Everything you need to know about bitcoin

Everything you need to know about bitcoin

What is Bitcoin? If you’ve heard of cryptocurrency, then you’ve almost certainly heard of Bitcoin. Founded in 2009,  Bitcoin was the very first decentralized cryptocurrency. A software developer, by the name of Satoshi Nakamoto, is said to be the creator of Bitcoin. Unlike fiat currency, bitcoin isn’t controlled by any central authority. Created and stored […]

What is Bitcoin?

If you’ve heard of cryptocurrency, then you’ve almost certainly heard of Bitcoin. Founded in 2009,  Bitcoin was the very first decentralized cryptocurrency. A software developer, by the name of Satoshi Nakamoto, is said to be the creator of Bitcoin. Unlike fiat currency, bitcoin isn’t controlled by any central authority. Created and stored electronically, bitcoins are produced by computers around the world. These computers use software to solve increasingly complex mathematical puzzles, with solutions rewarded in bitcoins. Much like regular currency, bitcoin can increasingly be used to purchase goods and services electronically.

Bitcoin offers a number of advantages to fiat currency. Aside from being decentralized, it’s very easy to buy bitcoin and set up a bitcoin wallet. There’s a level of anonymity to bitcoin, since addresses are not linked to personal information. Transparency is offered through the blockchain, which is a sort of digital ledger. This database allows you to see all of the transactions on the Bitcoin network and how much Bitcoin a person has in their wallet, without knowing their identity. Bitcoin and blockchain transactions are quick and cheap, in comparison to those offered by banking services.

While many other cryptocurrencies have been created since then, bitcoin has remained the most popular option and continues to dominate the crypto market today. Most people who buy bitcoin, and other forms of cryptocurrency, do so as an investment. This is hardly surprising, as the price of bitcoin has gone from a few cents per coin in 2010 to over $7,500 per coin in late 2017. At the time of writing, the market cap of bitcoin is $150 billion. Needless to say, bitcoin has attracted increasing attention over the years. Having a bitcoin investment strategy can make all the difference long-term.

 

Is it legal?

The legality of bitcoin really depends on where and how you use it. It’s certainly something of a grey area, due to the lack of regulation in the cryptocurrency industry. As such, the legal status of Bitcoin varies from country to country. Because it’s often undefined or changing in different countries, it’s important that you take the time to check this important information.

As of November 2017, Bitcoin is illegal in the following countries: Bangladesh, Bolivia, Ecuador, Kyrgyzstan, and Nepal.

Why would anyone want to ban bitcoin? Well, governments have concern over Bitcoin and other forms of cryptocurrency because of its ability to be used anonymously. While most people who buy, hold, and spend bitcoin do so with perfectly legal intentions, there are some who have used it for money laundering and other illegal activities. Perhaps the best example is Silk Road, a now defunct online marketplace that became infamous for the selling of illegal drugs.

 

Buying and selling

Buying and selling bitcoin is increasingly easy thanks to the growing number of online exchanges. The biggest bitcoin exchanges are available in most countries worldwide, but be sure to check the legality of bitcoin in your country before buying. On a Bitcoin money exchange, you can also learn how to trade. We recommend you take the time to do this rather than using a bitcoin bot, which is likely to be unreliable.

Here are some of the most popular Bitcoin exchanges to consider:

  • Binance: On Binance, you can buy Bitcoin, Binance Coin and many other coins. In fact, there are many different cryptocurrencies available. It’s known for being quick and offering relatively low fees.
  • Bitfinex: The largest bitcoin exchanges by trading volume, Bitfinex offers plenty of advanced trading features. Fees are relatively low, as compared to many exchanges.
  • Bitstamp: Bitstamp is a popular fiat to bitcoin exchange. It has a simple user interface and high trading volumes. There is good support offered in Europe.
  • Bittrex: One of the larger cryptocurrency exchanges, Bittrex offers most major cryptocurrencies. Setting up a basic account is very easy and customer support is decent.
  • CEX: Beginners will like CEX, since it has an easy-to-use interface. You can also find a nice range of trading features, if that’s of interest to you. Overall, it’s a reliable option.
  • Coinbase: Coinbase is probably the most beginner-friendly Bitcoin money exchange around. It’s available to users in 32 countries and offers a range of payment methods.
  • GDAX: Operating all over the world, GDAX offers good liquidity and competitive fees. It’s run by the same company that owns Coinbase, but offers lower fees.
  • Gemini: Gemini offers fairly quick account verification as well as comparatively low fees. Customer service response time is also quicker than many other exchanges.
  • HitBTC: Relatively low fees and a solid trading platform make HitBTC an option to consider. Bitcoin and other coins are available for trading on this platform.
  • Kraken: Kraken is a popular option in Europe, thanks to low transaction fees and free SEPA deposits. It’s available in most countries and offers plenty of features for bitcoin security.

