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What Is Bitcoin? A Complete Beginner's Guide

What Is Bitcoin? A Complete Beginner's Guide

Finance
By Jellan Arta
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Bitcoin (BTC) has emerged as a revolutionary digital asset and investment vehicle, gaining massive popularity since late 2020. With its price soaring to nearly IDR 700 million, Bitcoin is becoming a highly sought-after asset in Indonesia and worldwide.

Understanding Bitcoin

Bitcoin is a new form of currency digital, electronic, and virtual also known as a cryptocurrency. Created in 2009 by the pseudonymous Satoshi Nakamoto, Bitcoin enables peer-to-peer internet transactions without intermediaries such as banks. Secured by cryptography and operating on a decentralized network called blockchain, Bitcoin is both transparent and secure.

How Bitcoin Works

Bitcoin runs on a peer-to-peer (P2P) system without centralized storage or administration. Transactions are recorded on a distributed ledger maintained by network nodes called miners, who validate transactions and secure the network. Only 21 million Bitcoins can ever be mined, ensuring scarcity and preventing inflation.

Bitcoin's History

Bitcoin's journey began on August 18, 2008, with the registration of bitcoin.org. On October 31, 2008, Satoshi Nakamoto published the Bitcoin whitepaper describing a peer-to-peer electronic cash system. The first Bitcoin block, known as the genesis block, was mined on January 3, 2009, marking the network's launch and the start of Bitcoin mining.

Key Characteristics of Bitcoin

  • Decentralization: No single authority controls Bitcoin. Transactions are verified through cryptography on the blockchain.

  • Limited Supply: Only 21 million Bitcoins will ever exist, mimicking the scarcity of precious metals like gold.

  • Anonymity: Identities are encrypted, offering privacy despite public transaction records.

  • Non-Physical: Bitcoin exists only digitally with no physical form.

  • Transparency: Open-source technology allows anyone to view transactions on the blockchain.

  • Divisibility: Bitcoins can be divided into smaller units called Satoshi, the smallest being 0.00000001 BTC.

  • Portability: Easily transferred worldwide over the internet.

  • Low Transaction Fees: Generally cheaper than traditional financial systems, especially for international transfers.

  • Volatility: Bitcoin's price is known for rapid and significant fluctuations.

  • Legal and Regulatory Risks: Regulations vary globally, with some countries embracing Bitcoin and others imposing restrictions.

  • Energy Intensive: Mining consumes significant energy, raising environmental concerns.

Practical Uses of Bitcoin

Bitcoin serves multiple functions depending on user needs and regulatory environments:

  • Digital Currency: Used for purchasing goods and services online and in select physical stores.

  • Investment: Viewed as digital gold, many hold Bitcoin hoping for value appreciation.

  • Cross-Border Transfers: Offers faster, cheaper remittances compared to traditional methods.

  • Fundraising: Utilized in crowdfunding and charitable donations.

  • Privacy-Focused Transactions: Provides a level of anonymity in financial exchanges.

  • Financial Markets: Bitcoin derivatives like futures and options enable trading without owning the actual asset.

  • Micro-Payments: Layer 2 solutions like Lightning Network allow quick, low-cost small transactions.

  • Inflation Hedge: Used in countries with high inflation to preserve wealth.

How to Obtain Bitcoin

There are several methods to acquire Bitcoin:

  • Mining: Solving complex cryptographic puzzles with specialized hardware, though increasingly resource-intensive and costly.

  • Buying: The easiest way is purchasing Bitcoin through licensed exchanges in Indonesia, registered with BAPPEBTI.

  • Gaming: Some games reward players with small amounts of Bitcoin over time.

  • Airdrops: Promotional giveaways requiring users to perform tasks to receive free tokens.

Buying Bitcoin in Indonesia

To buy Bitcoin, simply register on a trusted exchange app available on Play Store or App Store. Provide identification for verification, deposit Indonesian Rupiah through bank transfer or e-wallets like Ovo or Gopay, and start buying Bitcoin. It is possible to buy fractional amounts starting from IDR 25,000, making it accessible to many.

Bitcoin's Legal Status in Indonesia

Bitcoin is recognized as a virtual asset for investment by Indonesia's Commodity Futures Trading Regulatory Agency (BAPPEBTI). Regulation No. 5 of 2019 legally permits Bitcoin trading on futures exchanges as a digital commodity. Indonesia hosts several licensed and secure exchanges such as Indodax, PINTU, Reku, Zipmex, and Upbit.

The Indonesian crypto ecosystem is now comprehensive, featuring traders, clearinghouses, exchanges, and depositories.

Bitcoin represents a groundbreaking financial revolution with both promising opportunities and inherent risks.

Anisa Giovanny