What is Bitcoin
Interest in the crypto currency is not just not abating, it is getting bigger every day.
Let’s start with a little theory. First, we answer the question “What is bitcoin in simple words”?
If we describe Bitcoin in simple words, then it is an anonymous payment system using the same currency. It uses a blocking system that combines operations into one large system.
If you reduce everything to a simple – this is the essence of the bitcoins. In order for the system to be safe, methods of cryptographic protection of information are used. They do not allow anyone else to enter your wallet, except for you.
The most interesting thing is that this system completely copies real money with the only exception – there are no middlemen in it. You transfer money directly from one purse to another. Transfers are carried out, at most, 10 minutes and there is nobody, who would know who and why you send money.
On the one hand, it is the currency of the future. On the other – something frightening. Let’s take a closer look at how it works, what are its strengths and weaknesses, and how to make money on it.
How Bitcoin appeared
He appeared in quite an interesting way. In 2008, the developer Satoshi Nakamoto presented to everyone who was subscribed to him the idea of his own payment system, in which everyone would be equal. In the letter, he talked about the ideas that came to his mind, and also asked interested people to help in their implementation.
In 2009, the program was completely written and Satoshi posted the source code on the network. After that, users began to transfer each other’s currency, exchange it for real money and thereby began the work of this system.
Since that moment some programmers and miners have changed the system several times, improving it. This is possible because everyone can make changes to this system with the consent of most other users.
The first exchange bitcoins for money was in 2009. The course was as follows: 5050 bitcoin for 5.05 dollars PayPal. The exchange for real goods was held in March 2010: the user offered to bring him two pizzas for 10,000 bitcoin.
Principle of work of bitcoins
Bitcoin is a payment system. Hence, in the first place, its functionality is to transfer funds between the participants’ wallets. To do this, you use cryptographic keys that are stored on computers, and the transaction blocks that collect the miners.
The point is: you have bitcoins, you want to transfer them to someone and open a transaction. You can open it with your own key, relying on the previous transfer of bitcoins.
After you generate the transaction, you need to specify the output – the private key or purse address of the person to whom you want to send the transfer. After you specify everything, the transaction gets in the queue to create the block.
Blocks are several transactions that are combined into one large cell. Miners must compute the header code so that it does not exceed a certain number.
Miners are rewarded with bitcoins for creating blocks. And, in addition, they receive a commission for creating a block, using the resources of their computer to generate a header hash.
This is a smart enough system, because it automatically monitors the speed of creating blocks. The system increases or decreases the complexity, so that the approximate time to create 1 block remained in the range of 9-11 minutes. If the blocks start to be created more quickly, complexity will increase, and if slower – vice versa.
Advantages and disadvantages of bitcoin
Now let’s summarize everything that was said above, and try to identify the pros and cons of the crypto currency.
Pros:
- Complete anonymity of transactions;
- Absence of a single issuer;
- Absence of regulation by any state;
- Unified rights of participants in the system.
These advantages make bitcoin a real currency for the future. But at the same time, the state insists that there are a number of drawbacks, which also need to be addressed.
Minuses:
- Impossibility to track money transfers;
- Ability to transfer money abroad;
- Vulnerability of the system.
The Cryptocurrency is ideal for money laundering, the withdrawal of capital from the country and other illegal transactions. That is why its legal status in many countries is not fully defined. And that’s why many countries are seriously worried about where the increased anonymity on the Internet can lead.
But for the average user, the bitcoin has only one drawback – a binding to one wallet. If you suddenly lose access to a computer with an electronic purse, and on it will be, say 1 000 bitcoin, then you will never go to it and you can not do anything about it.
Why bitcoin has become so popular
To understand why bitcoin used to cost less than 1 cents, and now trades around 4 thousand dollars for a coin, let’s talk about history.
Let’s start with 2009 year. On January 3, the first block was generated. Reward is 50 bitcoin. January 12 was the first transaction. On October 5, the first rate of bitcoin to the dollar is formed: 1 309 BTC to 1 $.
2010: On February 6, the first stock market of bitcoins opens. May 22, a user under the name Laszlo offers a deal: the exchange of 10,000 bitcoins for 2 pizzas. By the middle of June, the cost of bitcoins is 600 dollars. November 6, their capitalization is 1 million US dollars. On December 6, for bitcoin, the first time an exchange instrument was used – the call option.