If you still need help finding the best cryptocurrency exchange for your location, take a look below:

USA: If you’re based in the USA, then you should have no problem buying bitcoin. You can use most exchanges. In terms of bitcoin for beginners, Coinbase is recommended as it is easy to use. For low fees, try Bitfinex.

UK and Europe: If you’re based in the UK, or elsewhere in Europe, you’ll want an exchange that offers easy SEPA transfers. As such, Bitstamp and Kraken are good options to consider. Coinbase also offers a service in Europe.

Canada: There are fewer options available to those buying bitcoin in Canada. One of the most popular options is QuadrigaCX. Additionally, Canadian dollars can be used on Coinsquare.

Australia: Like most countries, Australia can use Coinbase for buying bitcoin. However, for trading back to AUD, take a look at BTC Markets or CoinJar.

India: Located in Delhi, Coinsecure is one of the more established bitcoin exchanges in India. Unocoin and Zebpay are also popular options.

Singapore: Aside from Coinbase, Singapore’s main options when it comes to buying bitcoin are CoinHako and Luno. In fact, CoinHako is based in Singapore.

It’s also possible to buy and sell bitcoin at a Bitcoin ATM. Currently, the vast majority of Bitcoin ATMs are located in the USA, and there’s a good chance that the Bitcoin ATM locations aren’t near you. However, if you are lucky, a Bitcoin ATM withdrawal is a good way to access your newly purchased bitcoin.

 

Storage options

How to Store Bitcoin

Once you’ve purchased your bitcoin, it’s important to keep it safe. It’s generally considered unsafe to keep your cryptocurrency on exchanges, as there’s a risk of your bitcoin being hacked. For this reason, you’ll want a bitcoin wallet which makes it easy to check how much bitcoin you have. There are several different types of bitcoin wallets, ranging from desktop to paper. While most wallets are just for one particular cryptocurrency, some allow you to store other crytocurrencies as well. Read on to find out about each of the wallet options, and how to go about choosing one that’s right for you.

 

Wallet options

How to compare and choose a bitcoin wallet?

A btcoin wallet is the combination of a public address and a private key. At first, you may feel a little overwhelmed with the number of bitcoin wallet options. However, it’s really a good thing to have so much choice. The type of bitcoin wallet you choose depends on which features most important to you. For convenience, you may want a web wallet, or one on your phone, for checking your bitcoin by mobile device. On the other hand, the bitcoin security offered by a hardware or paper wallet may be of greater value.

What is a bitcoin desktop wallet?

Quite simply, a bitcoin desktop wallet is one that you can access from your desktop computer. They store the private keys to your bitcoin information on your hard drive. Desktop wallets are available for Windows, MAC OSX, and Linux. One of the most popular is the Electrum Bitcoin Wallet which, while not particularly pretty, does the job required. It’s very secure and has a number of interesting features.

What is a bitcoin paper wallet?

A bitcoin paper wallet is just as it sounds. It’s the transferring of digital coins onto physical paper via a printer. The advantage of paper wallets is that they are offline and safe from malware. You are also fully in your control, as opposed to wallets that are operated by a third party. However, paper is obviously susceptible to damage. It’s also vulnerable to theft, so it’s important to place your paper wallet in a very secure location.

What is a bitcoin mobile wallet?

Some people choose to have a bitcoin mobile wallet in order to check their bitcoin amount and transactions while they’re on the go. When it comes to accessing your bitcoin accounts by mobile device, there are mobile wallets available for Android and iOS. They run as a bitcoin app on your smartphone. A popular mobile wallet for both Android and iOS is BreadWallet, which is known for its simplicity. BreadWallet is great for beginners.

What is a bitcoin hardware wallet?

Another option available to you is storing your bitcoin, or at least the private keys, on a hardware wallet. Unlike the other types of bitcoin wallets, hardware wallets aren’t free. However, the price may be worth it if you have a substantial amount of bitcoin. Hardware wallets cannot be hacked as they are secure, offline devices. There’s hardly an abundance of choices. Two options to seriously consider are the Ledger Nano S and the Trezor Bitcoin Wallet.

What is a bitcoin web wallet?

Also referred to as online wallets, bitcoin web wallets store your private keys online. This allows you to access your web wallets anywhere, on any device. Some of these link to mobile and desktop wallets, which certainly offers convenience. However, leaving your private keys in the hands of a third party is risky, particularly if you hold a large amount of bitcoin, which could put you at greater risk for a bitcoin hack. If  you’re still keen on the convenience of them, take a look at the web wallet offered by GreenAddress, which offers more security features.

