The basic principles of Bitcoin are based on blockchain technology. The core points include: 1. Decentralization, jointly maintained by network participants; 2. Distributed ledger, open and transparent transaction records; 3. Encryption guarantees security and anonymity; 4. Die Kuang verify transactions and issue new coins; 5. A total of 21 million coins ensures scarcity; 6. Hash function verifys data integrity; 7. Private key and public key mechanism manage ownership.

Bitcoin is undoubtedly the most eye-catching existence in the global financial market. This cryptocurrency, founded by anonymous developer Satoshi Nakamoto in 2008, was originally regarded as a toy for geeks, but now it has developed into a financial force that cannot be ignored. Its price fluctuations have touched the heartstrings of countless investors. Its decentralized characteristics challenge the foundation of the traditional financial system and even triggered deep thinking from governments and central banks in various countries on the future form of digital currencies. From the first few cents apiece to tens of thousands of dollars apiece at its peak, the value of Bitcoin soared epicly to demonstrate the potential of blockchain technology. It not only gave birth to a huge cryptocurrency market, but also indirectly promoted the vigorous development of innovation fields such as DeFi (decentralized finance) and NFT (non-fungible tokens). However, Bitcoin is not without controversy. Its high volatility, regulatory uncertainty and potential energy consumption problems make it a complex and multi-faceted financial variable.

What is the basic principle of Bitcoin?

The core of Bitcoin lies in its underlying technology - blockchain. Blockchain can be understood as a decentralized, tamper-free distributed ledger. Each Bitcoin transaction is packaged into a "block" and linked in chronological order to form a growing chain.

• Decentralization: There is no central authority to control the Bitcoin network, and transactions are jointly verified and maintained by all participants in the network.
• Distributed ledger: All transaction records are stored openly and transparently on every node in the network and can be viewed by anyone.
• Cryptoology: Use complex encryption algorithms to ensure the security and anonymity of transactions.
• Mining: Verify transactions and create new blocks by solving complex mathematical problems, while getting new bitcoins as a reward.
• Limited Supply: The total amount of Bitcoin is designed to be 21 million, and this scarcity is an important source of its value.
• Hash function: Converts input of any length into output of fixed length for data integrity verification.
• Private key and public key: Private key is used to sign transactions, and public key is used to receive Bitcoin.

How is the value of Bitcoin formed?

The value of Bitcoin is not guaranteed by any central bank or government issuance, but is determined jointly by the market supply and demand relationship, scarcity, technical characteristics and its consensus as a kind of "digital gold".

• Scarcity: The total amount is constant 21 million pieces, with anti-inflation characteristics.
• Network effect: As users and acceptance increase, network value also increases.
• Decentralization: Not controlled by a single agency, highly censored.
• Global accessibility: Internet connection allows transactions without border restrictions.
• Segmentability: Unlimited segmentation to meet different transaction needs.
• Utility: Can be used for payment, stored value, or as speculative assets.

What are the main risks of investing in Bitcoin?

Despite the huge potential returns from Bitcoin, investing in it comes with significant risks that investors must fully understand before making decisions.

• High price volatility: Bitcoin price may rise or fall sharply in a short period of time.
• Regulatory uncertainty: Government policies on cryptocurrencies are still evolving, and there are regulatory risks.
• Security risks: There are risks such as the attack on the exchange, the loss of private keys or theft.
• Technical risks: Blockchain networks may face technical failures or protocol upgrade issues.
• Market manipulation: There is a possibility that large investors or institutions will manipulate market prices.
• Competitive Risk: There are a large number of other cryptocurrencies in the market that may distract Bitcoin’s attention.
• Liquidity Risk: In some cases, it may be difficult to quickly convert large amounts of Bitcoin into fiat currency.

How to store and manage Bitcoin?

Store and manage Bitcoin is a crucial step in the investment process. Choosing the right storage method can greatly improve asset security.

The storage methods of Bitcoin are mainly divided into two categories: hot storage and cold storage.

Hot Wallet

Hot storage refers to storage connected to the Internet. Its advantages are that it is convenient and fast, suitable for small transactions and daily use, but its security is relatively low because connecting to the network increases the risk of being attacked.

Exchange storage:

This is the most common entry-level storage method where users store bitcoin in accounts provided by cryptocurrency exchanges.

• Advantages: Easy to operate, suitable for beginners; convenient and fast transactions.
• Disadvantages: The private key is kept by the exchange, and there is a risk of the exchange being theft or bankrupt; the user does not have full control of the asset.
• Operation steps:
  • Register and log in to the cryptocurrency exchange account of your choice.
  • Complete the authentication (KYC) process.
  • Find the "Coin Recharge" or "Deposit" option on the exchange interface and select Bitcoin (BTC).
  • The system will generate a Bitcoin recharge address.
  • Transfer Bitcoin to this address from other storage or source.
  • Waiting for network confirmation, Bitcoin will be displayed in your exchange account balance.

