What is bitcoin? Best way to get bitcoin and make money now
Bitcoin is the most familiar word in our digital world. But the question is “what is bitcoin?” Do we really know about it? To answer those questions we have to go to the very deep. After a long time research, I think it is the time to disclose all the secrets behind this technology.
Before starting, I want to give you an idea what really you are going to learn:
- What is bitcoin?
- How Did Bitcoin Start?
- How does it work?
- What is blockchain?
- How can we get/ earn it?
- How can we store bitcoin?
- Bitcoin wallet
- Bitcoin transaction
- Advantages and disadvantages
Bitcoin is a cryptocurrency or digital currency, a form of electronic cash. It is a decentralized digital currency without a central bank or a single administrator. We can send it from one person to another without using any bank. That is why this transaction is a P2P transaction.
Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins carried out collectively by the network. Bitcoin is open-source; nobody owns or controls it.
How Did Bitcoin Start?
On October 31st, 2008, “Bitcoin: A Peer-to-Peer Electronic Cash System” was posted to a cryptography mailing list, published under the name “Satoshi Nakamoto”. The identity of the creator remains a mystery.
All we have is a pseudonym – Satoshi Nakamoto. The accounts are no longer active; the coins in his wallet have never been spent. Satoshi Nakamoto has disappeared from the world, or so it would seem. No one knows Satoshi Nakamoto is one person or a group of people.
In 2009, The Bitcoin software is made available to the public for the first time and mining – the process through which new Bitcoins are created and transactions are recorded and verified on the blockchain – begins.
I will discuss mining and blockchain technology in later part.
How does Bitcoin work?
It is a network that runs on a protocol known as the blockchain. The creator of Bitcoin made three main concepts that are essential to understanding how does it work:
- Supply and Demand
- Decentralized Networks
Cryptography provides secure communication in the presence of malicious third parties—known as adversaries. It uses an algorithm and a key to transform an input (i.e., plaintext) into an encrypted output.
Bitcoin uses cryptography to convert transaction data. That is why Bitcoin is called a cryptocurrency.
Supply and Demand
The main concept of supply and demand: when something is limited, it has more value. The more people that want it, the more the price of it will go up. It’s the same as rare vintage cars.
Bitcoin uses this same concept. The supply of it is limited. It is produced at a fixed rate, which will decrease over time. It has a limit of 21 million coins; once there are 21 million bitcoins no more Bitcoins can be created.
When we sent money from one person to another, we have to follow some rules given by a central authority or banks. They work as a center and middleman of each transaction. They have all the data stored. This is called a centralized network.
But In a decentralized network, the data is everywhere. Data is not stored in one place. Everyone in that network has the power to see all the data.
Now, let us see how these concepts work together. To record transactions, we need to put them in a database (like an Excel sheet).
This would normally be stored in one place in a centralized network. But because Bitcoin uses a decentralized network, the Bitcoin database is shared. This shared database is known as a distributed ledger.
It is also known as a block. Every transaction creates a block. Then all the blocks join together and create a chain. This is called blockchain. In simple word, we can say, blockchain is a collection of data in the form of a chain.
What is bitcoin wallet?
A Bitcoin wallet is a software program where Bitcoins are stored. To be technically accurate, Bitcoins are not stored anywhere; there is a private key (secret number) for every Bitcoin address that is saved in the Bitcoin wallet of the person who owns the balance.
You can think of a wallet as your personal interface to the Bitcoin network, similar to how your online bank account is an interface to the regular monetary system.
Bitcoin wallets facilitate sending and receiving Bitcoins and give ownership of the Bitcoin balance to the user. The Bitcoin wallet comes in many forms; desktop, mobile, web, and hardware are the four main types of wallets.
In reality, it’s not bitcoins that need to be stored and secured, but the private keys that give you access to them. There are many wallets to store yours. For example
A transaction is a transfer of value between wallets that gets included in the blockchain. Bitcoin wallets keep a secret piece of data.
