Bitcoin is one of the online banking business that has gotten millions of attention and acceptance. From individuals, private sectors and corporate bodies. People now talk about investing in bitcoin. Investing into a particular business is not the main fact. People are more interested in a business ventures that can yield good results (profit) within a short period of time. For the past few years bitcoin has built that kind of reputation and trust. People now feel at home investing in bitcoin because of the lesser risk and more profit with incentives.
Meaning of 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.
It was built on the Blockchain technology. And its strengths lie in its anonymity and also on its transparency. All the details are on the network and yet, it is available only to those who need it. The control and the information is decentralised. Which is a marked change from the legacy financial systems where the control is centralised with the regulators. Bitcoins paved the way for free, fair and quick movement of funds at a fraction of the current costs. But at the same time, providing high security and transparency to the transaction that exists on the blockchain. These are the humble beginnings from which bitcoins came through. And it began to be accepted by more and more people who found a refreshing change from the existing financial and banking system.
Buy and Sell Bitcoin
As people people began to realise the growing use and the incentives attached to bitcoins, more people began to invest in Bitcoins. There was not much speculation in the prices for the first few years. During this period, one can only buy and sell Bitcoins for payments. People in countries with strict regulations on sending or receiving funds from foreign countries began to use bitcoins to send and receive payments. They found this to be a very secure, easy and quick method to send and receive funds and there were other people or businesses in place which helped them to convert these bitcoins back into fiat currencies.
At first, it was very difficult for people to convert the Bitcoins and hence many were forced to store their Bitcoins and there were no methods to change it into fiat currencies. Slowly, bitcoins began to gain acceptance and some elements also began to use the bitcoins to fund and move funds for illegal purposes. This generated to the higher demand and supply as more people joined in the Bitcoin market. The mining of bitcoins also began to gain attraction as the value of bitcoins began to grow and bitcoin became profitable to mine.
How to Buy Bitcoin?
One can get hold of Bitcoins in a variety of ways. Bitcoin mining was one of the most popular ways of getting bitcoins till a couple of years back. But as more and more Bitcoins were mined and with the total number of bitcoins being restricted to 21 million and with more than 16 to 17 million Bitcoins already having been mined, the difficult level for mining bitcoins has become huge and unless you have huge mining farms, profitable mining of bitcoins is out of the question these days.
The other major way to buy Bitcoins is to buy them off exchanges. There are many bitcoin exchanges all around the world and some countries have their own domestic exchanges while there are international exchanges like Coinmama, CEX.IO, as well which cater to people from various countries. People can buy bitcoins from such exchanges using fiat currencies like the dollar or the euro or by using other cryptocurrencies as well.
Bitcoin prices have been very volatile over the last few months and it’s important for the customers to buy them at the right time and the right price as well. These exchanges provide the easiest and cheapest way to buy bitcoins. There are also bitcoin ATMs that have been launched in a few parts of the world and the clients can buy bitcoins at such ATMs as well, though the problem of their location and their high transaction costs has been a bit restrictive as far as their adoption by clients is concerned.
As one stores money in a wallet, bitcoins also need to be stored in a signature wallet. This wallet can be stored online, offline, on hard disk, flash drive etc. The wallet has public and private keys to ensure that only the owner of the wallet can access it and the bitcoins stored within it. Ones the keys are lost, the user no longer has access to the wallet and the bitcoins stored within it are either lost or has been hijacked by an unknown body. This is why it is important to keep the keys in safe place.
In order to get a wallet, the user has to decide whether he wants an online or offline wallet. An offline wallet is much more safer, but is complicated to use and maintain. An online wallet is simpler to maintain and it is better to use them as long as you don’t own too many bitcoins. Anyone can get a wallet from any of the bitcoin exchanges anywhere in the world or from standard websites like blockchain.info and bitcoin.org.
These are free and all that a user needs to do is to give his mail id only and hence the wallet is as anonymous as it can be. The signup for a wallet is free and simple on any of these websites and once the user gets a wallet, he can store his bitcoins there and send and receive bitcoins from/to the wallet.
Where to Purchase Bitcoin?
Where one can purchase bitcoins depends on the person’s location. Some countries have totally banned the use of bitcoins and hence in such countries, bitcoins are available only in the black market and also at a high price with its resident issues and troubles. In some other countries, things are not very clear in either way and hence these countries are hosts to a number of bitcoin exchanges and ATMs where bitcoin can be freely and easily purchased at any point of time.
