A beginner's Guide to Bitcoin (Cryptocurrency)
Bitcoin is one of the greatest technological breakthroughs since the Internet. It also has been called “a black hole” into which a consumer’s money could just disappear. You don’t need to worry if you don’t have any clue What Bitcoin is, this article will guide you through the marvelous story of Bitcoin.
What is Bitcoin?
Bitcoin is a cryptocurrency and worldwide payment system. It is the first decentralized digital currency, as the system works without a central bank or single administrator. The network is peer-to-peer and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes through the use of cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009.
In 2009, 1 Bitcoin was 0.08 $ and now it is 10676 $, the growth is massive. Landmark feature of a Bitcoin is that it can curb the chances of fraud and identity thefts, and hence is considered a safe mode of holding money. Bitcoins allow buying of goods and services online, as well as transferring money.
What are the Benefits of using Bitcoin
Bitcoin has a global acceptance and is less volatile than cash / local currency. Due to this feature, it becomes easier to conduct transactions across boundaries and online. As Cryptocurrency is a new system of financial transaction, it is crucial for startups. Many startups have adopted this new system for receiving payments and other financial transactions. Earning Bitcoin is like earning gold, its value increases every day.
Bitcoin is a great tool for investment; it can be used all over the world without going through a conversion process. It is considered at par with Gold and combines the best of cash and gold while providing an open market and no restrictions imposed by banks or governments.
There is no way of duplicating a Bitcoin, unlike cash. Also, Bitcoin is immune to inflation, this means, that supply is limited and no one can just print more money only 21 million Bitcoins can be mined.
Bitcoin, of all currencies including gold, is already the most desirable currency in terms of Scarcity, Divisibility, Malleability, Portability, Transferability, Security, Incorruptibility, & Deniability.
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Being decentralized, anonymous and free from the clutches of banks and governments, the power of Bitcoin is unimaginable. From buying products and services from the dark web to buying an apartment in a legalized country, you can do anything and nobody can control these transactions. Bitcoin is the future.
Bitcoin has value because people think it does, if the Bitcoin shares touch a record high and all the investors try to cash out, the market would become flooded and prices would drop eventually and Bitcoin would be back to the original value.
Other crypto currencies include- Ethereum, Ripple, Litecoin, etc.
What is the Technology behind Bitcoin?
A car needs an engine to work similarly Bitcoin requires Blockchain technology. Blockchain operates Bitcoin. Behind Bitcoin there is this concept of Blockchain, this concept is implemented to run the crypto currency Bitcoin.
Bitcoin was created in order to solve the issues of currencies with banks like duplication, time consumption and financial crisis. Bitcoin is independent of any banks so it solves the problem, it is decentralized that is no one person owns the blockchain network, and it can never be manipulated or hacked because of the basic structure of a Blockchain.
Blockchain is a public distributed database holding encrypted ledgers. This means a block is the current part of Blockchain which records the recent transactions. Once it is verified it becomes a permanent part of the growing Blockchain.
Blockchain runs on the following technologies-
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Shared Ledger -Distributed machines on the peer- to-peer network help in maintaining the consistency of the public ledger. Every single person on the network has a copy of the ledger. There is no single centralized original copy. Ledger is the copy of all the transactions that ever happened. Blockchain is a distributed database that stores all the Bitcoin transactions that have happened in its history.
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Private Key Cryptography- Blockchain uses private key cryptography to secure identities and hash functions to make the Blockchain unchangeable, everything stored on the Blockchain is encrypted. This way, everyone is able to see all the transactions but at the same time no one will know which of those accounts belongs to you.
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Proof of Work- It is a concept invented in Bitcoin Blockchain wherein the miners will validate transactions by solving a complex mathematical puzzle called Proof of Work. Technically, there is a hash target value designated to every block before time. Proof of work ensures that the nodes automatically and continuously agree to the current state of the ledger.
These features are implemented through the Blockchain technology
The future of Blockchain technology
Payments – Blockchain will be the future of the payment solutions with direct, fast and secure payment methods without transaction cost.
Banking – Blockchain based solution is going to be the next big thing in Finance. Banking systems based on the blockchain are much secure and cost- effective.
