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Bitcoin is a cryptocurrency, a form of electronic money. It's a decentralized, digital currency that is bank independent and can be sent from user to user over the peer-to-peer Bitcoin blockchain network without the need for intermediaries.
If you want to know what Bitcoin is, how to get it, and how it can help you without getting into technical details, this guide is for you. He will explain how the system works, how you can use it for your profit and what scams to avoid. It also guides you to resources to help you store and use your first digital payments.
What is a Bitcoin and how does it work?
No wonder Bitcoin surfaced in 2008 shortly after Occupy Wall Street accused large banks of misusing borrowers' money, defrauding customers, manipulating the system, and levying fraudulent charges. Bitcoin pioneers wanted to hold the seller accountable, eliminate the middleman, remove interest fees, and make transactions transparent in order to hack corruption, create organic network value, and lower fees. They created a decentralized system where you could control your money and know what was going on without depending on banks.
Bitcoin has come a long way in a relatively short time. Companies around the world, from REEDS Jewelers, a large jewelry chain in the United States, to a private hospital in Warsaw, Poland, accept his currency. Billion dollar companies like Dell, Expedia, PayPal, and Microsoft do the same. Websites advertise them, publications such as Bitcoin Magazine publish their news and price promotions, the cryptocurrency is discussed in forums and their coins are traded. It has its application programming interface (API), price index, and exchange rate.
Problems include account hacking by thieves, high volatility, and delays in transactions. On the flip side, people in third world countries may consider Bitcoin to be their most reliable channel for giving or receiving money to date.
- October 31, 2008: Bitcoin whitepaper published by anonymous Satoshi Nakamoto.
- January 3, 2009: The Genesis block or block number one is being dismantled.
- January 12th, 2009: The first Bitcoin transaction.
- December 16, 2009: Version 0.2 is released.
- November 6, 2010: Market capitalization value exceeds $ 1 million.
- October 2011: Bitcoin forks for the first time to create Litecoin.
- June 3, 2012: Block 181919 created with 1322 transactions. This is the largest block so far.
- June 2012: Coinbase is launched.
- September 27, 2012: The Bitcoin Foundation is established.
- December 4, 2013: The price peaked at $ 1.079.
- December 7, 2013: Price drops to around $ 760.
- February 7, 2014: Mt. Gox was hacked. This was one of the worst hacks ever, causing the price to drop.
- June 2015: The BitLicense is introduced. This is one of the most important cryptocurrency regulations.
- August 1, 2017: Bitcoin forks again to form Bitcoin Cash.
- August 23, 2017: SegWit is activated.
- September 2017: China bans BTC trading.
- December 2017: The first Bitcoin futures contracts were introduced by CBOE Global Markets (CBOE) and the Chicago Mercantile Exchange (CME).
- December 2017: Bitcoin price hits its all-time high.
- January 2018: Price drops as a result of the cryptocurrency market crash of 2018.
- September 2018: The value of the cryptocurrency collapses 2018% since its peak in January 80, making the 2018 cryptocurrency bear market worse than the 78% collapse of the dot-com bubble.
- November 15, 2018: Bitcoin's market capitalization fell below $ 2017 billion for the first time since October 100.
- October 31, 2018: Bitcoin's 10th anniversary
- May 11, 2020: 3. Bitcoin halves
Understanding Bitcoin - What is Bitcoin in detail?
In the simplest case, Bitcoin is either a virtual currency or a reference to the technology. You can transact by check, wire transfer, or cash. You can also use Bitcoin (or BTC), referring the buyer to your signature, which is a long line of a security code encoded with 16 different symbols. The buyer decrypts the code with their smartphone in order to receive your cryptocurrency. In other words, cryptocurrency is an exchange of digital information that enables you to buy or sell goods and services. The transaction gains your security and trust by taking place on a peer-to-peer computer network similar to Skype or BitTorrent, a file sharing system. Satoshi Nakamoto used blockchain technology to enable Bitcoin to be decentralized, completely transparent and immutable.
Bitcoin transaction properties:
1.) Irreversible: Once confirmed, a transaction cannot be reversed. Nobody can reverse them. And nobody means nobody. Not you, not your banks, not the President of the United States, not Satoshi, not your miner. From nobody. If you send money, send it. Point. No one can help you if you've sent your money to a scammer or if a hacker stole it from your computer. There is no safety net.
2.) Pseudonym: Neither transactions nor accounts are associated with identities from the real world. You receive Bitcoins on so-called addresses, which are random chains of around 30 characters. While it is usually possible to analyze the flow of transactions, it is not necessarily possible to relate the identity of the real world users to these addresses.
3.) Fast and global: The transactions are distributed almost immediately in the network and confirmed in a few minutes. Since they take place on a global network of computers, they are completely indifferent to your physical location. It doesn't matter if I send Bitcoin to my neighbor or to someone on the other side of the world.
