What can you do with Bitcoin?

By Kraken Learn team
11 min
2024年3月26日
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A beginner's guide to using Bitcoin 📖

Bitcoin (BTC) is the world’s largest digital currency and is now owned by millions of people globally.

When the protocol first launched in 2009, Bitcoin’s anonymous creator(s) Satoshi Nakmoto aimed to deliver “a peer-to-peer electronic cash system.”

This means that unlike traditional currencies, Bitcoin’s public network allows “online payments to be sent directly from one party to another without going through a financial institution” as described in the Bitcoin white paper.

While the cryptocurrency has grown into one of the world’s largest assets by market capitalization, some still see Bitcoin purely as a speculative investment vehicle.

In reality, many people don’t only buy and hold bitcoin.

Today, people around the world are actively using Bitcoin not as a speculative bet but as a normal part of their everyday lives.

From straight forward use cases like transacting value, to emerging use cases like data storage, Bitcoin is far more than a bet.

Bitcoin is a tool that can empower people with a more efficient way to connect and transact.

Self-custody your own bitcoin 🏦

One key functionality of Bitcoin not found in other traditional assets is the ability to self-custody. 

When bitcoin owners self-custody their coins, they don’t have to rely on any centralized third party — which can act fraudulently, misuse data or suffer a data breach — to secure and manage their BTC. 

You can think of self-custody like storing your own cash in a personal vault at home, rather than depositing it into an account controlled by a bank. It’s available whenever you need it, and you don’t need to get permission from a third party to access it.

By taking self-custody of Bitcoin, individuals can eliminate the need to rely on a government, company or individual while managing their finances. There are no withdrawal limits, hold periods or other limitations on how you transact.

Bitcoin self-custody allows individuals to take full control of their finances and eliminate the influence of others in the process.

You can learn more about custody and the different possibilities self-custody unlocks in our Kraken Learn Center article, What is crypto custody?

Send efficient borderless payments 🌎

Bitcoin can be used to quickly send or receive international payments for a comparatively low cost. 

Have you ever tried to send money from one country to another? Millions of people do it every day. 

Those that have sent cross-border payments will know that the process is:

  • Costly - intermediaries typically charge a large fee to send the transaction, before charging an exchange rate fee for changing one currency to another.

  • Time consuming - payments can take several days, and can only be processed when the bank or payment service is open for business.

  • Intrusive - a large amount of highly personal information needs to be collected in order to send money that rightfully belongs to you.

  • Confusing - dozens of intermediaries are typically involved in the process, each with their own unique set of criteria.

Compared to some existing cross border payment service options, sending value via Bitcoin transactions can offer a significantly cheaper alternative.

One research paper reported that transferring $200 worldwide via bitcoin was 30 times cheaper than using a bank.

This is because Bitcoin’s decentralized infrastructure involves far fewer intermediaries than traditional payments.

While an overseas payment might pass through several banks or service providers that each charge a fee, only one bitcoin miner processes new transactions at a time.

Additionally, Bitcoin transactions are typically finalized in about an hour. Traditional international payment providers can take up to five days. This is because unlike banks and money transmitting services, the Bitcoin network operates 24/7

Whether it’s a national holiday, weekend or late evening — Bitcoin never stops operating. 

For individuals looking to send transactions without having to first receive approval from a third party, Bitcoin can be an attractive option as well.

Once an individual purchases crypto from a platform like Kraken and transfers it to their own Web3 wallet, it is theirs to spend how they wish.

With Bitcoin, there are no transaction minimums, maximums or other limitations that dictate how a person can or can’t spend their coins.

Sound valuable to you?

Get started by signing up for your Kraken account and buying as little as $10 worth of bitcoin.

Store value 💎

Bitcoin’s truly limited supply has caused some to view it as a store of value and a way to hedge against inflation

While it is true that Bitcoin’s price can be volatile, the network has maintained near-perfect uptime (99.98% at press time). This consistency helps to make Bitcoin a useful and reliable financial tool for many people around the world.

Additionally, Bitcoin’s source code caps its total supply at 21 million coins. Once the network has released all 21 million Bitcoin into circulation via the mining process, the protocol will no longer mint any new units. This makes Bitcoin a truly scarce asset.

The protocol manages the distribution of new units of bitcoin using a programmatic halving schedule. This process, which was defined since the launch of the protocol, provides a clear and predictable way of knowing exactly when new units of bitcoin enter circulation. 

Check out our article What is a Bitcoin halving? to learn more.

Many in the crypto space feel Bitcoin’s limited supply of 21 million coins and transparent distribution schedule are what distinguishes bitcoin from government issued currencies.

While governments can freely create or “print” new units of currency at any time, the process does not work the same way on the Bitcoin network.

This transparency and consistency is what makes bitcoin a potential store of value to people all over the world.

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Transact value pseudonymously 🥸

Understanding Bitcoin’s “pseudonymous” nature can be an abstract exercise for some. 

On one hand, transactions appear completely anonymous. There’s no identifying information attached to any transactions sent over the network, just public wallet addresses comprising strings of alphanumeric code.

But on the other hand, all transactions are completely transparent for all to see. The are posted to a globally accessible blockchain network where anyone in the world can reviews the details of every Bitcoin tranaction that has ever taken place.

So which is it?

In order to access traditional financial services, many institutions require customers to turn over their highly-sensitive personal information. These intermediaries then collect, store and analyze every detail about how people choose to spend their money.

Meanwhile, bitcoin users can download various free crypto wallets without needing to submit any sort of personal information. These services allow users to interact directly with the Bitcoin blockchain. 