2011: February 9 bitcoin is traded at $ 1 per coin. March 27, March 31 and April 5, England, Brazil and Poland recognize it as the official world currency. April 16 TIME publishes a note on bitcoin. On June 2, the rate is 10 US dollars for 1 BTC. After 8 days – already 31 dollars. November 25 – conference on the crypto currency in the Czech Republic.
As you can see, history has quite interesting events. First, ordinary users, then entrepreneurs, and then governments of countries began to recognize this currency and reckon with it.
Already in 2013, the rate was 600 dollars apiece. In the same year, one of the presidents of a large company was arrested on charges of laundering money through bitcoin.
In 2015-2017 there was a real boom of the crypto currency, which continues to this day. Many authoritative sources began to talk about it as a technology for the future. Americans officially recognized this currency, and with them, and almost the rest of the world But the popularity of bitcoin was made not by world governments and multi million-dollar arrests. Now the cost of bitcoin to the ruble ranges from 180 to 250 thousand rubles for 1BTC.
Thanks to those people who bitcoin on their home computers, the guy who bought pizza for 10,000 bitcoins and who tried to exchange bitcoins for material things, the crypto currency and became so popular.
These people have launched the same chain, which continues to this day. Crypto currency is becoming popular because of those who are currently mining it, because of investors who invest money in it and because of the technology of instant receiving of currency without the knowledge of the state.
Therefore, the more talk about bitcoin, the more popular it becomes and the more interest it causes.
How to create a bitcoin wallet
Bitcoin continues to gain popularity, and more people are wondering how they would create their bitcoin wallet. This is a very important matter, because the account will be real money. Let’s figure out how to create and manage your wallet as safely and conveniently as possible.
You can create it in 3 different ways:
- With the help of the original program;
- With the help of third-party, more subtle programs;
- Using online services.
An official client is a large program that contains transaction data, graphic keys and many things that are not useful to an ordinary user. Perhaps, it is the most secure of all, but at the same time, if you lose access to the computer, then it will be impossible to restore the account. Such a program weighs more than 50 GB on a computer. The output of bitcoins with this program will only be through the exchange.
Third-party programs are simple versions of the same purses, only lightweight. They do not have block chains or third-party information, which the user does not seem to need. But there is still a link to one wallet and a computer, which is quite inconvenient. The program weighs about 7 GB.
Online wallets are the best option for an ordinary user. You are online to create a purse, go through the registration and use it as a normal electronic money. Plus, that you do not need any verification.
Conclusion: create wallets in online services. There they will take a small commission, about 1% from each operation, but in the first place, you will be able to restore the account without any problems, and secondly, will not be tied to one computer. Also, these services are characterized by increased attention to security, because their servers store information about wallets and transactions of registered users. In our opinion, online services are the best option.
Before moving on to the issues of earnings, one must at once say: free bitcoins are a myth.
How to earn bitcoins
The easiest way to earn a crypto currency is to beat the bitcoin with your computer.
But now the capacities required for their production have exceeded the limits of one home PC. You need something more interesting – farm mining. They can be made either from special equipment designed exclusively for bitcoin mining, or from conventional video cards and several tuning programs.
Special equipment for mining is an expensive but extremely effective pleasure. Some machines allow you to earn up to 1.2 bitcoins per day, which translates into rubles – about 220,000 thousand. But there are such expensive cars – from 300 thousand to 1 million rubles, and this is without configuration and additional equipment. In total, such an installation can cost you 3-5 million. But the result for mining really is amazing.
Those who do not have such money, are forced to build their own farms for earnings. Usually, these are 4-12 video cards that are connected to each other and use computing power in order to solve the task of transferring money.
Why video cards? Everything is simple enough. With the advent of the cryptocurrency Ether, a lot of people switched to mining on the GPU, because for him this is the only possible way of mining because of the complexity of the code and the capacity requirements. And besides, the video cards show the best performance among all the other details. They overtake the processor and hard drive, which makes the video cards the best for normal farmer currency mining.
For those who do not have a farm, but there is a desire to earn, there is another option – mining in pools. Pula is the union of several miners. After the operation is completed, the bitcoins reward is divided proportionally to the contribution. But still in the mining to earn bitcoins without investments is impossible.
The approximate payback period of the video card is now 100 days, if you do not take into account the cost of electricity. If you count with all the costs, you get a figure of about 130-140 days.
