If you’re new to Bitcoin, you may find yourself bombarded with information and jargon that you don’t understand. You could ask on crypto forums, such as  r/cryptocurrency on Reddit, but chances are you won’t get a response that will satisfy you.

Starting out in cryptocurrency will be a steep learning curve, and the truth is, no one is an expert in it – not even the developers who create coins like Bitcoin and Ethereum. Even they have made mistakes and learned along the way.

Here are the most common entry-level cryptocurrency questions. Find your answers now so that you never have to wonder again.

Why use an ‘imaginary’ currency-based payment system?

Bitcoin is often mistakenly considered an imaginary currency that is produced out of thin air by technology geeks. The truth is that the number of bitcoins to be issued has a fixed limit, which makes its value more than real. Moreover, the coin is backed up by a network of computers through the process of mining.

Bitcoin runs on blockchain technology. The technology in its simplest form is a chain of transactions (blocks) that are recorded for all to see. Once a block is on the chain, it can’t be altered. This means that using bitcoin is more secure than traditional currencies, which are notoriously open to fraud and manipulation.

Is Bitcoin a bubble and only used for speculation?

Another common misconception is that bitcoin is a bubble and it only holds value speculatively. In reality, bitcoin functions exactly the same way as traditional currencies do: without people seeing value in a currency, that currency has no value.

The same is true for bitcoin – it has value because people believe it has value. Technically, this could mean that bitcoin becomes a bubble when people speculate its value is higher than it actually is, but this can be said of the US Dollar as well.

Unlike the US Dollar though, Bitcoin has no central bank that can print endless amounts of it. Bitcoin has a fixed supply limit that can’t be exceeded. This protects the crypto from common problems associated with printing money, such as inflation, where your hard-earned fiat currency loses buying power through no fault of your own.

Who created Bitcoin?

Bitcoin was created by an unknown coder or group of people under the pseudonym Satoshi Nakamoto. Their motivation to create Bitcoin was resentment of the fact that financial institutions and banks are constantly bailed out by governments for poor financial practices – something that was detrimental to taxpayers all over the world.

Bitcoin was created to be decentralised and automated with code so that it couldn’t be manipulated or abused by a central entity.

Where do bitcoins come from?

Each bitcoin is “mined” using computers that solve complicated mathematical problems. When Bitcoin was launched, a miner could use a laptop to mine some coins, but as time has gone, the process got harder. As a result, today only high-powered computers using powerful graphics cards are used to solve the mining algorithms and issue new coins.

Once mined, bitcoins are typically sold – because the process costs a lot of money, and the miners need to receive their profit. The coins can be sold on exchanges, which pair up buyers and sellers. This way, people that don’t mine can buy bitcoin. As you can see, mining creates a steady flow of bitcoin to the market.

Because the demand for bitcoin is higher than the mining supply, the price has increased significantly over time. Bitcoin will continue to get harder to mine, and all going well, the demand should increase further – driving the price up even more.

How do I get bitcoins?

You can mine bitcoins with an upfront investment and technical know-how. But most people aren’t in the financial position to put in that amount of money without seeing a quick return. Most mining is now done by special bitcoin mining companies.

Apart from mining, the easiest way to get bitcoin is to buy from an exchange. Exchanges track the market rate of bitcoin and allow ordinary people to buy it with little hassle. Before making a purchase, you will need to create a bitcoin wallet to store your precious coins once they have been bought.

There are numerous different crypto wallets on the market. Make sure you create a wallet that supports Ethereum if you’re buying Ethereum, and one that supports bitcoin if you’re purchasing bitcoin.

Could bitcoins ever replace fiat money?

It is unlikely that bitcoin itself will replace fiat money for several reasons. First, the transaction times on the Bitcoin network are slow, and the more people use the network the more congested it gets – and the higher the fees.

This makes it impractical as a daily currency. Many liken Bitcoin to digital gold instead of a digital dollar. There are other coins that could be used as fiat, and many countries are even developing their own digital currencies.

Do I need to invest in cryptocurrency?

One day, all currency will be digital. Cash transactions in many countries are being phased out in favour of electronic transactions. E-transactions will need the high level of security that blockchain provides, so it is very possible that one day all transactions will be made with cryptocurrency.

As mentioned, that currency is unlikely to be bitcoin, but bitcoin itself will still serve as a store of value and function as a good investment.

Conclusion

With the rapid developments in the cryptocurrency industry, it is only a matter of time before you invest in Bitcoin or other cryptos. This article puts you ahead of the curve by providing you with the most basic information about digital currencies in general, and Bitcoin in particular. It allows you to benefit financially by picking the right projects to invest in.

Once crypto becomes mainstream, the ability to make money from projects will be much more limited, so if you want to get in on the action, invest sooner rather than later.