Once downloaded, users can freely hold, spend and receive bitcoin or other types of cryptocurrencies without ever revealing their personal information to the public network. This provides a high degree of privacy, but not total anonymity.

Public crypto wallet addresses might only contain strings of alphanumeric code. You can learn more about this in our Kraken Learn Center article, How do cryptocurrencies use cryptography?

While it may be challenging for the average individual to track Bitcoin transactions, modern forensic techniques and financial regulations have enabled law enforcement to isolate individual crypto wallets and identify their underlying users.

It is also important to understand that certain anti-money-laundering and anti-terorrism laws require centralized exchanges like Kraken to collect and record information about its clients.

In circumstances where fraud or criminal activity has taken place, the blockchain can turn into a clear and reliable way of tracking that behavior, rather than obfuscating it.

Even still, no personal identifying information is stored on the bitcoin blockchain — meaning coins that have not been associated with an individual can be transacted in a private way.

Mine bitcoin (BTC) ⛏️

Mining is the process that secures the Bitcoin network. 

During the mining process, volunteers compete against each other using powerful computers to win a cryptography-based competition that repeats roughly once every ten minutes.

Winning miners earn the right to propose new blocks and receive a block reward consisting of newly-minted BTC. They are also rewarded with any fees attached to the transactions that include in their proposed block.

Bitcoin mining can be very expensive and difficult to do without the proper equipment and technical knowledge. However, there are ways novice Bitcoin users can enjoy some of the benefits of mining without committing substantial amounts of capital and time.

Lottery miners, joining mining pools or using cloud mining services are just some of the ways beginners can access the world of bitcoin mining in a more cost-effective way.

For more information, check out our Kraken Learn Center article What is Bitcoin mining?

Trade Bitcoin 🤝

Trading refers to the active buying and selling of an asset. Many aim to buy at low prices and sell at higher prices. This can be difficult to achieve in practice — especially when trading volatile crypto assets like bitcoin.

Traders often use various techniques such as technical analysis in an effort to make more informed decisions and improve their chances of success. Technical analysis involves traders analyzing historical financial data and trends in an effort to predict future price movements. 

You can learn more about the tools and techniques behind technical analysis in our Kraken Learn Center article A brief introduction to technical analysis.

Bitcoin’s price can change quickly and drastically as traders constantly evaluate the value of Bitcoin. This volatility makes Bitcoin an attractive asset for looking to capture profits from its large price changes or arbitrage opportunities.

For traders who are still looking to capitalize on these price swings, but are not interested in having to manage the custody of their Bitcoin, a variety of crypto derivatives exist. Derivative products can provide traders with a way to gain exposure to Bitcoin’s price changes, without having to take custody of Bitcoin at any point. However, derivatives are also a complicated financial instrument that only advanced traders should consider.

You can learn more about the various types of derivatives that existing in our Kraken Learn Center article, What are crypto derivatives?

Earn DeFi rewards using Bitcoin 🏆

Wrapped Bitcoin (WBTC) allows users to gain exposure to the world’s largest cryptocurrency on blockchains where actual Bitcoin can’t exist. Custodians hold Bitcoin on its network and then mint WBTC on chains like Ethereum. 

Check out the Kraken Learn Center artcle, What are wrapped crypto assets? to learn more.

Wrapped Bitcoin allows individuals to use Bitcoin for different purposes across a variety of decentralized finance (DeFi) applications, including yield farming, borrowing against Bitcoin collateral and more.

It’s important to note that using WBTC adds “custodian risk” to your DeFi activities, because it relies on centralized third parties to hold the bitcoin that backs each WBTC coin until they’re redeemed. 

Check out our article, How to stay safe in DeFi, if you want to learn more about the different types of risks you may encounter.

Store data on Bitcoin’s blockchain 💾

As of 2024, the Bitcoin network has the ability to mint and store unique pieces of information on satoshis — which are the smallest units of Bitcoin. This capability, referred to as Bitcoin Ordinals, unlocks similar functionality as non-fungible tokens (NFTs) directly on the Bitcoin blockchain.

Ordinals are created by embedding, or “inscribing,” data in specific satoshis. The inscribed data can represent NFTs or new tokens on Bitcoin’s network. 

A user can inscribe virtually any kind of data into a satoshi, which has more recently led to increased activity around trading and creating infrastructure for Ordinals.

Stablecoins, bridges with other chains, staking functionality and more are all developed or in development using Ordinals.

Check out our Kraken Learn Center article Bitcoin NFTs: What are Ordinals? to learn more.

Thanks to BitVM and Ordinals, Bitcoin’s network can now also mint and trade crypto tokens besides BTC and run DeFi decentralized applications (dApps) like DEXes. 

Increasingly, it appears that everything you can do within Web3 may eventually be possible to do directly with the Bitcoin blockchain.

Verify complex computations 🤖

The most recent breakthrough in Bitcoin technology is BitVM (Bitcoin Virtual Machine), a system that allows anyone to verify complex computations on Bitcoin’s blockchain. 

This innovation paves the way for Bitcoin Turing-complete smart contracts, making the network as versatile as Ethereum (ETH) and other prominent smart contract platforms.

With BitvVM Bitcoin could eventually support its own ecosystem of native decentralized applications, in the same way that Solana (SOL) and Cardano (ADA) currently do.

Visit our Kraken Learn Center article, Bitcoin BitVM: What is it, exactly? to find out more.

Getting started with Kraken

Whether you’re looking to transfer crypto to a loved one in another country, take full custody of your own digital assets or experiment with Ordinals, Bitcoin offers a solution.

Kraken offers a trusted place to get started with crypto and buy bitcoin today.

*Peer-to-peer transfers are not available on the Kraken platform.