series of letters and numbers) to your bitcoin wallet.

 

Can you lose your Bitcoin?

Bitcoin can be lost, so it is important to keep track of your bitcoin. If someone loses their bitcoin, it is usually because they lost the password to their bitcoin wallet. Most bitcoin wallets have a “seed phrase” which can be used to restore your bitcoin should you lose your keys – a seed phrase is a series of words that only you know. If somebody loses the keys to their wallet, as well as their recovery phrase, then their bitcoin is likely lost forever. For this reason, it is important to store your bitcoin with a wallet that you understand.

Some people also lose their bitcoin due to hackers; this has happened sometimes when someone has left their bitcoin in an exchange wallet or a software wallet that was not secure. For this reason, it is important to ensure whatever wallet you are using is secure and has safeguards in place that you trust.

 

Do you have to pay taxes when you sell your bitcoin?

Selling bitcoin is a taxable event, much like selling other investments. The IRS will be asking you about cryptocurrency when you file your taxes each year; last year, the IRS asked “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?” For this reason, you’ll want to keep track of every time you buy or sell cryptocurrency. A tax preparation professional can help you understand what the implications of each transaction are.

 

What countries can use Bitcoin?

Bitcoin can be brought to any country on earth in a wallet. However, some countries ban cryptocurrency entirely; you can find a list of those countries here.

 

Do any famous people own Bitcoin?

A growing number of celebrities are becoming interested in Bitcoin, including Mike Tyson, Snoop Dogg, and Ashton Kutcher. Several professional sports teams, presidential campaigns, and corporations have also used bitcoin to buy and sell products.

 

Why does the value of Bitcoin go up and down?

Bitcoin’s value usually moves due to the demand for the cryptocurrency. When more people want to buy bitcoin, the price often increases; when more people want to sell bitcoin, the price often decreases. The price of bitcoin can also move based on current events; if the economy is doing well, the price may move in a certain direction – if a major corporation announces that they will use Bitcoin, the price might move in a different direction.

 

How many different cryptocurrencies are there? What’s so special about Bitcoin?

There are currently over 7,000 different types of cryptocurrency. Bitcoin is seen as special due to it being the original cryptocurrency, the first ever invented. For this reason, Bitcoin is seen to have what’s known as “first mover advantage,” meaning it benefits from being the most established and well-known cryptocurrency in the world.

Some people prefer to own other types of cryptocurrencies based on the goals of those projects. In the world of cryptocurrency, there are no right or wrong answers – it’s entirely up to you and what your goals are for your money.

 

Do you capitalize Bitcoin when talking about it?

When talking about BTC as a unit of measure it’s best to write it lowercase (bitcoin) or just say BTC. “Bitcoin” capitalized is a pronoun for the concept of Bitcoin or the blockchain itself.

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Have a question that you would like answered about Bitcoin, or cryptocurrency in general? Reach out to us on social media and let us know – we’d be happy to answer your question, and we might just add it to this article!

🤘 Your friends at Metal 🤘

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