Total: we have a profitability index around 0.7% of the day, which is quite good, considering that the risks in the mining process are minimal. But do not necessarily spend money on the farm. You can buy borrowed capacity. Let’s talk about cloud mining.
Cloud Mining
Cloud mining is the rental of equipment capacities. That is, you pay money and rent a certain part of the farm. For example, 1/100 of its part. And accordingly, each bitcoin produced by this farm will be divided into all co-investors and sent to their purse. In this case, you will get 1/100 bitcoin. Mine bitcoins for an ordinary person is so really more convenient.
Cloud mining is an interesting way of investing your own money . It is quite promising and reduces almost all risks to a minimum. You just pay the minimum amount, which often does not exceed $ 100, and you buy yourself a share in some farm.
It is convenient for the company – it earns money that way, without working with risky crypto currency, and for users who do not need bitcoin farm as such.
But despite the fact that the risks are minimal, they are there. Everything lies in the honesty / dishonesty of the company, which provides the capacity of the farms. After all, no one prevents her from simply paying interest, which first drips, and then take and hide with the money received in an unknown direction.
That’s why before you begin cloud mining, take care to look at the reviews of the company with which you start work. Then read her story, see how interesting and stylishly designed the site.
You need to look at the profitability that the company promises. Above 200% per annum – you can safely close and go looking for another. The most reliable service now is HashFlare.
Self purchase
In addition to mining, there is another, rather banal way of earning money – buying currency on the exchange.
Bitcoin exchanges appeared in 2012, when the popularity of crypto-currency has only just begun to unfold. Then there were large exchangers, who themselves dictated the course of bitcoins.
Time passed, they turned into full-fledged trading platforms, requiring registration, verification and allowing even to receive money. Ideal place for those who want to earn at the jumps of the price of crypto currency.
The most popular and large bitcoin stock exchange in the world is Bitfinex. This is one of the very first giants who stood up against hacker attacks and coped with the influx of visitors. Unlike the same MtGox, which because of the hacker attack suffered enormous losses and could not even pay the debts to its users.
If you want to buy bitcoins for rubles, it’s better to use exchangers.
How much is bitcoin
This is quite an interesting and at the same time clear question. The mechanism of pricing is similar to the rest of the currencies – the demand, supply is analyzed and the average price at which people are ready to buy and sell their bitcoins is displayed. Only with the latter, in contrast to world currencies, everything depends entirely on the mood of the market.
If earlier the price for 1BTC was determined in most cases by a stock exchange or a well-known converter, now, due to the fact that many want to trade bitcoin, only the market decides how much this asset is worth.
No bank in the world can directly affect how much the crypto currency will cost. Only indirectly and only neatly, otherwise the market of bitcoins will completely collapse and the leading Western investors will also find themselves in the pit.
Therefore, the crypto currency is worth as much as people in the world can transfer bitcoins to other people. That is, everything depends on supply and demand in the market.
Is it worth investing in bitcoins
Whether it is worth investing your money is a very controversial issue. Most experts advised spending all their free funds in the crypto currency since 2012-2013. Then the technology of blocking only developed, but the tendency to growth was already visible. It could be noted that since 2011, bitcoin has consistently shown growth, at least, at 50% per annum.
But what happened now? Why are all world financial experts concerned with the prospects of this crypto currency?
In fact, many traders familiar with technical analysis can easily find the answer to these questions. It’s enough just to look at the charts to see that the course now resembles the figure of a classical bubble. And if it’s a bubble, it will surely burst.
So it was already in 2002, so it was in 2007, and so it will be in 2018-2019. An overvalued currency will now simply lose all its positions, which they gained because of their active PR by the media, the Internet and world economic centers.
Of course, conspiracy theories – this is not something that should be oriented, but still there is some opinion that in order to get rid of the really uncomfortable states of the currency, the Central Bank can use its resources and simply crush it.
That is why the issue of investment is still not fully disclosed. On the one hand, bitcoins are promising, but soon their resource will be worked out (to calculate when it is specifically difficult, but the most optimistic forecast is 2030), and then the price of bitcoin will inevitably increase.
There is one BUT. The position of the crypto-currency in general is very shaky because of the position of the world authorities. Despite the fact that right now many ministries of the economy are positive, several precedents for financing illegal activities may appear, and everyone will suddenly decide that the anonymous currency is dangerous, and this will inevitably lead to a fall.
