Bitcoin has been in the news today more than ever before. Launched around a decade ago, this cryptocurrency became mainstream in the year 2017.

Having said that, Blockchain, the technology behind Bitcoin, is the new buzzword in the technology and financial industry – with every other company trying to implement its functionality in every possible application. Many investors around the world are looking at it as the next big thing.

Despite all this buzz around Bitcoin and the technology behind it, only a few people can understand what Bitcoin is and how it works. If you are one of those who wants to get a better understanding of Bitcoin and or are interested in trading in it, then you are at the right place. I cannot tell you whether you should buy it or not, but I can help you to better understand Bitcoin.

In this review article, I will discuss Bitcoin, the technology behind it and some of the cryptocurrency exchanges from where you can buy and sell your Bitcoins. Let us get into more detail and start with Bitcoin.

Warning

This is no financial advise, all the content and the ideas present in this page and all the other pages of the website do not guarantee financial success and may lead to a loss of your money. You should always do your own due diligence before trading or seek professional advise.
If you want to learn how to trade risk free, you want to learn paper trading first. Check this tutorial out, I will take you through all the necessary steps to set up your free account on TradingView and place your ‘monopoly money’ traders in the real market.

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Blockchain

Bitcoin

Created in 2009, Bitcoin is a decentralized, digital currency that has no central monetary authority. A peer-to-peer computer network is utilized to keep track of Bitcoins transactions, which is also responsible for creating additional bitcoins through the process known as Bitcoin Mining. Users and their bitcoin transactions are pseudonymous, with no international exchange rates and middlemen to collect the fees from users. Bitcoin was born, when a person or group known by the name of Satoshi Nakamoto came with an idea of decentralized digital currency that would be free from any kind of institutional and government interference. Satoshi Nakamoto developed an online bookkeeping system that will be able to keep track and record different Bitcoin transaction and in the process mined first Bitcoins. Since the software that is used to track, create, hold and transfer bitcoin is open-source, it is free to be used.

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Bitcoin

  • Bitcoin was created in 2009 by ‘Satoshi Nakamoto’ whose identity is unknown.
  • Bitcoin has no monetary authority.
  • Bitcoin can be created through a process called Mining.
  • Bitcoin doesn’t need banks to be transferred.

Blockchain

Satoshi Nakamoto is the person or group behind the creation of Blockchain technology – that is a distributed digital ledger which accounts and documents all bitcoin and bitcoin-related transactions. Blockchain is the only place wherein bitcoins exist. Every hour, many times, new batches of bitcoin and transactions known as blocks are registered and are transmitted through the internet to all different hosts of Bitcoin Blockchain.

Each time the block is completed, it gets added to the chain, thus creating a permanent record which cannot be altered. Every new block is linked with the previous block through encryption. Thus, if anyone tries to change the recorded block, it will cause a mathematical ripple effect immediately that will be visible to all of the Blockchain hosts.

As these blocks cannot be altered, users get the ability to validate transactions without requiring any third-party authentication. Since Blockchain technology is decentralized and can be validated easily, there is huge potential for this being used in numerous different applications. This includes the sharing of medical records. Financial institutions can make use of technology to operate more securely.

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Blockchain

  • Blockchain is a digital ledger that keeps records and publishes all transactions related to bitcoin.
  • As each block is completed, it is added to the chain which cannot be altered.
  • It can be used in different applications across industries such as healthcare and finance.
Bitcoin Mining

Bitcoin Mining

In simple words, Bitcoin Mining can be referred to as the process of validating bitcoin transactions, either by creating new bitcoin currency or by moving Bitcoin from one wallet into another. In real-world, where the money is printed when more of it is needed, bitcoin cannot be willed into existence but needs to be mined by solving complex mathematical problems, which is also known as proof-of-work. Miners are actually trying to come up with a unique 64-digit hexadecimal number, known as a hash. The block gets validated once the hash is found, after which miners are rewarded with bitcoins. The mining reward was 50 bitcoins when it first came into existence. However, it gets halved with every 210000 registered blocks. Overall 21 million bitcoins can be mined. Due to this cap, the market is prevented from flooding and devaluation of bitcoins that are already in circulation in the market is avoided. As of the start of 2019, the total number of bitcoins that were in existence is 17.8 million. This is approximately 85% of the total bitcoins possible to be mined. It is estimated that all of the 21 million bitcoins will be fully mined by the year 2040. Many might think that mining bitcoins is a lucrative business, but the kind of upfront investment that is required for robust computer processing is high and is not too easy. No longer can you mine bitcoins by using your old computer systems. Professional bitcoin miners make use of high-end graphics cards that are generally found in computer gaming. However, the best method would be through using (ASIC) Application-Specific Integrated Circuit for bitcoin mining. ASIC is a general term for a computer chip that has been designed for specific purposes – in this case, bitcoin mining. These chips can be measured through their power efficiency and can cost anywhere between $500 to a couple of thousand dollars per chip. And if you opt for higher-end models, they are expected to mine bitcoins at a faster rate. However, the amount of energy consumed during bitcoin mining is one of the major issues. Lot electricity is consumed in the creation of one Bitcoin Blockchain Block.