4.) Secure: Bitcoin funds are locked in a public key cryptography system. Only the owner of the private key can send cryptocurrency. Strong cryptographic technology and the magic of large numbers make it impossible to break this scheme. A Bitcoin address is more secure than Fort Knox.
5.) Without permission: You don't have to ask anyone to use cryptocurrency. It is just a piece of software that anyone can download for free. After you've installed them, you can receive and send bitcoins or other cryptocurrencies. Nobody can stop you from doing business with your own money. There is no gatekeeper.
Where can I buy bitcoins?
First of all, we recommend that you read this in-depth guide on how to buy Bitcoin.
You can get your first bitcoins from any of these four places.
- A crypto wallet where you can exchange "normal" coins for BitCoins or Satoschis that correspond to the BTC cent type. Resources: Coinbase and Coinsquare in the US and Canada, and BitBargain UK and Bittylicious in the UK.
- A bitcoin ATM (or cryptocurrency exchange) where you can exchange bitcoins or cash for another cryptocurrency. Resources: Your best bets are BTER and CoinCorner
- A classified service where you can find a seller to help you exchange bitcoins for cash. Resources: The final website is LocalBitcoins.
- You could be selling a product or service for BitCoins. Resources: sites like Purse.
Attention! Bitcoin is notorious for scams. So before engaging in any service, check for reviews from previous customers or ask your questions on the Bitcoin forum.
How exactly does Bitcoin work?
Without going into the technical details, Bitcoin is working on a huge public ledger, also known as a blockchain, in which all confirmed transactions are contained as so-called "blocks". Once each block enters the system, it is sent to users' peer-to-peer computer network for validation. This way, all users are informed of every transaction, which prevents theft and double spending where someone spends the same currency twice. The procedure also helps block user trust in the system.
Is Bitcoin Safe and Legal?
To see how the system works, imagine someone named Alice trying out bitcoins. She would sign up for a wallet of cryptocurrency that she could drop her bitcoins into.
The Bitcoin wallet
There are three different applications Alice could use.
- Full client - This is like a standalone email server that handles all aspects of the process without relying on third party servers. Alice would be in control of her entire transaction from start to finish. Understandably, this is not for beginners.
- Lightweight client - This is a standalone email client that connects to a mail server to access a mailbox. It would store Alice's bitcoins, but it would need a third-party server to access the network and complete the transaction.
- Web client - This is the opposite of "full client" and is similar to webmail in that it is entirely based on a third-party server. The third party replaces Alice and carries out her entire transaction.
Wallet technology comes in five main types: desktop, mobile, web, paper and hardware. Each of these types has its advantages and disadvantages.
How do I buy and sell things with bitcoins?
The funny thing about bitcoins is that there are no physical traces of them as of dollars. All you have are just records of transactions between different addresses, with balances increasing and decreasing in their records stored on the blockchain.
To see how the process works, let's return to Alice.
Example of a Bitcoin transaction
Alice wants to use her Bitcoin to buy Bob's pizza. She will send the bitcoin to Bob's public address, which looks like his bitcoin bank account. She signs the transaction with her private key to verify that she is actually the sender of the digital currency. Once the miners have verified the validity of their transaction, the BitCoin is sent to Bob's public address. Bob can now unlock the BitCoin with her private key. At the same time, Alice's transaction is sent to all other network participants (called "nodes") on the Bitcoin blockchain and confirmed about ten minutes later through a process of certain technical and business rules called "mining". This "mining" process gives Bob a score to know whether or not to proceed with Alice's transaction.
What is Bitcoin Mining?
Mining or processing secures the Bitcoin process by adding new transactions (or blocks) to the chain chronologically and keeping them in the queue. Blocks get chopped off as each transaction is completed, codes decoded and bitcoins passed or exchanged.
Miners can also generate new BitCoins by using special software technology to solve cryptographic problems. This is a smart way to spend the currency and it is also an incentive for people to mine money.
The reward is agreed by everyone on the network but is generally 12,5 bitcoins as well as the fees paid by the users sending transactions. In order to prevent inflation and to keep the system manageable, no more than a fixed total of 2040 million Bitcoins (or BTCs) must be in circulation by the year 21, so that the "puzzle" is increasingly difficult to solve.
This is how the Bitcoin mining process can be summarized:
- The Bitcoin miners are nodes in the Bitcoin network that have special software technology called ASICs.
- Bitcoin miners are constantly solving hard cryptographically puzzles.
- If they are successful, they are allowed to add a block to the Bitcoin blockchain and receive a reward in return.
- Currently, the reward for the Bitcoin block is around 12,5 BTC.