On the other hand, the technology of blocking is quite an interesting and progressive thing that can be used in business . Many companies are just collecting investments for the introduction of this technology in their activities. That’s why the cryptocurrency can and will not live, but the technology itself will be popular, and consequently, the more popular the technology, the higher the interest in its components.
Expert opinions
As for bitcoin, you should trust only the opinion of experienced traders who are engaged in technical analysis. According to 90% of them, bitcoins now formed a typical figure for the bubble, which led to a correction to 3.2-3.8 thousand dollars from almost 5 thousand. Many crypto investors were happy that the correction is so insignificant, and they began to buy / sell them anew.
But the optimism of investors is not shared by experienced traders. They believe that if bitcoin does not urgently test the psychological ceiling of $ 5,000 and break through it, there will be a very strong pullback, which will not be limited to 3 thousand dollars.
Now the general opinion on the market is this: the rate is likely to drop even lower, and the bubble eventually collapses. So it was with the dotcom market and the stock market in the US in the past (2002 and 2007 respectively).
Therefore, if everything continues to go as it is now – the bitcoin rate may drop to 2.2 thousand dollars, which will entail significant losses and disposal of this crypto currency. And who knows where this rally will lead the virtual currency. And all because of too much talk and overestimate.
And yet the prospect of earning a virtual currency with a yield of about 1% a day is something real. But now let’s move from specific figures to general prospects.
Despite the fact that many of the near-financial experts are trying to sell the outgoing train under the name of bitcoins on the wave of the HYIP, the outlook for this currency is rather vague.
The volatility of the market is simply enormous, which inevitably leads to the fact that these investment funds can become too risky. Who needs an asset whose price depends solely on demand? And this is not an ordinary currency, which is supported by GDP, military power and authority of the country. And not even the shares , behind which is the property of the company. It’s just a data set. In fact, the cost – the price of the goods that it can offer.
And one more, but very important remark. The price is formed also proceeding from the fact that there are large players who collect bitcoins in their wallets. And if one of them wants to throw them to the auction – there will be a collapse. And to depend on the decision of a person whose name you do not even know is a dubious pleasure for a competent investor.
If you are looking for a promising way to earn money on cryptocurrencies, pay attention to cloud mining and investing in alcoins. New promising currencies appear with enviable regularity, and one-two-three of them shot after a while.
As, for example, the ether, which appeared only in 2014, but already managed to take the second place in popularity, after bitcoins. And such projects will appear, your task as an investor is to wait and buy them on time.
Bitcoin and Cryptocurrency Outlook
Now we have nothing but a vague rumor that allowed the Central Bank to legalize crypto currency in 2018. Currently, the Ministry of Finance and the main bank of the country continue to frighten people, keep quiet about the position on crypto-currencies and close exchanges of bitcoins, which can convert currency into rubles.
On the other hand, the position of the world financial centers in the United States, Japan, China and Europe gives a clear understanding of the fact that in the whole developed world the crypto currency has been accepted, albeit with limitations. In these countries will try to control it by legalizing exchange offices and overseeing the issuance of these funds. All is quite logical – if you have a lot of bitcoins, then please report where you got them.
In general, the prospects for cryptocurrency are not that vague, but they depend on too many factors that are difficult to take into account. And although market sentiments can be foreseen, the world financial backstage reaction is not. Therefore, you need to closely monitor the situation.
Remember that when working with bitcoins and investing money in them, you must dedicate 24 hours 7 days a week and 365 days a year. Only then you will be able to achieve really impressive results, because the market is quite volatile, which means that there is an ideal opportunity to earn at the price jumps.
Conclusion
Cryptocurrency bitcoin is quite an interesting milestone in the development of the world economy. On the one hand, we get a promising currency that is not tied to any bank in the world, and on the other – a time bomb that only waits for one big player to crush the entire market.
But if you are an ordinary investor who is interested in the cryptocurrency market, then here you are expecting high profits, involving high risks.
For those who are trying to find free money: bitcoin without attachments can not be obtained in any way.
But remember that now is not the most favorable time for investing in bitcoins, trying to accumulate them. There are many alternative ways of investing in exchanges, buying places in cloud mining and other, more stable options for earning on cryptocurrencies.
The clouds over the bitcoins thicken, so look for alternative ways of generating revenue with this very promising, but terribly overrated market.
