WHAT IS CRYPTOCURRENCY/ BITCOIN?
Understanding bitcoin is not difficult once you grasp its two distinct elements.
The first element to bitcoin is its protocol; the widespread network that keeps track of activity, like a ledger. The second component is the bitcoin token. The token is a verifiable bit of code that shows your ownership of the digital entity. This is comparable to a virtual promissory note. Both of these individual elements are known as “bitcoin.”
One of the highly praised facets of bitcoin is that users can send and receive bitcoin without the oversight (and fees) of a bank or other gateway. Additionally, bitcoin currency is virtual, not printed like a euro or a dollar. A worldwide network of computers generates bitcoin with a free software program.
Bitcoin is the first in a group of currencies known as cryptocurrencies. These are a digital asset, not entirely different from traditional money. A major divergence from paper currency is that bitcoin verification takes place via a cryptography system.
BUY YOUR FIRST BITCOIN
Learning all about bitcoin’s potential is exciting. Once you have mastered the basics, you are likely ready to get some of your own. I would be remiss if I did not mention that bitcoin, like other commodities, are subject to the forces of the market and by nature volatile. Be sure you do not invest more than you can comfortably lose.
You can purchase bitcoin directly from others via a marketplace or from exchanges. There are many payment options including, credit and debit cards, cash, wire transfers, and with other cryptocurrencies- this depends on who you are dealing with and your location. Setting up your own CoinSpot (or Coinbase) account is an easy way to purchase bitcoin.
HOW TO STORE CRYPTOCURRENCY
Prior to the purchase of bitcoin, it is necessary for you to have a form of storage ready. Bitcoin owners use a “wallet” to hold their virtual assets. Your wallet has your individual key that gives you access to your bitcoin address. If your wallet is well designed, it will appear as if the bitcoin is present in the wallet. You may keep your wallet on your mobile device, computer, an external storage device, or simply a paper ledger.
Often, a virtual wallet holds numerous keys, and many bitcoin owners use several wallets. The complexity and number of wallets you use are up to you.
HOW TO SELL CRYPTOCURRENCY
Except for select bitcoin ATMs, nearly all places you purchase bitcoin will provide a “sell” option. You can find out more about ATMs near you with Coin ATM Radar.
Exchanges are also a good place to sell as well as buy cryptocurrency. Be sure to work with an exchange geared towards your use of bitcoin. Some exchanges are quite specific and will only work with specific groups such as an institutional holder, trader, or small investor. Some, such as Gemini, or GDAX focus on sizeable orders from institutional traders and investors.
A retail client can work with exchanges such as Bitstamp, Coinbase, Kraken, Poloniex, and others. Each exchange has its own interface and its individual requirements.
WHAT IS MINING
Many clients new to the world of bitcoin ask about the term “mining” and how it relates to virtual currency. The world of bitcoin uses the term mining because of the similarities to gold mining. Bitcoin exists in the design of the protocol, in much the same way gold exists underground. Miners unearth the physical entity we call gold and bitcoin miners virtually uncover bitcoin within the program. While no one knows just how much gold exists, the bitcoin design promises that there will be 21 million bitcoins uncovered at some point in the future. Bitcoin miners use computer programs to bring the bitcoins to the surface. These miners can do this as a reward for validating transactions and adding them to the blockchain.
COMPONENTS OF BITCOIN At this point, I would like to highlight several components of the bitcoin mining process
A node is a strong computer that both runs bitcoin software and relays the information necessary to keep bitcoin working. There is free bitcoin software available for anyone to download, so anyone who wants to try can run a node. After downloading the software, simply leave a port open and the node takes care of the work. Your node shares bitcoin transactions with other nodes it knows within the network. These nodes pass the information to nodes they know, and the data continues to spread through the entire system. The biggest drawback to the process is nodes use large amounts of energy and storage space.
SOLVING THE PUZZLE
The bitcoin miners work with the nodes to solve a complicated mathematical problem that is part of the bitcoin program. To solve the riddle and complete the chain, a miner must figure out a number that will combine with the data in the block then passed through a hash function will create a result within a specific range. This is incredibly difficult because the hash function prevents any output predicting. Miners find the number by guessing and applying the hash function to the combined mystery number and the data in the block. The miner who solves the puzzle receives new bitcoin as a reward.
At this present time, a miner’s reward is 12.5 bitcoins. According to today’s rate, the bitcoin reward equals $ 87,500. While the payoff is generous (and based on the daily value of a bitcoin which does fluctuate) this is a highly competitive venture. Success depends on ultra-fast computing power and an element of luck.
Additionally, it is quite costly to operate as a mining node. There is a considerable amount of electricity to pay for as well as purchasing the very top of the line computer processors to outpace the other miners.
Lest anyone believe that any part of the mining process is simple, be aware that the difficulty of the calculation changes frequently. The goal is for miners to take 10 minutes to process each block. Bitcoin developers settled on ten-minute increments because they want a consistent and decreasing supply of bitcoin until they reach the final tally of 21 million bitcoins. The timeframe predicts mining will end in 2140.
While this is a broad outline of the bitcoin concept and some of what is involved, there is still a plethora of information for you to discover about bitcoin.
Advice for Beginners
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There are three overarching types of cryptocurrency:
1. Transactional cryptocurrencies serve as a way to store and exchange value. Examples include bitcoin and Litecoin.
2. Cryptocurrency platforms are designed to build a foundation that allows for the creation of new blockchain applications. These often focus on the development of secure record-keeping as well as running smart contracts.
3. Cryptocurrency applications can range from decentralized exchange to initial coin offerings to raise start-up funding.
Once your company decides to accept bitcoin and potentially other forms of cryptocurrency, there is a relatively straightforward process that will allow you to take digital currency as a form of payment.
1. Create secure storage for your cryptocurrency. Depending on the amount of bitcoin you will store, a hardware wallet is an excellent example of a safe place to store coin. If you anticipate large sums of currency, you may wish to consider a company that offers custodial crypto services.
2. Decide on how you will process payments. Once again, the anticipated amount of volume is a determining factor when choosing a payment processor. For occasional cryptocurrency purchases, your customers can pay directly to your wallet via your public address. For large numbers of purchases paid with a digital currency, aligning yourself with an application to facilitate your transactions.
3. Advertise your acceptance of bitcoin. It is nearly pointless to create storage and payment processing plan if no one knows you are joining the ranks of the scores of companies who accept cryptocurrency.
Trading bitcoin and other cryptocurrencies can be extremely profitable. If trading is something that interests you, it is a simple process to learn.
Your first step in trading is to choose an exchange for your trading. There are numerous exchanges where you can trade. Before you commit, look into the fine details about the exchange. You will want to know about things like fees, liquidity, and locations for depositing fiat currency, if necessary. Once you have decided on an exchange, create an account, and follow the instructions on the site.
While there is an element of excitement to trading in a global market that functions 24/7, you need to be sure to assess your risks before proceeding.