There are a few other important things to consider when mining Bitcoin or with proof of work:
- It is extremely difficult to do. Miners often have to spend a lot of money and computing power to successfully mine a Bitcoin. In fact, mining is so difficult today that it is impossible for a single miner to do it alone. Because of this, miners often band together to form mining pools.
- The metric that defines the level of tenacity in mining is called "difficulty".
- The difficulty is directly proportional to the hashrate of the network. The hashrate is a value that calculates the speed at which miners are doing the work within the ecosystem. The higher the hashrate of the network, the higher the speed and security of the network.
- As the BitCoin hashrate increases, so does the difficulty of keeping the mining under control and maintaining a constant BitCoins block time of 10 minutes.
What do I need to know to protect my bitcoins?
Here are four pieces of advice that will help you get ahead with your BitCoins.
As with a regular wallet, you should only keep small amounts of bitcoins on your computer, cell phone or server for daily use and keep the remaining part of your money in a safer environment.
- Back up your wallet regularly and encrypt your wallet or smartphone with a strong password to protect it from thieves (unfortunately not from keylogging hardware or software).
- Keep some of your bitcoins in an offline bitcoin wallet that is separate from your network for extra security. Think of them as your bank accounts, while generally keeping only part of your money in your wallet.
- Do not keep your cryptocurrency in Bitcoin exchanges or other third party storage locations.
- Update your bitcoin software. For additional protection, use Bitcoins' multi-signature feature, which allows a transaction to require multiple independent approvals.
Investing some time in these steps can save you money.
We recommend the Nano Ledger S - hardware wallet
Nano Ledger X is just as secure as the other two hardware wallets. It's popular because of its relatively low price of $ 65 when compared to its competitors. Because it's smaller than KeepKey, it's more portable and easier to carry around. It's a hardware wallet that comes at a very competitive price and comes with top-notch technology.
Important bitcoin tables
Bitcoin's performance over the months
The above chart is a candlestick representation of the Bitcoin price over the months. Pay attention to the last eight candlesticks. From August 2018 to January 2019, Bitcoin had six consecutive red candlesticks. This shows that Bitcoin has made losses over those six months. However, the last two months are green, in other words, they have been profitable months.
Sum of the transaction fees received in the last ten 10 days
Most of the transaction fees were collected on April 24th, 131 BTC were given away as transaction fees.
Total number of transactions made in the last 10 days
When it comes to the total number of transactions sent per day, we can make some interesting observations:
- The total number of daily transactions varies between 300.000 and 400.000.
- As of April 24th, the largest number of transactions in our dataset were 404.279.
- April 23rd had the lowest number of transactions in our dataset at 311.753.
- In our dataset, April 24th had the most transactions and the most transaction fees.
- Interestingly, April 23rd did not coincide with the lowest number of transaction fees collected.
- The lowest total amount of transaction fees was taken on April 21st, which is also where the second highest number of transactions was recorded!
Average daily transaction fees for the past 10 days
So far we have the sum of the transaction fees received and the total number of transactions executed. Now we can use these two pieces of information to find out what the average daily transaction fees were. The formula is simple:
Average transaction fees = sum of transaction fees received / total number of transactions.
- April 24th has the highest average daily transaction fees at 0,00032 BTC.
- April 21st has the lowest average daily transaction fees at 0,00012 BTC, although we have the second highest number of transactions in our dataset.
- On further calculating, we found that the average transaction fees for the past 10 days were 0,00022 BTC, or $ 1,13.
Daily total of transactions sent over the past 10 days
- Right away, April 24th stands out again. On that day, 279.421 BTC were transferred.
- On April 21st, the lowest number of Bitcoins was transferred with 65.431 BTC.
- Only on April 20 and 21, less than 100.000 BTC was transferred.
- For the past 10 days, an average of 140.488 BTC was sent daily.
The average value of each transaction
We can use a simple formula to calculate the average value of each transaction: sum of BTC sent that day / total number of transactions.
- On April 24th, the average value of any transaction sent was the highest at 0,473 BTC.
- April 21st had the least with 0,167 BTC.
- On April 17 and 23, high values were also recorded at 0,473 BTC and 0,477 BTC, respectively.
- If you take an average of all these values, you get 0,387 BTC or $ 2002.
- We can deduce from this that for a $ 2002 transaction we only have to pay $ 1,13 in transaction fees. So the transaction fees in our dataset are 0,56%.
- For the same transaction, PayPal would have charged you $ 58,30 (calculated via salecalc).
The graphic above shows how many addresses have a certain range of bitcoins. There are only five addresses that have more than 100.000 BTC. 98 addresses have 10.000-100.000 bitcoins. A large part of the addresses (45,5%) have either 0,0001-0,001 BTC or 0,001-0,01 BTC.
What else should I know?
