What is Bitcoin?
Bitcoin (BTC) is a digital currency created by Satoshi Nakamoto in 2008 that you can pay with on the internet for goods or services. It is also a cryptocurrency because it combines economic incentives with cryptography which means that you can pay with it in an insecure environment (internet) with a secure way. But the most exciting thing about bitcoin is that it is decentralized. This means that there are no banks or other central institutions which control the price or payment process so you do not have to pay high fees for sending your bitcoin to a merchander or anyone else. Also since the bitcoin is a digital currency, payment could reach its target in few minutes.
You could argue that during Q4 2017 there was an unreasonable increase in fees and time that was needed to send the transaction. But consider the situation, that the price of bitcoin was nearly $20.000 and everyone was talking about bitcoin so the network was not ready for this situation.
Although Bitcoin which is the first cryptocurrency and has the biggest value, also has its limits. These limits are being solved by the team of developers that upgrade bitcoin (bitcoin is a computer program, simple said) but also by other cryptocurrencies, known together as altcoins (alternative coins).
How to receive and send bitcoins?
At first you must have a bitcoin wallet. Bitcoin wallet is a software were your bitcoins are stored. It has some unique identifiers that you have to know about; public and private key. Public key is simply an address that you use when someone sends bitcoins to your wallet. It is also known as receiving address. Private key is the opposite - with the private key you are able to send bitcoin to someone's wallet.
HINT: Various types of wallets (paper, hardware, mobile, web) differ in the level of security and how and where your private key is saved. Because who has your private key so has the ability to send bitcoins out of your wallet without the chance that you get them back.
Where to buy bitcoin?
There are lot of places where bitcoins can be bought with fiat currencies through direct bank transaction or via credit/debit card. These websites also have wallets where your bitcoins are stored. It is not recommended to hold a big amount of any cryptocurrency in web wallets, so after you buy them, send them to more secure mobile, hardware or paper wallets.
Coinbase is a reputable website where you can buy and sell digital currencies like bitcoin, bitcoin cash, ethereum and litecoin. The company was founded in 2012 and is based in San Francisco (California, USA).
HINT: Register under by Coinbase refferal link to earn $10 in bitcoin.
Blockchain company, based in Luxembourg, allows you to buy and sell bitcoin, ethereum and bitcoin cash.
HINT: Always set up two-factor authentication when using web wallets.
What is bitcoin mining?
Bitcoin is technologically not very easy to understand. There are lots of articles or youtube videos which inform you better on what it is and how it works.
The difference between bitcoin and fiat currencies (euros, dollars...) is its limited supply. There will be only 21 million bitcoins. Bitcoins are not created aritrarily. They are created by solving mathematical puzzle that uses your computer processing power. Whenever your computer finds a solution to this puzzle, you get rewarded by a portion of bitcoins, known as satoshis (1 satoshi = 0.00000001 BTC). Computational power is also needed for transaction confirmation, so the network filters out invalid transactions.
Bitcoin uses some kind of cryptographic algorithm which your computer must solve. But today it is inefficient to mine bitcoins at home because there are specialized machines (bitcoin mining hardware) called ASICs which were built for only this purpose. There are companies that own hundreds or even thousands of these ASICs. Because of so called proof-of-work system, the more computational power you have, the more you get rewarded with bitcoins. This process also costs electricity. Also the more bitcoins is mined, the more difficult the mining process is and also the reward is smaller.
Since you need heavy computational power to mine bitcoins, it is better to join other people and mine together so your chance of getting rewarded is higher. Pooling of resources by miners who share their processing power is called pool mining.
What is cloud mining?
Bitcoin cloud mining enables people to earn bitcoins without their own mining hardware, software or paying for electricity. There are cloud mining companies which have large data centers. You can buy some part of their power. There are pros and cons of this service.
- no need for buying and maintaining mining hardware
- no need for setting up the equipment
- no high bills for electricity
- no risk of overheating and fire
- risk of fraud
- unverifiable or otherwise shady mining operations
- if the bitcoin price will go up you could probably have made more money by just byuing and holding bitcoin
- maintenance fees could be high if the bitcoin price is low
HINT: You always need to do some calculations if it is profitable to use cloud mining service right now. HashFlare is cloud mining company based in Estonia (European Union) from which you can buy cloud mining contract on bitcoin, litecoin, ethereum and/or zcash. It is not a scam. Many people blame HashFlare because they wanted to be rich as f*ck but had rejected to do some math before they have invested.
What are bitcoin faucets?
Bitcoin faucets are simple websites or apps which reward you with very small amount of bitcoins (approx. tens of satoshis) every few minutes or hours by completing captchas or other tasks. These websites are created to introduce you to bitcoin. You will learn how the wallets work and how to send and receive bitcoins. Not all faucets are worth it, some of them are scams. Do not send your bitcoins to their addresses is a general recommendation! But you could make some money if you spend a long time behind your computer and you believe that the bitcoin price will be higher in the future. I have completed a list of some faucets that are worth it.
How can I buy other altcoins?
As mentioned above, some altcoins can be bought on web wallets like Coinbase or Blockchain. But the real fun begins when you want to buy other cryptocurrencies. This is possible on exchanges, like Bittrex or Binance. There you can instantly buy and sell many altcoins, but you have to buy them with other cryptocurrency, not fiat, e.g. bitcoin, ethereum, or litecoin. Trading cryptocurrencies resembles real forex or commodities trading.
HINT: CoinMarketCap, WorldCoinIndex, or Cryptocompare are the best sites so far where you can see the actual price of altcoins in fiat (e.g. us dollars) or its price relative to bitcoin (btc). Please remember, when you buy altcoins on exchanges with bitcoin, you have to follow the altcoin price in bitcoin too. For example, if you buy OmiseGo (OMG) at the price 0.00125 BTC, which is equivalent now to $8.00, and then bitcoin price goes up, you can easily see OMG at $16.00, so you think that you made a perfect 100% profit. But looking at the BTC price you see that actual price of 1 OMG is 0.00080 BTC and you are actually losing, because you can't exchange OMG directly with USD. You know what I am trying to explain...
HINT: Always set up two-factor authentication when using exchanges.
Other forms of making profit from altcoins
Some cryptocurrencies are stakable. This means that you can generate more coins of the same or similar coin just by holding them in particular wallet, e.g. desktop wallet. For example, Neo (NEO) can generate some Gas (GAS) when holding in Neon desktop wallet. Wallets in exchanges are generally not suitable for staking.
Electroneum (ETN) introduced "fake" mobile mining. Instead of real mining using device's processing power, it only simulates mining. You can generate up to 10 ETN in 3 days (Xiaomi Redmi Note 4) depending on your mobile phone. Please use the following code 373FA4 after installing Android app to support me.
Presearch (PRE) gives you up to 8 PRE per day when you search through their search field. Search request is automatically redirected to Google search or whatever service you choose (Amazon, Etherscan, DuckDuckGo, Facebook, Twitter, Presearch). Also you can set up your Google chrome plugin which will automatically opens presearch site everytime when you open new tab in your browser. Every seach is rewarded with 0.25 PRE.