Bitcoin is a decentralized digital or cryptocurrency used in a payment system that operates on the Internet.
The project was launched in 2009.
The creator of bitcoin is thought to be Nakamoto Satoshi – probably a programmer or a group of people.
In the Bitcoin system, the amount of currency is limited to 21 million coins – virtual points.
The lower the demand and the number of participants, the easier it is in the system to earn rewards.
As the number of users increases, the complexity of the tasks for which bitcoins are rewarded has increased.
“The coins used in the system are a unique computer code that cannot be generated by accident.
So they are protected from tampering or other malicious actions.
The price of coins depends on supply and demand, not on the number of participants in the system.
What does bitcoin look like?
The cryptocurrency itself is stored in a wallet that anyone can install on their computer. Bitcoin address is a set of Latin letters and numbers 34 characters long. It can also be represented as a QR code.
Sometimes in the pictures we see bitcoin as a simple coin in different colors – gold or silver. It even has its own sign. However, such money actually doesn’t exist and can’t be, because in fact it is an electronic record in the system, which for convenience was called a coin. Investors know bitcoin by the code BTC, but when you buy it, you get no paper, metal or any other physical equivalent – only a record in your bitcoin wallet.
What is a bitcoin wallet?
A digital bitcoin wallet is a program that is needed to work with cryptocurrencies and store savings in them via blockchain. When you make transactions with it, you can not depend on the modes of banking systems, quickly transfer funds around the world at any time and remain anonymous.
Despite the name, a bitcoin wallet is designed to store and transact with a wide variety of cryptocurrencies, not just traditional bitcoins (BTC), which are periodically predicted to become obsolete and die.
Each wallet has a public and a private key.
The first one is the address of the wallet, a set of symbols, which is visible to everyone who sends money to it, be it deposits or transfers.
The private key is generated from random numbers, is kept private, and is used to sign transactions.
To restore a private key in case of loss, the sid-phrase memorized by the owner – the same random sequence of words – will help.
The main advantage of bitcoin:
Bitcoin developers have managed to come up with a system where one can avoid problems with intermediaries, such as a bank or a payment system, who charge a fee for their services. This is achieved by technology where each user can directly transfer money to another user.
– The risk of losing money when exchanging because exchange platforms are not regulated;
– The price of BTCs can change rapidly or even disappear because they are not tied to any official state currency;
– Consumers who use bitcoin to pay for goods and services are not protected by regulations in the U.S., EU, Russia or any other country that provide for refunds if they are debited as a result of an unauthorized transaction;
– Bitcoins stolen from a digital wallet are virtually impossible to recover;
– Lost wallet codes cannot be recovered.
Can bitcoin be faked?
Bitcoin registries are protected by cryptography. It is impossible to fake them all at the same time. You can’t rewrite the data in the blocks and claim that someone now has millions. BTC is pretty secure in that sense. It is true that there is already an attack that allows you to settle twice with the same bitcoins, so it is impossible to say that bitcoin is absolutely secure.
What are the dangers of buying and holding bitcoin
Despite the many stories of success investing in bitcoin, study all the possible risks before buying the asset. The main factors include:
1. Price instability. The value of bitcoin fluctuates daily and can change by 10-15% up or down. Such volatility provides opportunities to make money, but can also lead to losing money.
2. Regulatory uncertainty. Many governments are unable to develop a legal concept for the status of digital money, a taxation system, and ways to declare assets. Bitcoin is a new class of financial instrument that is encouraged in some states and banned in others.
3. The issue of legitimacy of income. Since the state does not pass bitcoin laws, banks are free to interpret cryptocurrency revenues in different ways. Some companies have no problem processing transactions, while others require proof that the money is legal.
4. lack of regulation. In the case of brokers or investments in traditional assets, everything is extremely transparent. A person chooses the direction for investments and contacts an intermediary, which works in accordance with the law. Legality of operation of most exchanges and exchangers is under question.
How to buy bitcoin
To buy bitcoin you need to create a wallet and understand how it works. The main thing is to keep the private key securely and not to pass it on to third parties, as it gives access to the management of funds.
The main options for buying bitcoin:
1. exchange platforms. There are a large number of sites on the Internet that allow you to buy or sell bitcoin for a small fee. Bank accounts, popular online banking and electronic wallets are used for transactions. It is necessary to choose an exchanger with the help of reputable sites that collect reviews about the sites, exchange rates and allow you to look for the best offers.
Exchanges. Investors can at once register on an exchange site, pass verification and deposit the account with a card. After that, it will be possible to buy bitcoin. It is possible to store it both on the exchange and in a personal wallet.
3. LocalBitcoins service. An intermediary platform between users, which acts as a guarantor and protects the interests of buyers and sellers.
4. Direct transactions. Investors can independently find bitcoin holders on thematic forums or sites, and then agree to buy BTC. It is recommended to use a guarantor for more reliability.
How to make money from bitcoin
Most people have heard about the stories of making money from the cheap purchase and long-term storage of bitcoin. But this is by no means a complete list of profit opportunities. The main options for making money from BTC are:
1. Long-term investments – buying bitcoin with the expectation of an increase in the price of the cryptocurrency and the subsequent profitable sale.
2. trading – earning on changes in the value of BTC in both the short and medium term. 3.
Mining – opportunity to take part in bitcoin emission and get reward for it. Independent mining is impossible, that’s why users unite in pools.
Arbitrage – buying bitcoin on one exchange with the subsequent profitable sale on another. The method makes sense with a large budget.