For miners to earn bitcoins by verifying transactions, two things must happen. Firstly, miners need to verify 1 MB worth of transactions. It could be as small as one transaction but are normally several thousand. It depends upon the data each transactions stores.

Secondly, miners will now have to solve complex mathematical problems that is also known as proof-of-work. By this I mean that miners are trying to come up with unique 64-digit hexadecimal number, known as hash, which is less than or equal to the target hash. The computer power that the miner is using generates hashes at the speed of megahashes per second, gigahashes per second, or terahashes per second, trying to guess all possible 64-digit numbers until they find a unique one. The chance of miner finding a hash below the target hash is one in 6 trillion as of now.

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Bitcoin Mining

  • The total number of bitcoins that can be mined is 21 million.
  • As of 2019, 17.8 million bitcoin already exist and the remaining are expected to be mined by 2040.
  • Bitcoin mining is a lucrative business but requires a huge investment upfront to buy the computing power required to solve the complex mathematical algorithm.
  • Bitcoin mining requires a huge amount of energy.

Should you mine bitcoins?

You can certainly try to mine bitcoin. However, if you are looking to do so alone, it will take a lot of time and luck and will be less rewarding with no guarantee to get the reward. So look for mining pools and join them, once you have the necessary hardware. By working in groups, you will be able to solve the block faster.

Yes, the reward for mining the bitcoin will be shared between the groups, but you will get rewarded. As I said above, miners should be able to verify 1MB of transactions and must be the first to complete the computation of 64-digit hexadecimal number. The possibility of computing is increased when working in groups and thus your chances of getting rewarded, even if it is shared.

For beginners, who wants to do it, it will be more worthwhile to mine other cryptocurrencies that have fewer hardware requirements as compared to Bitcoin.

History of Bitcoin Prices

The price of Bitcoin

At the time of launch in 2009, the price of bitcoin wasn’t much. You could have got around 1300 bitcoins with a single US Dollar. However, as it became more and more popular internationally, the prices increased and soared up to $260 per bitcoin during the early days of April 2013. But like anything else that gained traction from all around the world, threats of cyber-attacks started to loom over Bitcoin as well, and its value plummeted to $50 later that month.

However, in the same year, the prices increased exponentially and touched the highs of $1200 in November because of Chinese intervention. But the Chinese central bank took measures to prevent trading in Bitcoin, which again caused the prices to fall.

For the major part of 2015, the prices kept fluctuating from $200 to $400, but the prices again went high during the mid-2016 and touched unprecedented highs of $19,000/bitcoin in December 2017.

At the start of 2019, it was valued around $3,000/bitcoin but saw a steady growth in the months to follow. At the time of writing this article, in mid-August, it is valued at approximately $11,500. If you are thinking about whether it is the right time to buy or sell your bitcoins, you check out our technical analysis of Bitcoin on our website at promisingtrader.com.

I do technical analysis videos on YouTube with the aim of predicting its price and to inspire those who would like to quit their jobs to become entrepreneurs through trading.

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Should You Mine Bitcoins?

  • At the time of its launch, you would have got 1300 bitcoins for a 1USD.
  • In 2016, one bitcoin was worth $19,000 in December.
  • At the time of writing, it is valued at $11,500.

Where Do You Buy Bitcoins?

Bitcoins can be bought by anyone from all around the world. However, to buy bitcoin, you will first need to sign up for a bitcoin wallet. One such bitcoin wallet is provided by Coinbase, which is considered as one of the safest wallets to store bitcoins and is also best suited for beginners.