Healthcare – We help you to secure patient data sharing between platforms. Better collaboration between health data providers that results in higher possibilities of accurate diagnoses.
Logistics – The key benefits of blockchain for logistics network is that it establishes a shared, secure record of information across the network.
Blockchain is an idea that can change the world; peer-to-peer immutable databases that can safely store and transfer digital assets are a truly disruptive logic. There will be wide acceptance of blockchain.
How can you earn Bitcoins?
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products and services. As of February, 2015 over 100,000 merchants and vendors accepted Bitcoin as payment, the number has certainly increased now.
There are three ways for mining-
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Deploy your own mining setup- You will need mining equipment, AntMiner S9 is the latest one, you should also have a good internet connection as large amount of data will be uploaded and downloaded. There will be high usage of power, so electricity should be cheap as it can play a vital role in the profits.
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Cloud mining contract- You can buy a mining contract from the companies who have already deployed mining equipment and they continuously add capacities as per their needs. Genesis Mining is the best company as they have revealed detailed about their owners, mining farms etc.. You can simply register with them, select how much hash power you wish to buy .Your earnings will come directly to your wallet every day, without any hassle of doing it manually. As the cloud mining contract is lifetime, you don’t need to worry about the contract expiry.
You can buy contract at- https://hashflare.io/r/1BFAAE39-CloudMining
https://www.genesis-mining.com/
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CPU/GPU Mining-You can use the hashrate of your own computer to mine Bitcoins. But due to huge number of miners, difficulty of blockchain and high hash rates of ASIC it’s nearly impossible to mine Bitcoin for profitability. If you have free electricity then you can get some sort of profit. All you need to do is register and download Minergate. GUI Miner for Windows/Linux and start mining. For the software click here- https://minergate.com/
*Do work for Bitcoins- If mining is not for you, you can search for work that you can do for Bitcoins. There are multiple services that will offer one an opportunity to work for crypto currency. You can find something at Coinality or by just going to /r/Jobs4Bitcoins on Reddit. Currently, you can earn Bitcoins online as a freelancer mainly, but some Bitcoin startups and companies like Overstock offer an option to get the regular payment in BTC. With greater acceptance, there will be more options to look for. Click -https://www.reddit.com/r/Jobs4Bitcoins
*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 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.
*Gambling and casino games- If you are searching for a simple way to earn Bitcoins online, you may try gambling. Try out your luck at- https://fortunejack.com/
How to do trading in Bitcoin?
Bitcoin is the mother of all crypto currencies; Bitcoin is digital, it can be saved, spent and invested. Today, Bitcoin has a peak market valuation of more than $2 billion.
With the increasing value of Bitcoin there is a great rush between the investors, who want to cash in on Bitcoin. Bitcoin offers quite a few compelling trading opportunities.
A trader mainly looks for spreads i.e. Volatility, security and fees. Higher volatility provides greater variability to make trades around all around the world; Bitcoin is highly secured and cannot be hacked so security is not an issue for the traders. Bitcoins blockchain technology allows you to make a transaction with no fees at all, so there is a plus point too. Bitcoin trading is a trader’s delight.
PLATFORMS THAT WILL ALLOW YOU TO TRADE IN BITCOINS
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Coinbase -Coinbase is a cryptocurrency exchange and trading platform that allows customers to trade Bitcoin directly. Coinbase even offers margin trading for traders who qualify under the Commodity Exchange Act. They have a really friendly dashboard where they currently have three cryptocurrencies available. Coinbase supports Bitcoin (BTC), Ethereal (ETH), and LiteCoin (LTC). Your portfolio shows your four “wallets” for where it stores your cryptocurrencies and cash. You can also set alerts for your favorite cryptocurrencies to purchase or sell when it hits a certain price point. Combining this with a verified Paypal and Credit Card is convenient for instant transactions.
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Bitstamp - BITSTAMP was founded in 2011 making it one of Bitcoin’s oldest exchanges. It’s currently the world’s second-largest exchange based on USD volume, with a little under 10,000 BTC traded per day.
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Kraken- Kraken’s innovative features claim of fast execution, outstanding support, and high security. The organization is based in San Francisco, USA. Kraken is operational worldwide with a pre-validation for those countries where it is not eligible. The platform accepts both Cryptocurrency and fiat and the transaction is completed by a wire transfer that should be completed at the bank. The platform does not accept debit, credit, or cash.
