Our AtoZMarkets Bitcoin guide for dummies explains what the flagship cryptocurrency is, how it works and how you can use it in everyday life.
December 18, 2018 | AtoZ Markets- The creator or the team of Bitcoin creators calling themselves Satoshi Nakamoto provided a document on the last day of October in 2008, which stated they were working on a unique monetary cryptosystem. Its main advantages, as Satoshi team said, was supposed to be the independence from world governments, the provision of the possibility of a completely anonymous use, as well as the protection from fraudulent exposure.
In Japanese, “Satoshi Nakamoto” stands for “clearly thinking at the base or “clear thinking in a book” (expert, sage). Nobody knows who Nakamoto is or what is their gender even, what their real name is. Since Bitcoin appeared, several people have already claimed that they are Satoshi Nakamoto. In 2014, Newsweek magazine claimed that American Dorian Nakamoto was the creator of Bitcoin.
Another theory says that Nakamoto is the head of Tesla and SpaceX projects’ Elon Musk. As considered by traders and miners, a person can prove that they are Satoshi Nakamoto in a digital signature created using cryptographic keys belonging to the very first operations with bitcoins.
In May 2016 Craig Wright, an Australian computer scientist, and businessman claimed to be the real Satoshi Nakamoto. The situation with Bitcoin can be compared with literary hoaxes. There are still many arguments whether William Shakespeare really existed or his literary works are the fruit of the collective labor of the English aristocracy. All in all, it seems that Bitcoin is a result of collective creative-digital work and there is no sense in searching for its author (or authors) anymore. Some people consider the secrecy surrounding Bitcoin as a source of profit. We can only imagine how much earnings could bring writing a script about creating Bitcoin, or a book based on “real” events.
How Bitcoin works?
This is probably the reason you are reading this Bitcoin guide and we will explain in simple terms. Bitcoin is a set of values endowed with the properties of cash, digital currency, and gold, which can be used in transactions. Bitcoin transactions are anonymous and cheap without the participation of a third party as cryptos transferred directly between subscribers. Moreover, there is no binding of the person’s name to the wallet, and you can create as many as you need; You can not block the user’s wallet, cancel the transfer or return the sent bitcoins back; digital money can be stored on your computer, in a virtual wallet or on a well-protected mobile device; nobody regulates Bitcoins – the price depends solely on their demand/supply in the economic market.
This feature makes Bitcoin not quite a reliable kind of funds, as, without support and interest in it, Bitcoin’s value will drop to zero. Bitcoin cannot be generated indefinitely, the process has its limitations. Initially, the system code was created so that the maximum number of coins did not exceed 21 million. It also tracks the dynamics of the creation of the crypto, and for the current time within 10 minutes, you can issue no more than 25 coins.
They are distributed by mining protoshares (PTS) among the pools which make calculations aimed at making transactions and ensuring flawless operation of the blockchain. Every 4 years, when the number of blocks reaches the number 210,000, the release of new coins, is halved (from 50 to 25, then to 12.5, etc.).
Thus, the principle of deflation increases the value of Bitcoin, which is why it gradually becomes more expensive. But even when the last 21 million bitcoin is formed, this does not mean that the issue will end, because after the decimal point it can continue to be divided up to the 8th digit. Bitcoin like any fiat currency has its own variant of a penny or a cent – satoshi, and 1 bitcoin = 100,000,000 satoshi.
Bitcoin is like an ordinary computer program, with a concept based on sharing, just like that of what is known of torrent, where the download depends on how many peers each computer connected on the network can contribute with, for the downloader to assemble the whole parts of what they are downloading, you install the program, and someone else does the same.
After that, you can transfer files to each other directly, without the participation of any servers, and almost without control. The task of Bitcoin is not to transfer files between users, but to give them “virtual points”. In what ways is it different from traditional currencies? Bitcoin can be used to pay for things electronically if both parties are willing. In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally.
How to get Bitcoin?
This Bitcoin guide wouldn’t have been complete had we not give an answer to this question. You see, the process of getting Bitcoins is fraught with difficulties. While it can be exchanged for ordinary money, we have found 5 methods to get it for free.
- Faucets. The nuances of the work of various Bitcoin faucets vary, but the general principle is the same. The user of the faucet receives a free cryptocurrency as a reward for performing any simple operation like viewing an advertising message or filling out a questionnaire. In most cases, the reward varies from 0.000001 to 0.00001 BTC for each action. In some cases, the user can additionally win a large reward (up to 1 BTC). By ensuring themselves against fraudsters, faucets pay bitcoins to users at regular intervals. In most cases, this interval is from 15 minutes to 1 hour. To start working with these services, you must disable all ad blocking services in the browser. Some faucets immediately transfer the earned bitcoins to your wallet, on others you need to collect a certain minimum amount. Working with faucets, in any case, will bring you a certain income (albeit small). Most likely, earnings from the faucets cannot be compared with the income that your main job brings, but this is a good option for getting additional income in your free time.