After setting up your bitcoin wallet, you will have to use an exchange platform or broker to buy and sell your bitcoin. Some of the online cryptocurrency exchanges that you can use include Coinbase and Binance. Both of these are safe and user-friendly for beginners. After you create an account on of these exchange platform, you can buy bitcoins by using your debit/credit card and move your bitcoin into the wallet.

You can even move bitcoins from one exchange to the other if you decide to use other exchanges in the future. Unlike Coinbase, Binance does offers a wallet to store bitcoin, but can be used to trade bitcoins once the money is moved into your account.

Following is the general process of buying bitcoins on Coinbase and Binance. I also have detailed reviews of Coinbase and Binance, which you can read to understand more about these platforms.

Coinbase

Buying bitcoins on Coinbase is fairly simple and easy. Once you create an account on Coinbase, you start buying bitcoins for as low as $25. Following are the steps to buy bitcoin on Coinbase Cryptocurrency Exchange.

  1. Once you login to your Coinbase account, select the buy/sell link and click on it. Now select the buy button displayed on your account page.
  2. Now select the option to buy Bitcoin under Cryptocurrency Tab.
  3. In case if you have set up more than one payment method on the platform, select one as your desired payment option.
  4. Now enter the amount that you would like to buy bitcoin for or bitcoin denomination, under Amount section and then click buy bitcoin button.
  5. You will now be able to see a summary of your transaction with two different options – Confirm Buy or Cancel Transaction.
  6. If you have to make any changes to the current transaction, you can choose to cancel the transaction.
  7. If you do not wish to make any changes, you can confirm the transaction and place a buy order for your bitcoin.

All of the fees associated with the Coinbase exchange will be displayed on your screen. In case if you are buying bitcoins through your credit card, the screen will display the message, once your purchase is completed and you will get the bitcoins in your wallet immediately. The processing time varies according to the bank if you are using other methods.

To know more about the safety and fees related to Coinbase exchange, you can read our full review here.

Binance

Previously Binance did not allow buying cryptocurrencies like Bitcoin using fiat options. However, they recently launched the service of buying bitcoin by depositing money through credit cards. You can buy bitcoin for as low as $50 on Binance. Following are the steps to follow to buy bitcoins on Binance through credit cards.

  1. Once you have an account on Binance, log in with your credentials and head over to the Funds section on your screen.
  2. Click on funds to select Buy with Credit Card option.
  3. Select bitcoin and enter the denomination you want to buy. The second tab will show the total amount in your local currency that you will be charged against buying bitcoin.
  4. You will be charged 3.5% as a transaction fee for buying bitcoin on Binance.
  5. Once you click, Buy Now button, it will ask you to confirm the order.
  6. Once you click on Go to Payment, you will have to provide all your details for the purchase to be completed.
  7. After the phone and email, verification is completed, you will have to provide your credit card details.

Once the purchase is done, you will be able to see the bitcoin under your Binance account, which you can then move to your wallet.

To know more about the safety and fees related to Binance exchange, you can read our full review here.

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Where Do You Buy Bitcoins?

  • You can use cryptocurrency exchanges such as Coinbase and Binance to buy and sell bitcoins.
  • Binance has lesser transactions fees as compared to Coinbase.

Bitcoins Wallets

All transactions related to bitcoins are processed through wallets, which is an application that you need to install and download on your computers and smartphone devices. The user is identified with the help of their digital wallet address. This address is a unique string that includes numbers and letters along with a private key, only available to wallet owner. It is quite easy to set up wallets and can be done for free. You can even open and close down your wallets as required to maintain anonymity. You can even have a number of different wallets. Following are the different types of bitcoin wallets that you can choose from. Each of these wallets has its advantages and disadvantages.

Desktop Wallets

You can download these types of wallet directly onto your computer system. The advantage of such a wallet is that it provides you with complete control and responsibility of your bitcoin wallet. As your Bitcoin address will be kept saved on your system storage drive, no one else other than you will have access to it. However, you must always stay secure by having a security system such as antivirus protection to prevent loss of data and sensitive information. In case when your desktop wallet gets corrupted, all the bitcoin stored there will also be deleted and are irretrievable.

Online Wallets

By using online wallets you can manage your bitcoins directly through a web browser. The advantage of using such types of wallets is that it provides you the convenience to get access from anywhere and anytime. Moreover, you cannot delete them accidentally and does not have to keep backups. Having said that, online wallets are provided by third-party service providers, meaning that there is a high degree of trust required. You are completely relying on someone else to manage and handle the security of your bitcoins.