Bitcoin isn’t fiat currency, meaning its price isn’t directly related to the economy or policies of any single country. Each time Bitcoins price rises, new investors and speculators want their share of profits. Because Bitcoin is global and easy to send anywhere, trading Bitcoin is simple.
How does a Bitcoin transaction work?
Bitcoin transactions are sent from or to electronic Bitcoin wallets and are digitally signed for security. Everyone on the network knows about a transaction, and the history of a transaction can be traced back to the point where the Bitcoins were produced. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa.
Bitcoin transactions are divisible. A satoshi is one hundred millionth of a Bitcoin, and it is possible to send a transaction as small as 5430 satoshis on the Bitcoin network.
Cryptographic signatures- Bitcoin relies on digital signatures, a cryptographic technique which functions similarly to physical signatures in that a signature cannot be forged by anyone but the signee. This means that if someone sends Bitcoin to your address, then you are the only person who can now spend (i.e. sign a transaction) the Bitcoin.
Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, it is done by miners through a process called mining.
A Bitcoin miner is simply a person who contributes arbitrary amounts of computing power to the network in order to update the ledger, confirm the pending transaction, and mint new Bitcoins to send into circulation. They first check that you haven’t sent those funds before, then it begins the cryptographic work of hashing the block which will confirm the transaction and include them into the network and the miner received the Bitcoin reward amount as well as the sum total of all the transaction fees in their block.
Who pays the miners?
The mining is paid for by the people who are willing to operate mining nodes. So, the mining is essentially paid for by the Yuan, the Dollar, and to a lesser extent, the Euro. Bitcoins are basically just electricity being gauged and converted into virtual currency that yields value.
Transaction Fees- sometimes a transaction fee is charged, transaction fees are calculated using various factors. Some wallets let you set transaction fees manually. Any portion of a transaction that isn’t picked up by the recipient or returned as change is considered a fee. This then goes to the miner lucky enough to solve the transaction block as an extra reward. Right now, many miners process transactions for no fees.
How to cash out Bitcoins?
Bitcoin Debit card-There are a bunch of Bitcoin debit cards around and they all serve much the same function but remember you are still paying with a Fiat Currency such as EUR, GBP or USD. There are a number of prepaid debit cards that can receive Bitcoin as a top-up method but they are converted to the Fiat currency for use with the card.
Exchange -You would need to create an account at one of the many exchanges (e.g.
Kraken, Bitstamp) and there you would have a new Bitcoin wallet to transfer your Bitcoin. After your Bitcoin have arrived to your new wallet you will be able to sell them and transfer the fiat amount (money/ currency in USD) to your bank account.
Payout service-There are a few services that will accept Bitcoin for fiat this means you send them your Bitcoin from your wallet of choice and they will transfer the amount (minus a fee 0.5%) to your account. Eg- Bitwala
OTHER INFORMATION
With the merits of cryptocurrencies there come demerits too, such as hacking and fraud. We have seen many high profile cryptocurrency hacks over the past few years. But on Thursday, 25th
January 2018, the cryptocurrency market recorded the largest hack ever since Bitcoin came into the market in 2009. Coincheck the leading in cryptocurrency exchange in Asia (Japan) reported on Thursday that up to $500 million in NEM coins were stolen from Coincheck’s wallet resulting in a suspension of all coins aside from Bitcoin.
Experts say that this hack could push regulators to take a harder stand on cryptocurrency exchanges going forward, it can also push investors to find new ways to secure their coins outside an exchange using services like Tether and Zappo, This hack was bigger than the Mt. Gox hack that happened in 2014, Mt. Gox lost about 740,000 Bitcoins to hackers.
BITCOIN TAX
Yes, if you hold Bitcoins and are earning profits on Bitcoin then you have to pay a certain amount of tax to the government.
Income Tax on Bitcoin Profits in India-
https://newsandstory.com/story/300130174323201846730/File-Income-Tax-on-Bitcoin-Profits-in-India/
Income Tax on Bitcoin Profits in the USA-https://newsandstory.com/story/300130170730201855100/File-Income-Tax-on-Bitcoin-Profits-in-the-USA/