How Bitcoin Works – Bitcoin Trading Guide for Dummies


Cryptocurrency has gained popularity over the past decade, especially among the younger generation. With advanced technology, cryptocurrencies provide great security to their users. The important part is that, with its gradual growth, it made fortunes for people. Many became billionaires because of cryptocurrency.

This led to the word spreading among people, and among all the cryptocurrencies, bitcoin was hit. Bitcoin came out of nowhere, and people didn’t know anything about it. Still, we know the name of the creator of Bitcoin, but where is he from and who is he? We know nothing.

It is expected that bitcoin will take over the traditional financial system, and many users believe in it because bitcoin, in particular, has a huge user base and is expanding at a good pace. But if you want to start trading or investing, you have to be courageous and ready to invest an amount that you are ready to lose.

People don’t realize the risk at first, but if you want to start trending and investing in bitcoin, you should be aware of the technology used in it and have basic knowledge of it. In this article, I will briefly explain what bitcoin is and how it is traded.

What is Bitcoin?

Bitcoin is a digital currency made by its mysterious creator, Satoshi Nakamoto. It is not clear yet whether the creator, Satoshi Nakamoto, is a single person or a team. The idea was published in a technical paper, and many developers came along and helped create a new technology. Satoshi was the first to create a blockchain. Later, many developers helped to develop the technology. Hal Finney was the first recipient to receive the first transaction from Satoshi Nakamoto. He was the one who reported the bugs and helped improve the technology.

Bitcoin was the first cryptocurrency with which the blockchain technology was introduced to the public domain. Bitcoin was built to be free from a centralized body, and people can freely send money all over the world. Bitcoin is completely decentralized, meaning no one has control over how much bitcoin you have. But Satoshi did put a limit, the maximum number of bitcoins that can be mined is 21 million, out of which 19 million are already mined.

After reaching the 21 million limit, no more bitcoins will be created. This makes bitcoin a rare form of digital gold. It takes a lot of resources and power to mine a bitcoin; technically, it is estimated that bitcoin, out of all cryptocurrencies, consumes 127 TWh per year. It does leave carbon footprints, as it consumes more power compared to many countries.

But as of now, many steps are being taken to avoid carbon footprints, and miners are moving towards renewable sources of energy. Only 2 million bitcoins are available to mine, making the craze more popular among the younger generation. As of now, a single bitcoin is valued at $27,911.50, while its all-time high price was $64,800. That is the reason people are into bitcoin, and if you want to start trading, let’s understand how bitcoin works.

How Bitcoin Works

Bitcoin is the easiest mode of transaction; as it is quoted, it is a “peer-to-peer electronic cash system.” In the traditional financial system, you have physical and electronic modes of payment, but for electronic payments, it takes days for processing. Whereas Bitcoin does this work in minutes, from any corner of the world.

Bitcoin works on a blockchain network, which is a fully public ledger, and it eliminates intermediary bodies as it completely works on computer power. Cryptographic proof offers the utmost security with a seamless experience. To operate bitcoin, a user needs a wallet, and the wallet comes with public and private keys.

Through your wallet, you can make purchases or sell assets and receive funds in return. Here, you can receive the amount by sharing the public key, and you can send the money by entering the private key, which is a type of digital signature.

When you make a transaction, it is recorded on the blockchain and stored in a ledger. After a transaction, you can’t make changes to it, and it is irreversible. No one can tamper with the data after the transaction is made. Most of the transaction data is public, and anyone can look over the record, but to maintain the privacy of the user, the name and address of the users are not traceable.

When someone makes a transaction, the data is broadcasted to the network publicly and shared from one node to another. Every 10 minutes, data is collected and organized into groups known as “blocks,” which are then permanently added to the blockchain.


The blockchain is the ledger where data is shared and linked securely with each other via cryptographic hashes. The blockchain offers the best data security because the data are stored in groups called blocks, and after 10 minutes, miners add that block permanently to the blockchain.

The block has a storage capacity, and limited data is stored in one block. While adding the block, the new block is linked to a previous block, as every new block contains the cryptographic hash of the previous block. The information includes the timestamp and transaction data. The proof of the transaction’s existence is a timestamp. Thus, the chain of blocks is formed, making it a blockchain.

What is Bitcoin trading

Bitcoin trading is nothing but the buying and selling of bitcoin and other assets on the crypto market. The trading is done via a third-party application that is an exchange platform. With the exchange platform, you can make trades and book good deals, but there are many ways of trading, one of which is CFD, or contracts for difference.

CFDs are based on the concept of market movement, in which the change in behaviors of the market trading can make profit or loss from the trade. The change in direction makes the trader decide whether they will make a good profit or not. The trader has to decide whether they have to hold the position for a long or short period of time.

If you want to learn and step into bitcoin trading, you can follow these steps to start your journey:
  • Make an exchange account.
  • Have a digital wallet
  • Make your own strategy.
  • Deposit
  • Market research
  • Use of instruments
  • Start small.

Bitcoin trading tips for Beginners

Bitcoin trading for dummies and newbies can seem like an overwhelming course. Since the crypto market is technologically advancing and fluctuating at all times, it can seem like a lot to follow up on.

However, to your relief, our experts have put together some tips that you could successfully trade by;
  1. Understand how the bitcoin market works and analyze its growth for a while.
  2. Don’t take decisions driven by your emotions.
  3. Monitor the market and its trends.
  4. Test your strategy and see what works for you.
  5. Do more of what works for you.
  6. If you see potential, hold your assets.
  7. Diversify to lower risks.
  8. Determine your risk-bearing ability.

Use of Bitcoin in Modern Times

The usage of Bitcoin is expanding at a rapid pace, as many countries have now accepted it. With its outgrowing popularity, the cryptocurrency system has turned out to be an alternative to the traditional financial system. Being completely decentralized, bitcoin offers lower fees on transactions with pronounced security. People can make international transactions by paying excess fees, and no one can control how much money you can hold. It has its own advantages and drawbacks, as people on the dark web heavily use bitcoin for transactions, and even innocent people are duped in many bitcoin scams.


Winding up the article, I hope it was helpful and informative for you. If you begin the bitcoin trading journey, deep research and learning will definitely help you become a pro trader. You have to be strategic and understand the workings of the crypto market. As the crypto industry is quite risky, having enough knowledge of it will help you tackle problems.

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