The organizations that offer such online wallets also normally works as bitcoin brokers. They make money by charging you with the commission fee on every transaction made through their platform. Coinbase is one such service that offers an online wallet and provides an exchange platform.

Mobile Wallets

Mobile wallets can be downloaded on your smartphones and tablets through the Play Store or the App Store. They are interactive, easy to use and provides touch-based controls. You also get the ability to scan QR Code of bitcoin addresses. Just like Desktop Wallets, you will have to ensure the safety of mobile wallets. You can use an antivirus solution on your smartphone device to ensure the protection and safety of your bitcoin wallet.

Paper Wallets

In this type of Bitcoin wallet, QR code or bitcoin address is printed on a piece of paper and kept safe. There is no need to worry about cyber-attacks and theft of your bitcoin address, as nothing is kept digitally. However, if you lose the printed paper that has the QR code or bitcoin address, the bitcoins will be lost forever. You will not be able to access it any longer.

Hardware Wallets

Hardware wallets are considered as one of the most secure wallets. It is an external device that has been specifically designed to manage and hold bitcoins. Unless your hardware wallet is connected to the computer or another mobile device, no transaction can take place. In addition to this, accessing the bitcoins through hardware wallets require a special PIN code. However, these types of wallets cannot be availed for free.

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Bitcoins Wallets

  • You can use cryptocurrency exchanges such as Coinbase and Binance to buy and sell bitcoins.
  • Binance has lesser transactions fees as compared to Coinbase.

Bitcoin Address

Think of bitcoin address as a bank account number. Just like your bank account number, the bitcoin address is also unique containing a string of numbers and letters from 26 – 35 characters. Using these strings of characters, you can send and receive bitcoins. Several users have different addresses connected to a single pseudonym. Bitcoin address has a key that is cryptographically linked with the address. Only you as a holder of the address will have the key, allowing access to your bitcoins.

Can you use Bitcoin Anonymously?

Bitcoins are not completely anonymous. They are pseudonymous. You can make use of any name or handles as you like, but since they are transparent due to the Blockchain system, every transaction related to bitcoin is public. Anyone can see how many bitcoins are present in a particular wallet. Being said that, you can make use of different wallets or different bitcoin services, to obscure the digital bitcoin paper trail. But in the end, it is not completely anonymous. Because of its transparent nature, it can be traced back to you.

Businesses Accepting Bitcoins

Due to its pseudonymity, Bitcoins are normally used for illegal activities such as ransomware. However, many different businesses do accept payments in the form of bitcoins. These businesses could be a hotel next to your place or an electronic shop in your city. Following are some of the world-renowned companies that accept payments through bitcoins.

  1. Express VPN
  2. Cheap Air
  3. AT&T
  4. Microsoft
  5. Subway
  6. Golden Gate Casino and Hotel
  7. Dish Network
  8. Reeds Jewelers
  9. Roadway Moving Company
  10. Overstock.com

You can even pay with bitcoins to Amazon sellers, who are ready to accept bitcoins in the form of payment. Using browser extensions like Purse and Moon, you find out Amazon sellers who accept the bitcoin payment method. Having said that, Amazon does not accept bitcoin payment directly on its platform. You will have to find a seller who accept them, in case if you wish to buy something from them.

You can also make use of a service known as SPEDN that allows you to buy items from Barnes & Nobles, Regal Cinemas, Lowe’s, and Office Depot, GameStop and other brick-and-mortar shops, using your bitcoins.

Is Bitcoin Legal?

As bitcoin is not regulated by any government, their use and questions about legality are the major concern amongst digital currency users. Having said that, the use of bitcoin in the United States of America is legal. It is legal because it is not used in physical form as a printed dollar. It also legal in most of Europe. You can even make use of bitcoin in Australia and New Zealand.

Although it is legal to use digital currency in Canada and Mexico, bitcoins are regulated in those countries. During 2017, China banned the operations of cryptocurrency exchanges and made it illegal for financial companies to hold bitcoins. The government even blocked access to overseas exchanges.

Apart from this, bitcoins are completely illegal in countries including Morocco, Ecuador, Nepal, Pakistan, Bangladesh, and Bolivia.

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Bitcoin Address

  • It is legal in countries like Australia, New Zealand, the USA, and most European Countries.
  • It is illegal in China, Pakistan, Bangladesh, Morocco, Ecuador, and Bolivia.