What is a bitcoin brain wallet?

A brain wallet involves you memorizing the private keys of your bitcoin; the private key is never written down. Naturally, this is much more secure than leaving physical evidence of your private key, such as on paper or a web wallet. However, the risk is that you may forget the private key and lose your bitcoin forever. The security of your funds is dependent on the strength and complexity of the passphrase chosen – the longer the better, as long as you can remember it!

What is a bitcoin private key?

A Bitcoin private key is a secret, alphanumeric number which is randomly generated when you create a wallet. It allows you to spend and send your bitcoin. A private key is not to be confused with a public address, which is what you use to receive funds. Your bitcoin private key needs to be kept in a safe and secure location. That may be on a piece of paper, on your hard drive, or on hardware. For maximum security of your bitcoin information, your bitcoin private key is better off with you than with a third party, such as a web wallet.

 

Debit card options

How to compare and choose a bitcoin debit card?

One bitcoin payment system that lets you spend your bitcoin, as you would spend fiat currency from a regular debit card, is the bitcoin debit card. It works by drawing bitcoin directly from your bitcoin wallet. The advantage of this is that you can spend your bitcoin in more places, since bitcoin debit cards are typically VISA cards. You’re no longer limited to buying from a store that accepts bitcoin, or from having to convert your bitcoin to a fiat currency in order to buy things. Some of the main bitcoin debit cards to explore are Wirex, Cryptopay, and Xapo.

It’s important to take the time to compare and contrast the various bitcoin debit cards. When comparing and choosing a bitcoin debit card, consider the following points:

  • Fees: Unfortunately, there are fees associated with bitcoin debit cards. This may include a delivery and activation fee, as well as ATM and foreign transaction fees.
  • Security: If you’re spending bitcoin from your bitcoin wallet via a debit card, you want to know your wallet is safe. Be sure to check security features available.
  • Customer Service: There’s nothing more frustrating than slow support. Read reviews on customer service to make sure the customer service is quick, reliable, and friendly.
  • Apps: The ability to see what you’re spending is undoubtedly convenient. Some bitcoin debit cards offer you a bitcoin app for this. Both Android and iOS options are usually available.

 

How to trade

How do I trade bitcoin?

It’s one thing to buy bitcoin and hold it long-term, and another to trade bitcoin on a regular basis. Trading bitcoin can be extremely profitable, but it’s not without risk, due to the overall volatility of cryptocurrency. In order to trade bitcoin, you need to find a bitcoin money exchange. Earlier, we mentioned some popular bitcoin exchanges. Take a look at these and research available locations, transaction fees, liquidity, reliability, and overall safety and security. In particular, Bitfinex and Kraken meet most of these requirements. Coinbase is much easier to use than Bitfinex and Kraken, but the fees are higher.

 

How does it work?

How do bitcoin transactions work?

In the case of bitcoin, everything is very transparent. Bitcoin transactions are digitally signed for security. Everyone on the bitcoin network can see a transaction, and transactions between two addresses are stored on a vast public ledger, known as the blockchain. By looking at the blockchain information, you can see the information regarding the block and balance of a particular bitcoin address. While this isn’t very private, a degree of anonymity is offered since no personal information is linked to a bitcoin address.

In order to send bitcoin, you need a bitcoin address and a private key. These are generated when you create a bitcoin wallet. When you send bitcoin, you use your private key to sign a message with a transaction input in order to create a record of which address the Bitcoin is coming from. You also include a transaction output, which is the recipient’s bitcoin address, and the amount you want to send. The bitcoins are then sent out onto the bitcoin database and verified by miners before being put on a transaction block and solved. Miners are paid transaction fees and a subsidy of the newly created coins.

How does bitcoin mining work?

We’ve just briefly touched on transactions being verified by miners. Now we’ll explore bitcoin mining a little further. Without bitcoin mining, we wouldn’t have bitcoins. In order to mine bitcoin, miners use special software to solve mathematical problems. Bitcoin data mining works much like mining for physical resources, such as gold, in the sense that it’s resource-intensive and increasingly difficult. It’s designed this way so as to control the number of blocks found by miners each day.

In order to be considered valid, individual blocks must have a proof-of-work, which is verified by other bitcoin nodes when they receive a block. A proof-of-work is a method used to ensure that time and money went into making a block. Not only does mining serve to create new coins, it also serves to verify the legitimacy of transactions. This prevents a person from spending the same bitcoin twice.

 

Mining

Bitcoin Mining

How do I become a bitcoin miner?