Protect your address: Although your user identity remains anonymous behind your address, Bitcoin is the most public form of transaction, where anyone on the network can see your account balance and transaction log. This is one reason why you should change bitcoin addresses with every transaction and protect your address. You can also use multiple wallets for different purposes, so your balance and transaction history are kept secret from those who send you money.
Your confirmation result: As I said, you will receive a confirmation note about 10 minutes before your purchase. Different wallets have their own reading style.
What are the disadvantages of Bitcoin?
In the beginning, many people were skeptical about Bitcoin as nobody knows the identity of its founder - Satoshi Nakamoto. In fact, we don't even know if Satoshi Nakamoto is a man, a woman, or a group of people.
For more practical issues, hacking and fraud are the norm. They happen at least once a week and are becoming more and more sophisticated. The complexity of Bitcoin's software and the volatility of its currency keep many people from using its payment system, while its transactions can be frustratingly slow. You must wait at least ten minutes for your network to approve the transaction. Recently, some Reddit users reported that they had to wait more than an hour for their transactions to be confirmed.
Scams to beware of
The four most typical Bitcoin scams are Ponzi schemes, mining scams, fraudulent wallets, and fraudulent exchanges.
- Ponzi Scams: Ponzi scams or high-yield investment programs bring you higher than the market interest rate (e.g. 1-2% interest per day) while you divert your money into the thief's wallet. They also tend to crouch and show up under different names to protect themselves. Stay away from companies that give you Bitcoin addresses for incoming payments instead of the usual payment processors like BitPay or Coinbase.
- Bitcoin mining scams: These companies are offering to mine outrageous amounts of Bitcoin for you. You will have to pay them. This is the last thing you will see of your money (excluding bitcoins, which you also cannot show).
- Bitcoin Exchange scams: Bitcoin Exchange Scams offer features that typical Bitcoin wallets don't, such as: B. PayPal / credit card processing or better exchange rates. Needless to say, these scammers let you down while they siphon off your dollars.
- Bitcoin wallet scams: Fraudulent Bitcoin wallets are similar to online wallets - with one difference. They will ask for your money. If the robbers like the amount, that is the last thing you will see of your deposit. In other words, the address leads to them, not you.
Of all these scams, the wallet scams are the most popular, with the scammers stealing millions.
What are the benefits of Bitcoin?
The best thing about Bitcoin is that it is decentralized, which means you have a payment system that can handle international business without messing around with exchange rates and additional fees. Plus, you don't have to use a third party like a bank to process your transactions. Bitcoin is free from government interference and manipulation, so there is no Federal Reserve System to raise interest rates. It's also transparent so you know what is happening to your money. You can start accepting bitcoins right away without investing money or energy in details like setting up a merchant account or purchasing hardware for credit card processing. Bitcoins cannot be counterfeited, nor can your customer request a refund.
It's a small miracle that users call Bitcoin "Money 2.0" or that Bill Gates called it "a techno tour de force".
Other coins like bitcoin
Although Bitcoin is THE big coin in the crypto space, it does have some shortcomings when it comes to scalability and data protection. Because of this, many projects have simply branched off the main Bitcoin protocol to create their own currencies. Some of the better known Bitcoin forks are
- Litecoin: Litecoin positions itself as silver to Bitcoin's gold and can be viewed as a lighter and faster version of Bitcoin.
- Bitcoin Cash: A fork of the Bitcoin protocol that has a block size of 8 MB as opposed to 1 MB.
- Zcash: Uses zk-SNARKS with the underlying Bitcoin protocol to create a unique data protection coin.
- Dash: A bitcoin fork that offers a payment system that is both private and scalable.
What is Bitcoin: Conclusion
Where do I go from here?
Here are various resources that will guide you to the best places to find wallets, stores accepting bitcoins, exchanges for trading bitcoin and bitcoin news, prices, charts, guides and analysis, among other information.
Bitcoin has overcome several obstacles lately with the implementation of Bitcoin Cash fork and SegWit. Bitcoin has really disrupted the global economy and financial systems for the past 11 years by providing a payment system that is ahead of its time. The idea of being your own bank and having your own bank account instead of keeping your money with a third party financial institution or payment processor is revolutionary. But that is only the beginning. The Bitcoin revolution still has many miles to go. It will be very exciting to see how we go on.
- Blockchain.info - Blockchain-Info is the point of contact for checking transactions on the ledger. You can check how much money is in your wallet, or, for that matter, how much BTC is stored in a particular wallet address.
- Bitnodes - Operated by the Bitcoin Foundation, Bitnodes estimates and visualizes the size of the Bitcoin network.
- Wizbit - Wizbit shows all transactions and newly mined blocks in real time on an eye-catching rotating globe.
- We Use Coins - Weusecoins.com is a list of credible exchanges for trading Bitcoins worldwide or in the US.
- Buy Bitcoin Worldwide - Get Help Finding Bitcoin Exchanges.