Mobile phone storage/desktop storage (App/Software Wallet):

These are applications installed on smartphones or computers, and the user controls the private keys themselves.

• Advantages: The private key is kept by the user and has a higher security than the exchange storage; it is intuitive to operate and is easy to use every day.
• Disadvantages: The device may be invaded or lost by viruses; the user needs to back up the private key by himself.
• Operation steps:
  • Download and install storage apps you trust (e.g. Electrum, BlueWallet) from an official app store (e.g. Google Play or Apple App Store) or official website.
  • Open the app and select Create new storage.
  • The system generates a set of mnemonic words (usually 12 or 24 English words), and must be copied accurately and stored safely. This is the only way to restore storage.
  • Set a secure storage password.
  • You will see your Bitcoin receiving address. Bitcoin can be received from this address.
  • To send Bitcoin, enter the receiver's address and amount, and then use your password or biometric information to confirm the transaction.

Cold Wallet

Cold storage refers to storage that is not connected to the Internet. Its advantage is that it is extremely secure and is suitable for storing large amounts of Bitcoins for a long time. The disadvantage is that it is relatively complex in operations and is not suitable for frequent transactions.

Hardware Wallet:

This is a physical device designed specifically for storing private keys for cryptocurrency, usually like a USB flash drive.

• Advantages: Private keys are stored offline, with the highest security; even if connected to an infected computer, the private key will not be leaked.
• Disadvantages: high price; relatively complex operation steps; equipment loss or damage needs to be restored through mnemonics.
• Operation steps:
  • Purchase an official genuine hardware storage (for example: Ledger Nano S/X, Trezor Model T).
  • Follow the instructions included with the hardware storage for the first time. This usually includes connecting to a computer or mobile phone, setting up a PIN code, copying a mnemonic (Recovery Seed), etc. Be sure to copy the mnemonics accurately on the included recovery card and store them in an extremely safe place away from the risks of fire, flooding and theft. This is the only credential for your asset recovery.
  • Install the corresponding management software for hardware storage on the computer (for example: Ledger Live, Trezor Suite).
  • Connect your hardware storage with management software.
  • Select "Receive" Bitcoin in the software, and a Bitcoin receiving address will be displayed on the hardware storage screen. Be sure to check whether the displayed address is consistent with the address in the software on the hardware storage screen to prevent the address from being tampered with.
  • Send Bitcoin to this receiving address.
  • To send Bitcoin, enter the receiver's address and amount in the management software, and then confirm the transaction through the physical buttons stored in the hardware. The private key signature is completed inside the hardware storage and the private key itself does not leave the device.

Paper Wallet:

A form of printing bitcoin public and private keys on paper.

• Advantages: completely offline, extremely safe and low cost.
• Disadvantages: easy to lose and damage; inconvenient to use; be careful when importing into digital storage.
• Operation steps:
  • Find an offline paper storage generator website (for example: bitaddress.org), and it is best to operate on a computer with disconnected network to avoid private key leakage.
  • Move the mouse or keyboard to generate a random number until the private key is generated.
  • Print paper storage containing the bitcoin address (public key) and corresponding private key.
  • Store printed paper in an extremely safe place, such as a safe.
  • Important tip: When using paper storage, once you want to use the above bitcoins, it is best to transfer all the above bitcoins to a new address, because once the private key has been used online, its security may be compromised.

Which cryptocurrency exchanges are globally mainstream?

Choosing a secure, reliable and fully functional cryptocurrency exchange is crucial for investors. Here are some mainstream cryptocurrency exchanges around the world:

1. Binance

Binance is one of the world's leading cryptocurrency exchanges, known for its huge trading volume and abundant trading products.

• The world's largest cryptocurrency trading platform with huge trading volume.
• Provide diversified products such as spot, contracts, leverage, and pledge.
• It has a self-developed public chain BNB Chain, with a rich ecosystem.
• Supports a variety of fiat currency recharge and withdrawal options.
• Global user coverage is wide and service languages are diverse.

2. OKX (Ou Yi)

OKX is another world-renowned cryptocurrency exchange that provides one-stop crypto asset services.

• Provides a comprehensive cryptocurrency trading service including spot and derivatives.
• Focus on technological innovation and provide Web3 storage and DApp portals.
• The interface is friendly and suitable for users of different experience levels.
• Supports a variety of mainstream cryptocurrencies and trading pairs.
• It has operating agencies in many countries and regions around the world.

3. Huobi (Huobi)

Huobi is a highly-known cryptocurrency exchange in Asia and has many years of operational experience.

• A long-standing cryptocurrency exchange with a broad user base.
• Provides various services such as spot trading, contract trading, and financial management.
• The security system is mature and the user asset protection measures are perfect.
• Actively plan the global market and support multilingual services.
• Have a strong technical team and innovative capabilities.

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