If you’re interested in mining bitcoin, you’ll probably want to take a look at setting up a bitcoin miner. The alternative is bitcoin cloud mining, which we’ll cover shortly. First, you’ll need to consider hash rate. This is the number of calculations your hardware can perform each second, as it attempts to solve the mathematical problems put before it. The higher your hash rate and bitcoin mining power, the more likely you are to solve a transaction block. Second, it’s important to consider energy consumption. Read further and you’ll find out more about this in relation to bitcoin mining cost and profitability.

Once upon a time, you would have been able to mine with a Bitcoin CPU miner. Nowadays, the main bitcoin mining problem is that you’ll need to spend more money on an ASIC bitcoin miner for mining activities to be worth it. Based on price per hash and electrical efficiency, you’re best choices for hardware are the AntMiner S7 or S9, depending on your budget. Once you’ve purchased your bitcoin mining hardware, your next step is to download a program for mining bitcoin. The two most popular are CGminer and BFGminer. You should also consider EasyMiner, if you’re looking for a more user-friendly experience.

What are bitcoin mining pools?

In order to make money mining bitcoin, you’ll probably need to join a bitcoin mining pool. A mining pool consists of a group of miners who pool their resources together. This increases your odds of being rewarded, but decreases your reward as it is shared with the other miners in the pool. You’re unlikely to get rich from a bitcoin data mining pool, but you will be rewarded on a more consistent basis. Most of the biggest bitcoin mining companies are located in China, due to the cheap cost of electricity there.

When choosing a bitcoin mining pool, you need to ask yourself a few questions. Consider the following:

  • Pool Size: The bigger the mining pool, the more frequent the payout. However, the reward is then split between more miners.
  • Reward Method: There’s a wide range of reward methods in crypto mining. This dictates how and when you’re paid. The most common are PPS and PPLNS.
  • Fees: Most bitcoin mining pools charge fees. These can vary a great deal from pool to pool, so be sure to check to details regarding fees.
  • Security: Choosing a mining pool that offers bitcoin security, as well as personal security, is of the utmost importance. For increased security, look to more established mining pools.

How does cloud mining of bitcoin work?

You don’t need a bitcoin miner of your own in order to get involved with mining bitcoin. With bitcoin cloud mining, you can avoid much of the hassle involved. Cloud mining means using shared bitcoin mining power, which is run from remote data centers. By buying a particular cloud mining contract, you’re essentially renting some of the available hardware to mine bitcoin.

The advantages of cloud mining are that there is no added electricity costs and no expensive mining equipment to deal with. However, a few issues to consider are that profits are lower and that most bitcoin cloud mining companies are scams. This makes finding the few good bitcoin cloud mining companies even harder. It’s very easy for someone to take your money, claim that they’re mining for you, and then not pay out fairly or at all. One of the few bitcoin mining companies to consider is Genesis Mining. This is a Hong Kong-based company which offers three different mining cloud contracts.

How do I calculate mining profitability?

First of all, it’s worth mentioning that bitcoin mining is highly competitive due to the existence of huge mining pools. The difficulty of mining is constantly increasing, so you should work out the costs to mining bitcoin to see whether it can be profitable for you. You can do this with a bitcoin mining calculator, which will let you enter the data of the bitcoin miner in order to see how long it will take for you to make a profit.

One of the key things to consider when it comes to the profitability of mining bitcoin, aside from the cost, is energy consumption. Mining cryptocurrency consumes electricity, which can be costly. Check the energy consumption of the hardware used, as measured in watts. If you’re using a bitcoin mining computer to run your mining hardware, you’ll also need to factor in its electricity consumption.

 

E-commerce

Bitcoin ecommerce

How do I accept bitcoin payments in my store?

If you have a business, you may wish to accept bitcoin payments. It’s easier than you think to install a bitcoin payment system. The easiest way to do this is simply place a sign on your store, whether it’s in your shop window or on your store’s website. Chances are, only a small number of people will want to pay in bitcoin. These customers can ask you for your wallet address in order to pay you using bitcoin.

When it comes to accepting payment, you have a few options. Customers can pay using hardware terminals, such as a bitcoin app or via QR codes. The user can then scan the code and press ‘spend’ in order to buy a particular item.

Bitcoin e-commerce services for merchants

Setting up your website’s bitcoin payment system is now easier than ever before. There have been a number of bitcoin e-commerce services springing up in recent years. Currently, the most established and popular options are Bitpay and Coinbase. One newer option in 2017 is Shopify. While there are other e-commerce services available, it’s recommended that you research them thoroughly before choosing them for your bitcoin store.

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