Other Cryptocurrencies

Though Bitcoin remains to be the best-known cryptocurrency around the world, it is certainly not the only one. You can trade in many different cryptocurrencies from the exchanges listed above and can store them in your wallets, which you already know about. There are hundreds of cryptocurrencies and altcoins that you can trade-in. Following is a list of some of the other coins that have risen in value along with Bitcoin.

Litecoin

Launched in 2011, it is one of the initial cryptocurrency that came to market as is also known as Bitcoin Gold. A peer-to-peer digital currency that was created by Charlie Lee, who is also a former Google employee. Though it is like Bitcoin, Litecoin has a faster block generation rate and offers transaction confirmation at a much-improved rate as compared to Bitcoin.

Ethereum

Ehtereum was launched in 2015, are a software platform that allows to build and run Distributed Applications and Smart Contracts without any downtime, control, and fraud by the third party. It is one of the most widely used non-Bitcoin based cryptocurrency, like Litecoin and also has its rival fork known as Ethereum Classic.

ZCash

Launched in 2016, ZCash is a decentralized, open-source digital currency which has also made its mark since its inception. It offers more privacy and transparency of transactions to its users. They claim that is more secure and all the transactions are published on a Blockchain. However, details such as recipient, sender, and the amount remain private.

Dash

Launched in 2014, it was originally known as Dark coin. Since it works on decentralized master code network it offers more anonymity than bitcoin. The transactions related to Dash are almost untraceable. Due to this reason, it has been growing in popularity more quickly as compared to some of the other cryptocurrencies.

Ripple

Ripple was launched in 2012, that enables banks to settle cross-border payments in real-time. It offers end-to-end transparency and offers instant settlements at much lower costs. Ripple does not require mining, and thus it reduces computing power usage and network latency. It is one of the most talked about digital currency that has the power to revolutionize cross-border payments.

Bitcoin Cash

Launched in 2017, Bitcoin Cash is one of the earliest altcoins and successful forks of original bitcoin. As bitcoin has a limit on block size, 1MB, Bitcoin Cash increases the size of the block from 1 MB to 8 MB. The idea behind the increase in the block is that larger blocks will allow for quicker transaction times.

Monero

Launched in 2014, this cryptocurrency is private, secure and untraceable. It came into existence with a strong focus on scalability and decentralization. It offers complete privacy with a special technique known as Ring Signatures. This technique appears as a group of cryptographic signatures with at least one real participant. And as all of them appear to be real and valid, differentiating and finding the real one becomes impossible.

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Other Cryptocurrencies

  • It is legal in countries like Australia, New Zealand, the USA, and most European Countries.
  • It is illegal in China, Pakistan, Bangladesh, Morocco, Ecuador, and Bolivia.

Bitcoin Fork

Due to the large volume of players who are mining Bitcoin, there is often disagreement among them on the common rules. This disagreement has led to forks, as the digital currency gets split when players cannot reach an agreement. There are over 50 bitcoin forks at the moment, and more to follow. Out of these 50, the two commonly known forks are Bitcoin Gold and Bitcoin Cash.

Cyber-attacks and Bitcoin

Where there is money to be gained, you will always find cyber-hackers there. And Bitcoin is no different. Over the past few years, since it has gained popularity and a lot many attacks have taken place that has resulted in the loss of bitcoins worth millions. As the value of bitcoin increased more, you will find cyber-attacks becoming more common.

Attackers make use of phishing techniques to steal admin credentials and gain access to different accounts. They also make use of malware that is specifically designed to intrude Mac, Windows, Unix and Linux OS devices to look for bitcoins and steal them from the infected PC’s. Thus, it is becoming necessarily important to protect your bitcoins from cyber-attackers, by using antivirus protection mechanism.

Final Thoughts

Many may look at Bitcoin has a great investment opportunity more now than ever before. However, because of the high volatility included, investment in bitcoins should only be done by completely evaluating the market and the risk factors associated with it. Bitcoin has provided great returns for investors over the years, but many have also lost a huge chunk of their savings due to this.

In this article, I have discussed everything that there is to discuss about Bitcoins, including the technology behind it, its history, exchanges that you can use to trade in bitcoins, different kinds of wallets that can be used to store your bitcoin addresses, other cryptocurrencies like bitcoin that have risen and the cyber-attack issue.

If you want to learn more about trading in cryptocurrencies and stocks, I have my own resources that you can access and learn to make more informed investing decisions.

Alex Promising Trader

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