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What-Is-Bitcoin: Understanding the Basics of Cryptocurrency



13 Jan, 2021


Bitcoin is a digital currency; its creation and transfer totally depends on an open source protocol encrypted network that is totally independent from any central authority. A Bitcoin can be transferred from anyplace in the world to anywhere in the world by the use of a computer or a smartphone without the involvement of any intervening third party or intermediate financial institution. This concept was initially introduced in 2008 on a white paper published by a pseudonymous programmer named Satoshi Nakamoto, it can be defined as a peer-to-peer electronic payment system. The Network was turned on by Satoshi on the 3rd of January 2009.

Bitcoin can be used for payments similarly to the dollar (or any other currency). Due to the mathematical characteristics of Bitcoin, it has the huge potential capacity due to its multi-divisible properties enabling micro values to be sent virtually with no cost. Bitcoin opens the door to many possibilities and services that have never been imagined.

Bitcoin is the most efficient solution when it comes to tipping or making donations over the internet. Donations can be visible to the general public in large amounts, making a better way of financial solutions and thereby providing a greater transparency for non-profit organizations. In Emergency situations such as natural catastrophes, donations in the form of Bitcoin and digital currencies arrive faster to those in need, this helps in reducing the international response time as well as serves as an extremely effective frictionless way of value transfer. Though there are still very few initiatives, we can already see the first crowdfunding projects related to Bitcoin pop up more frequently.

Bitcoin permits pseudonymous transactions and transfer of assets and other values. Bitcoins can be stored in a computer inside a special software that protects and stores the encrypted keys, or by using an online wallet provided by third parties; in both the cases Bitcoins can be sent over the Internet to anyone who has a Bitcoin address.

The p2p topology of the Bitcoin network and the absence of a central management entity make it impossible for any authority, government or institution, to control the distribution and issuance of Bitcoin.

How are Bitcoins made?

For the making of this new virtual currency as an open source program that connects the peers through a network which created is specifically for this purpose, unlike most currencies, Bitcoin is not dependent on trust with any centralized issuer; instead it is powered by an encrypted complex mathematical algorithm which acts as the main building block of the protocol.

Fundamentally, all bitcoin transactions are recorded on a giant ledger shared by all the network users. When someone uses bitcoin to pay for something or get paid, the executed transaction is recorded on this public ledger. The machines running the bitcoin protocol algorithm then compete to confirm the transaction by solving complex mathematical equations, and once a block is processed the machines running it are rewarded for their effort. This process is widely known as Mining.

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Mining Bitcoin

Initially when the network was launched by Satoshi in 2009, any computer connected to the network could effectively mine bitcoins. This was possible because there were too few people mining it and because the protocol made it to work that way. Bitcoin operates as a peer-to-peer network. This means that everyone connected to the network is helping to produce it. In the case of paper money, governments decide when money is to be printed and how it will be distributed, but bitcoin is completely decentralized, it doesn’t have any central government to control its functioning. Bitcoin is mined with the help of a special software to solve math problems. Miners run the software on their machines and are issued a certain amount of bitcoin in return. This provides a smart way to issue the currency and also creates an incentive for more people to participate. The major advantage of mining is, as the number of people who participate in mining increases the more secure the network becomes.

“Bitcoin is completely decentralized, it doesn’t have any central government.'

Bitcoin miners are rewarded by a new batch of Bitcoins about 6 times per hour which are distributed among miners based on their utilized computing power or “hash rate'. Here everyone has the equal opportunity to win their share while running the Bitcoin miner software program, or third party programs. The act of creating Bitcoins is usually entitled as mining because it has some similarities with gold mining. The probability of a certain user to gain a lot depends on the processing power that he contributes to the network in relation to the processing power of all the other miners. The amount of Bitcoins generated by batch never exceeds 50, and this value is programmed to shrink every four years until it gets to 0, so that the total set amount of Bitcoins to ever be produced will never exceed more than 21 million.

Where can I keep my Bitcoins safely?

Bitcoins can be saved in a Wallet. There is a special software programmed for your computer, to your smartphone and even online wallets. The wallets will allow users to save their bitcoins and to execute transactions with an operation that is much similar to sending an email.

Here is a small list of the bitcoin Wallet software we can recommend:

  • Jaxx
  • Trust Wallet
  • Bitcoin Core
  • Multibit
  • Electrum
  • Armory
  • Bitamp

The installation process is quite simple and synchronization with the network takes only a few seconds.

Users can also create an online wallet. There are several suppliers for this service, Blockchain, Coinbase, Coinkite, etc. It should be borne in mind regarding the credibility of the service as always we want a service that transmits security.

How to earn Bitcoin?

Bitcoins can be earned in many ways. They can be mined, bought, given, won, or earned as an exchange for services. The easiest way to get some bitcoins, although not the most effective, is through Giveaways or through the commonly known Faucets which offer small amounts of bitcoin from time to time.

Today, to mine Bitcoin with some profitability you might need to invest a good chunk to get the things move, and in order to keep the growth you might have to keep the reinvestment running throughout the time period. So if you’re thinking about starting to mine, we strongly advise you to do your own math. Or Simply sign up with Botsfolio and make your trading simple, safe and secure

Bitcoin Faucets are sites that offer small amounts of bitcoin from time to time. Currently to get something significant through Faucets is nearly impossible because these faucets limit the amount given per bitcoin address.

Lastly, you can try and be on lookout for giveaways, not just Bitcoin giveaways but also other crypto currencies, since you can always turn them into bitcoin simply with the help of exchanges.

How/Where to buy Bitcoins?

You can buy Bitcoins in many ways. You can buy personally to someone as a friend, or with the help of local Bitcoins, or you can buy them through a Bitcoin Exchange.

Local bitcoins – is a bitcoin shopping service that lets the user find people in his vicinity who want to sell and buy bitcoins and then both can agree to meet personally to do the business, or they can either use the escrow service provided by the Local bitcoins platform.

Bitcoins can also be bought at several Bitcoin exchanges: Kraken, BTC-e, Bitstamp, Bitfinex – There are several other operators but these are the most reliable and rated by the community. There are also some companies that are specialized in selling bitcoin by accepting credit card payments and money transfers; however, we do not advise anyone to use this type of services because of the uncertainty of their correct behavior. Furthermore, we strongly advise anyone who is interested in dealing with bitcoins to have extra caution with security issues and before making any decision be certain that you have studied this decision very closely.

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