What is Bitcoin for Dummies: A Guide For Beginners

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Is there a Bitcoin rally in sight? Here's what you should know about Bitcoin.

Predicting a bear market bottom is like catching a falling knife. Even so, traders often attempt to predict one based on how the price behaved relative to critical indicators during previous bear runs. The assumption here is that history will repeat itself.

One such rare signal has emerged, suggesting bitcoin's decline may be flattening and now is the best time to add exposure to the cryptocurrency.

In reality, cryptocurrency has been gaining traction for years, especially as more Millennials are drawn to the appealing concept of decentralized, digital currency.

How Does Bitcoin Work?

Bitcoin operates on a technology called blockchain, a public ledger that records all transactions. This ledger is a series of connected blocks, where each block contains a list of transactions.

When you send or receive bitcoin, the transaction is broadcast to this network and awaits confirmation. This confirmation comes from miners, participants in the network who use powerful computers to solve complex mathematical problems.

Successfully solving a problem adds a new block to the chain and the miner is rewarded with some bitcoin. This process not only validates transactions but also creates new bitcoins, in a process known as mining.

Every transaction is secured using cryptography, ensuring that only the owner of the bitcoins can spend them. Since the blockchain is decentralized and transparent, every transaction is publicly recorded and virtually impossible to alter, ensuring the security and integrity of the currency.

Bitcoin's design allows for pseudonymous transactions, meaning that while transactions are recorded, the identities of the parties involved are encrypted.

Bitcoin has a finite supply, capped at 21 million coins, making it a deflationary asset. Its decentralized nature means it operates without a central authority or government, giving it a unique position in the financial world.

Bitcoin for Dummies: What is Bitcoin?

bitcoin for dummies

Bitcoin is a cryptocurrency that is open source and created for peer-to-peer money transfers. Imagine Paypal or Venmo without a central authority. No one to tell you what to pay, how to buy, when to buy with no worries of a huge fee.

Now imagine all your transactions becoming open to the public eye through pseudonymity. Bitcoin was created to combat the financial crisis that happened as the banks had too much power.

Satoshi Nakamoto, the creator of Bitcoin created it to give the people the power over their money. No need for banks to hold your money. You hold your money in your own wallet.

Your wallet can consist of a paper wallet with just your Bitcoin hash address, a mobile/computer wallet or a cryptocurrency hardware wallet.

Benefits of Bitcoin

  • Quick: One major advantage of cryptocurrencies, in general, is that they are quick. If you buy something, the seller will get their coins pretty quickly. If you purchase with a Visa, they need to wait for the transaction to be accepted, then settle then go to your bank account in 3 days.
  • Cheaper Transactions: Paypal and payment processors generally charge 3-4% of the fees and charge that from the seller. In this case, the buyer is paying the fees but it amounts to fractions of a percent.
  • Paperless: Going into the age of digital, paperless is becoming bigger as more people are liking it. Digital currencies do not need a reason to be with paper as everything is done on your phone or computer.
  • Irreversible Transactions: Some people think irreversible transactions is a bad thing but there are ways to go around it. For sellers, it is a great idea because people cannot make unnecessary chargebacks as we see it being done on sites like eBay and Amazon. To make sure you’re not sending it to the wrong address, always send a minimal amount to the hash address to make sure it is correct.
  • Appreciating Asset: With the way things are going, it seems like Bitcoin can’t keep going up forever. To be frank, not everything will go up forever. However, the difference between fiat and Bitcoin is that the government keeps printing more money while Bitcoin has a set amount that there will ever be which is 21 million total coins.

Now that you know the benefits of Bitcoin, you may be wondering how to get started with using this digital currency. First and foremost, you need a Bitcoin wallet. As you can guess, this is also tangible and is either on your computer or phone. You can also have a hardware wallet. The wallet will have the ability to store, send or receive your cryptocurrencies. When you have found one that you like, go ahead and pick an exchange to buy your Bitcoins.

The next step is to get started with a crypto exchange so that you can buy and sell cryptocurrencies like bitcoins.

The Best Cryptocurrency Exchanges

There are many different exchanges available, so it is important to do your research to find one that is reputable and offers the best rates. Once you have found an exchange, you will need to create an account and deposit funds into it so that you can begin trading. Here are the best crypto exchanges we found:


coinbase best crypto exchange

Coinbase has emerged as one of the high-profile names in the cryptocurrency world — placing itself on the top as a one-stop solution for buying, selling, and managing crypto. Coinbase is a San Francisco based cryptocurrency exchange that lets you turn your fiat currency into cryptocurrency. It's the main entry point into the cryptocurrency space for most people. It’s currently the quickest and easiest way to buy cryptocurrencies in the USA. You can also shop for NFTs, get free NFTs, and explore all the NFT collections on Coinbase NFT.