- Mining The times when it was possible to earn decent money with mining have already passed. However, it’s still too early to put an end to this method of getting bitcoins. If you want to do mining, you have to keep in mind, that the chances of making money are higher if you work in a pool with other miners. But now it is not necessary to invest big money in the purchase of expensive equipment and pay huge bills for electricity to start mining. Most of the mining companies have already switched to cloud mining technology. Mining bitcoins is a rather difficult task, and today for most it is just a hobby. The complexity of mining cryptocurrency is constantly increasing and requires more and more computing power. Mining can be done on a wide range of computing devices, but at the moment, adequate earnings can be obtained only on specialized ASIC miners. Just be aware that building mining farms is not easy, requires large investments, consumes a huge amount of electricity, occupies a lot of space, requires special cooling and specific knowledge. If you become familiar with the basics of the Bitcoin network, it will become clear that you will not receive adequate earnings by injecting large capacities, the Bitcoin system will automatically restructure the complexity so that the issue does not exceed the required volumes, i.e. receive over time you will become less.
- Work for bitcoins. Working for Bitcoin as a salary is a fairly common phenomenon. The popularity of cryptocurrency is constantly growing, and many employers are beginning to consider Bitcoin as a way to pay salaries with it. For example, private companies often place logo creation orders offering BTC. Often users’ attention is attracted by services like WorkForBitcoins, but you have to keep in mind that in this area people are often offered to distribute spam or use other dishonest ways of earning. You should not follow suspicious links and deal with such things. You can get a salary in cryptocurrency at the main place of work. Talk to your employer, because he can pay your wages in bitcoins using the Bitpay service.
- Tips (Tips). Getting a person to pay you a tip is hard enough. But if people are ready to encourage you for something, they can give you a tip with the help of the ChangeTip service. Suppose you write interesting and useful articles, and some of the visitors will really like your Twitter material. He wants to thank you, and for that, he will just need to mention @changetip in the answer to tweet and specify the desired amount. The service will write money from his account and credit it to yours. On average, tips are no more than one dollar.
- Buy from people who have them. The main problem is to trust the seller, and not run into fraudsters. You can use special Bitcoin exchange platforms. It is the easiest, fastest and safest way. If you are using legal exchanges you should have no problems. The method is most suitable for those who like to play with the exchange and understands what he is doing.
Where to store Bitcoin?
Bitcoin wallet – an electronic device for storing bitcoins. There is a private key that allows you to dispose of virtual money. There are a few kinds of Bitcoin wallets and will we discuss them in this Bitcoin guide.
- Bitcoin wallet as software on a computer. You need to download the application. Keys are stored locally (unless HD wallet technology is used). These wallets can be: thick – you need to download the whole chain of blocks and download new ones (the most reliable option); thin – download full chains are not necessary, so it is convenient to use on smartphones and tablets, but one hundred percent security is not guaranteed.
- Online wallets for storing bitcoins. You do not need to download absolutely all blocks of the network, so it saves time and device memory. You can manage your wallet remotely save addresses of other wallets and transfer Bitcoins. There is a risk of hacking and theft of your virtual savings. Experienced users recommend to keep small amounts in this kind of storage and not for long period of time.
- Mobile Wallets. To store Bitcoins you can use devices based on iOS and Android. Technologies of reading and recognition of QR codes or NFC (Near Field Communication) are applied. Bitcoin Wallet is a standalone wallet for Android. The balance is displayed in different formats and currencies. Addresses are saved. Allows you to pay via Bluetooth, sends notifications about the arrival of bitcoins.
Future of Bitcoin
There is still some skepticism about Bitcoin. The bright minds of economics, including Nobel prize winners P. Krugman, J. Stiglitz, R. Schiller, and the legendary investor W.Buffet consider this crypto a controversial matter. They call Bitcoin a fraud, a financial bubble that will eventually explode. There also are very authoritative entrepreneurs and financial giants on the Bitcoin’s side. For example, J.Dorsey, the CEO of Twitter, P.Thie one of the PayPal founders, R. Branson a Virgin’s founder and S.Wozniak (Woz) one of the Apple founders, believe in this crypto’s future. These absolutely opposite opinions clash society and split it.
The cryptocurrency market experienced at quick pace popularity last year, as many investors felt Bitcoin was the asset that guarantees an explosive profit. That seemed unarguable at that time. Considering that at the start of 2017, Bitcoin was barely trading at $1000, but by December it had skyrocketed by nearly 1880% to trade at $19800.Between November and early December 2017 alone, Bitcoin gained about 250% to make the cryptocurrency market wildly popular.
Yet, how different the year after could be? Well, the price of the king of the cryptocurrencies, Bitcoin, fell by 82%, trading at the time of writing below $4000. From a market capitalization perspective, Bitcoin maintains more than 50% of the crypto market dominance. Therefore, the effect Bitcoin price correction was felt across other cryptos, tokens and even mining operations. As a matter of fact, cryptocurrencies have lost over 80% of their market values in 2018.
This prompted the market to question whether Bitcoin is dead? But is it? In the previous bullish trends, the price hit $29, $1120 and $19800. The next bullish trend might be slower and less than the previous but it’s very likely to go above $100,000 mark. If the price would repeat its previous behaviors. With strong institutions, strict regulations and more high-net-worth investors coming in, the cloud of pessimism around bitcoin and cryptocurrency might just disappear for a new wave of healthy spikes. The next bullish trend, if it happens, could take much more time than before, but it is unlikely that Bitcoin will end or vanish completely.
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