If one person has to send Bitcoins to another person, then the corresponding transaction will combine with three pieces of data:
Input: This is basically a record of the bitcoin address being used to send the bitcoins.
Amount: This represents a number of bitcoins that are being sent.
Output: It is a record of bitcoin address at which bitcoins are being sent.
Two things are required to send bitcoins; a bitcoin address and a private key. An address is produced randomly and is actually a series of letters and numbers. The private key is another series of letters and numbers. The only difference between both is that private key always remains a secret.
The sender of Bitcoins uses his/her private key to sign a message with an input, amount and an output. Then, the sender sends bitcoins from his/her wallet. After this, miners come in the frame and they authenticate the transaction by putting it into a transaction block and then start solving the associated mathematical puzzle
It takes some time for the transactions to get clear because each transaction is to verify by the miners who solve a mathematical puzzle to let an operation succeed. According to protocol, each block takes approx. 10 minutes to get mined. So one has to wait until the mining gets finished.
What is Blockchain?
A blockchain is a digitized, decentralized, public ledger (collection of records) of all cryptocurrency transactions. The first major application of blockchain technology was bitcoin which was released in 2008.
Currently, the technology is primarily used to verify transactions, within digital currencies. We only think blockchain is only used for bitcoin. But this is not right. The blockchain is a technology. We can use it anywhere to transfer and protect data.
Blockchain technology is like the internet in that it has a built-in robustness. By storing blocks of information that are identical across its network, the blockchain cannot:
- Be controlled by any single entity.
- Has no single point of failure.
This technology makes bitcoins decentralize. We can transfer it using this technology.
How can you earn Bitcoin?
We already know about it, the technology behind this currency. Now it’s time to know how to get bitcoin and earn money. You can earn it in the form of “Satoshi” (1 Bitcoin = 100000000 Satoshi). This is the smallest unit of bitcoin.
There are many ways to earn it. Let us look at some of the approaches to help you earn yours.
1.Mine your own Bitcoins
The very first way to get your own Bitcoins was through mining. Now imagine lots of transactions are taking place across the world. These individual transactions are grouped together into a block, organized by strict cryptographic rules.
The block is sent out to the network, which is made up of people running high-powered computers. These computers compete to validate the transactions by trying to solve complex mathematical puzzles. The winner receives an award in bitcoin. The person who solves complex mathematical puzzles and receives an award is called Mainer.
While the reward is still luring, there are some issues which stand in the way of earning some loot:
- The hashing difficulty has grown significantly over the last years. No single equipment has enough computational power to compete for Bitcoins.
- In hope for some reward, people are forced to unite in pools or use cloud mining services.
- Mining has gotten unprofitable.
- Even when the efforts are combined, there is still a need to pay for the electricity, and the utility bills often exceed the mining reward.
All these factors make mining these days unprofitable. This makes us move forward to the next strategy of earning Bitcoins online.
2.Complete Micro-tasks for Bitcoin
Though mining lets you earn Bitcoin faster than any other method, its high investment threshold means it won’t be suitable for everyone. You may prefer completing micro-tasks that pay in Bitcoin.
Micro-tasks are small, simple actions, such as viewing an advertisement or engaging with a post on social media. Though the pay is usually very low, micro-tasks are probably the simplest way to get into Bitcoin.
One of the best places to go to get started with micro-tasks that pay in Bitcoin is CoinWorker, a marketplace that specializes in such tasks. Tasks listed on CoinWorker are typically very easy and take only a few minutes to complete.
There are also several sites that will pay you small amounts for viewing ads. If you’re trying to earn your first Bitcoin, viewing ads is among the easiest ways to do it. Some of the best sites that allow users to view ads in exchange for it include CoinAdder, Ads4BTC, and Advercoins.
3.Earn Bitcoin from Faucets
A faucet is a type of website that gives away small amounts of Bitcoin to its users. What you need to know about faucets is that they allow you to get a small amount of cryptocurrency in particular time spans.