Promo: Create your Coinbase account and get up to $200 in Crypto at Coinbase.

  • Fees: Coinbase charges a dynamic base fee when you buy, sell, or convert on its platform. The fee is based on a combination of components, including a standard flat fee of 1% and spreads. Coinbase also charges maker fees ranging from 0.00% to 0.40% and taker fees ranging from 0.05% to 0.60%.
  • Pros: Offers access to more than 200 cryptocurrencies, low minimum to fund account and quick crypto withdrawals.
  • Cons: Higher fees than other cryptocurrency exchanges.
  • User Interface: Coinbase is generally considered quite easy for basic transactions.
  • Fees: Coinbase generally has higher fees compared to other popular crypto exchanges.
  • Reputation: Trusted

If you want to create a Coinbase account, you can create a Coinbase account through this link.

Sign up and get up to $200 in crypto

Coinbase offers over 100+ cryptos to trade, invest, or stake in. If you want to diversify your income sources through cryptocurrencies, Coinbase is an ideal platform to buy, sell, or even build your crypto portfolio.

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Robinhood Crypto

robinhood crypto best crypto exchange

Robinhood is a great option for those who want to buy Bitcoin but want to avoid paying any fees. Robinhood is an investing app that allows you to buy and sell Bitcoin with no commissions.

If you're already familiar with how to buy and sell stocks, then buying Bitcoin on Robinhood will be super easy. In addition to buying Bitcoin (BTC) — you can buy Bitcoin Cash (BCH), Bitcoin SV (BSV), Dogecoin (DOGE), Ethereum (ETH), Ethereum Classic (ETC), and Litecoin (LTC).

Overall, using Robinhood to buy Bitcoin is smart, easy, and straightforward. Plus, you'll even give you a free stock worth up to $225 for joining. Then you can sell that stock and buy free Bitcoin with it.

  • Fees: Free
  • Pros: No fees for crypto trades and it is convenient if you already have a Robinhood brokerage account.
  • Cons: No crypto-to-crypto trading.
  • User Interface: Easy to navigate and fully customizable.
  • Fees: Low
  • Reputation: Trusted

Overall, using Robinhood Crypto to buy Bitcoin is smart, easy, and straightforward.

You could get up to 3.5% more crypto on Robinhood
Robinhood Crypto

Robinhood offers the lowest cost to trade crypto on average. Buy, hold, and sell popular cryptocurrencies and stablecoins such as BTC, ETH, DOGE, SHIB, AVAX, LTC, UNI, ETC, LINK, XLM, AAVE, the list goes on. You can send crypto to Robinhood, or send crypto from your Robinhood account to other crypto wallets. It’s secure, simple, and you’ll never be charged deposit or withdrawal fees.

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kraken best crypto exchange

As one of the largest and oldest Bitcoin exchanges in the world, Kraken is consistently named one of the best places to buy and sell crypto online, thanks to its excellent service, low fees, margin trading, versatile funding options, and rigorous security standards — but this is only part of the story.

They've been at the forefront of the blockchain revolution since 2011 and is one of the best Coinbase alternatives. Kraken offers tools and resources for new crypto investors, but is more targeted for advanced traders and offers over 130 crypto trading paries, more than 230 different cryptocurrencies and margin trading.

  • Fees: 0.16%-5%
  • Pros: Over 230+ cryptocurrencies available, over 130 crypto trading pairs and low fees for advanced traders.
  • Cons: The service has limited funding options, is not available in New York or Washington state, and charges high fees for purchases in USD.
  • User Interface: Sleek design, a good overview of the trading market with lots of customizations.
  • Fees: Low
  • Reputation: Trusted

If you are trying to take your crypto investments to the next level, you can get started with Kraken here.


Kraken, an established leader in the crypto exchange market, combines top-notch security and a diverse selection of over 230+ coins in the U.S., all at a competitively low price point. Get started with as little as $10.

Open Account


gemini best crypto exchange

Gemini is the best place to buy Bitcoin with a debit card instantly. Gemini makes it simple to research the crypto market, buy Bitcoin and other cryptos, and build a portfolio for the future of money. Gemini provides a user-friendly trading platform for beginners, an advanced system for serious traders, and a peer-to-peer trading portal, catering to both casual and experienced investors.

  • Fees: 0.5% – 3.49%
  • Pro: Over 120+ coins available, available in all states, and an easy-to-use interface.
  • Con: Limited customer service.
  • User Interface: A beginner-friendly interface.
  • Fees: High, Gemini's fee structure might be a significant drawback for newcomers to crypto.
  • Reputation: Trusted

Gemini, known for its strong security and never having been hacked, is a user-friendly crypto exchange available in all U.S. states, including typically excluded New York. However, users should be aware of its relatively high and complex fee structure.

Open Account


etoro bonus

eToro has been a leading online trading platform since 2008 and was one of the first companies to support digital currency trading in 2013. The platform offers a crypto exchange that supports trading in over 30 cryptocurrencies, as well as an online brokerage platform with a limited selection of stocks and exchange-traded funds (ETFs).

This platform's engaging social features and vibrant community appeal to those who enjoy communal trading experiences. However, for those seeking a cost-effective crypto exchange, eToro's high trading fees might be excessive.

  • Fees: 1%
  • Pro: The platform provides a communal experience, allows transferring cryptocurrency off-site, and offers extensive educational resources.
  • Con: Not available in New York, Hawaii, Minnesota and Nevada, has limited customer service and no crypto-to-crypto trading pairs.
  • User Interface: Easy to Navigate
  • Fees: High
  • Reputation: Average

eToro users can start trading cryptocurrencies, stocks, and ETFs with just $10 and mimic successful traders' moves on its innovative platform.

Join over 12M users worldwide

Trade popular crypto on eToro. Explore professionally managed portfolios. eToro is one of the world’s leading social investment communities that allows people to grow their knowledge.

Open Account
Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk.

Other Ways to Get Bitcoin

Crypto Credit Cards

As cryptocurrency continues to go mainstream and the economy is incorporating crypto into daily spending and transactions — many people are now learning about easy ways to spend crypto.

This has brought about an upsurge in the number of available crypto credit cards, which offer cash back on spending and purchases, coupled with trading benefits and access to a variety of services at a discount.

If you are new to the crypto space and seeking to invest and earn passively while going about your daily business then these are the best cards to consider:

Best overall crypto credit card
An alternative crypto rewards card
Best overall crypto credit card
An alternative crypto rewards card

Crypto Savings Accounts

Why bother putting money in a traditional savings account? At a .75% interest rate, you might as well hide it under the mattress even with recent interest rate hikes. But a crypto savings account? You could earn a nice chunk of change fairly quickly. 

Of course, rates will vary, but it’s not unusual for crypto savings accounts to generate high yields between 4% to 8%. And they can go much higher. It’s your best chance to increase the overall return on your investment portfolio. 

But, before you go all-in with your BTC and ETH, you’ll want to have the information you need to make a good decision. It’s your hard-earned cash, after all. No one knows for sure what the demand will be next month, or tomorrow for that matter. And there are some inherent risks. 

Not just any old cryptocurrency account will do. We know you’ll want to be selective. That’s why we’ve rounded up the best of the best crypto exchanges. Here are our top three recommendations:

The Final Word

In conclusion, Bitcoin represents a groundbreaking shift in our approach to money. It stands not just as the first but also the most well-known cryptocurrency, built on the innovative blockchain technology.

Throughout this ‘Bitcoin for Dummies' guide, we've demystified the core concepts of Bitcoin – from how it works, its underlying blockchain technology, to how to buy, store, and use it. The decentralized nature of Bitcoin offers a new level of financial freedom and security, albeit accompanied by volatility and regulatory uncertainties.

As we move forward in the digital age, understanding Bitcoin is essential, not just as an investment but as a revolutionary technology that could redefine the future of finance. Whether you decide to invest in Bitcoin or simply observe its progress, its impact on the financial world is undeniable and worth understanding.


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About the author

Brian Meiggs
Hi, I'm Brian Meiggs! A personal finance expert, entrepreneur, and the founder of My Millennial Guide. My drive is to help others unlock the wealth of freedom and pave the path to financial success. With my bachelor's degree in finance, I help millennials follow the smart money in order to increase their earning potential and start building wealth for the future. I write regularly about side hustles, investing, and general personal finance topics aimed to help anyone earn more, pay off debt, and reach financial freedom. I have been quoted in major publications including Business Insider, Yahoo Finance, NASDAQ, Discover, GoDaddy, BiggerPockets, Fox News, Debt.com, Quick Sprout, Money Geek, MSN Money and many more!