For example, on many Bitcoin dice websites, you can get 0.0001 BTC every 5 minutes. However, to get a new portion of satoshis, you need to have a zero balance. There are other options too where you can earn ‘Bitcoin dust’ for time spent on the website (for example, when playing games).
4. Bitcoin Trading
A good way to make an earning with Bitcoin and cryptocurrency, in general, is to do it through trading. There is huge potential to make money on trading in BTC, but it takes a level of expertise and knowledge about the market in the same way that trading on any other financial market does.
If you wish to consider trading, here are some of the options:
Day trading – Day trading is buying and selling Bitcoins on the same day on the basis of small, short-term price fluctuations in the market.
Cryptohopper – Cryptohopper is a cloud-based trading bot which means it can trade cryptocurrency 24 hours a day whether you are at your computer or not. The system allows you to trade on technical indicators, or subscribe to a signaler who sends buy signals.
Trading Bots – Running your own Bitcoin Trading bot is an advanced method which can produce good returns if done properly.
CryptoTrader – The CryptoTrader bot is a cloud-based trading bot that provides users with fully automated trading solutions while not requiring them to install the bot on their own system. CryptoTrader features a strategies ‘marketplace’ that allows users to buy their favorite trading strategy, or alternatively to sell strategies developed by themselves.
5. Offer something for Bitcoins
Another way to earn Bitcoins online is to sell something for crypto. If you are keen on handmade, you can accept BTC on your ETSY page, and if you are a merchant, you can use your Bitcoin address to accept Bitcoins payment on your website. You can also hang a “Bitcoin Accepted Here” sign at your hotel, restaurant, café etc.
Here we take a look at some of these pros and cons and evaluate them to see how beneficial the idea of investing in bitcoins actually is.
The Advantages of Bitcoin:
- Extremely Low Fees – Another benefit of bitcoins is the presence of extremely low, and often payments without any fees. Users can include a fee in transactions to speed up the process. The more you pay, the faster will be the speed at which the transaction takes place.
- Highly secured – All your transactions will be secure as it is using NSA created cryptography. Allowing users to be in control of their transactions help keep Bitcoin safe for the network. Bitcoins can be backed up and encrypted to ensure the safety of your money.
- Easy access – Almost anyone can make use of it. It is a decentralized operation and investors from all over the world have easy access to them.
- No third party – You are the master of your money. You can keep it in your wallet and use it as per your wishes. There is no third party like a bank on whom you need to trust.
- Remain anonymous – Some coins can help you stay anonymous but contrary to popular belief, not all of them can. BTC is pseudonymous which means people won’t know exactly who you are on the blockchain but they can get some information from it.
Freedom in Payment – With BTC it is very possible to be able to send and get money anywhere in the world at any given time. You are in control of your money with BTC. There is no central authority figure in the Bitcoin network.
The Disadvantages of Bitcoin:
- Lack of Awareness – Fact is many people are still unaware of digital currencies and BTC. Networking is a must to spread the word on BTC. One of the biggest disadvantages of investing in bitcoins is the lack of awareness that people generally have about the cryptocurrency.
- Misuse of Bitcoin – We all know BTC use decentralized technology. There is no central authority to control this currency. For this criminals are taking advantage of Bitcoin’s anonymous nature.
- Difficult to understand – Cryptocurrencies are relatively new and come with a learning curve. People end up investing without proper knowledge and lose money to something they did not learn about.
- No way to reverse the payment – If you mistakenly pay someone by using cryptocurrency, then there is no way to get a refund of the amount paid. All you can do is to ask the person for a refund and if your request is turned down, then just forget about the money.
- Can lose your wallet – There is a possibility of losing your wallet. If you have stored the money in the form of digital currency on your phone or computer, you better remember your password and not lose those devices.
One of the most important things to keep in mind when thinking about what Bitcoin is: there is no single answer. Bitcoin is a platform that hosts a digital ledger on which people can mine, store and trade bitcoins, a digital form of currency earned through a computer algorithm and tied to no central authority.