The exchanges generally tend to be the ones with the least charges and that is the reason why many prefer to use exchanges to purchase bitcoins.
There are a multitude of bitcoin exchanges all over the world ranging from behemoths like Bitfinex, Coinmama and CEX.IO to exchanges that are quite small and cater to only a small population within a country. These exchanges are basically those where people can buy and sell bitcoins and the exchange facilitates this process and in turn, takes some commissions out of this exchange of bitcoins. This is one of the most convenient ways to buy and sell bitcoins for any traders but it comes with associated risks.
These exchanges are always under the purview of the regulators of each and every country. And when the regulator decides to take action, the exchanges are the first ones to face the wrath and they get shut down. This is what happened in China few months back. These exchanges are viewed as companies which facilitate the transfer of funds between unknown and different buyers. And regulators are simply not very convinced about such a business model which is not under their control. But going by the huge transaction volumes in such exchanges, the traders do not seem to care much about it. We are seeing the launch of more and more Bitcoin exchanges in different parts of the world serving specific geographies.
With the number of coins that can be mined drying up, traders and investors have had to depend on trading to buy and sell bitcoins. The trading in bitcoins has been ever expanding over the last year or so. And it appears that the whole world wants to trade Bitcoin as the prices have been skyrocketing. And the bitcoin market has begun to get worldwide attention. As mentioned earlier, trading of bitcoins requires the user to enroll at an exchange and deposit funds. So that he can buy and sell bitcoins at the existing market prices.
One can also buy bitcoins from bitcoin ATMs as well. And this can then be sold off at the exchanges. But considering the current frenzy among all to enter the bitcoin market, it is important to maintain some sanity.
Mining of Bitcoin
Mining is a record-keeping service done through the use of computer processing power. Miners keep the blockchain consistent, complete, and unalterable. That is, by repeatedly verifying and collecting newly broadcast transactions into a new group of transactions called a block. Each block contains a cryptographic hash of the previous block. Using the SHA-256 hashing algorithm, which links it to the previous block, thus giving the blockchain its name.
The proof-of-work system, alongside the chaining of blocks, makes modifications of the blockchain extremely hard. As an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted. As new blocks are mined all the time, the difficulty of modifying a block increases as time passes. And the number of subsequent blocks (also called confirmations of the given block) increases.
For all practical purposes, for retail people, the time for Bitcoin mining is well past. With most of the coins being already mined off over the last 3 years. There is very little left and this has made mining practically difficult and financially infeasible. There is only a total of 21 million bitcoins that is possible. And this limited supply is one of the main reasons for the prices to keep going up.
As for now, 16 to 17 million coins have been mined which means that there is very little left. This has in turn increased the difficult level for the mining of bitcoins by many notches. Even those who mined bitcoins earlier have given up due to the increase in difficulty level. Also the returns are not commensurate with the funds that are invested in buying top notch equipment for mining.
How to Protect Your Bitcoin
Step 1 – Use a lengthy password for your Bitcoin wallet
People are accustomed with using the same password for online as well as there offline accounts. It can put your Bitcoins at risk. It is better to choose a password that will be difficult for people to access for your Bitcoin account. You can use the following softwares like, 1password or Roboform to create and preserve your passwords – with this method you
will never be a repetition of password.
will never be a repetition of password.
Step 2 – Use 2 factor
Most online Bitcoin wallets provide the option of a 2 factorauthentication process. That is, whenever you log on you are required to authenticate yourself with an additional step other than your password. Most of the time this will be a verification text message sent to your phone. Even though this may feel cumbersome at times, using 2 factor authentication reduces the risk of theft drastically.
Step 3 – Bitcoin wallet Backup
One can protect bitcoin wallet against computer breakdown with the method of backup. This will allow you to recover your wallet after your mobile or computer has crashed by keeping your wallet encrypted.
Step 4 – Method of cold storage for large amounts of
If your wallet stores a large amount of Bitcoins make sure to keep it in what is known as cold storage. Cold storage means your wallet isn’t present on the web or on any other computer. An example for cold storage could be a paper wallet or a flash drive that has your private key encrypted on it.
No business is absolute in life. There must be ups and downs. For the past few experiences, it seems that the benefit from Bitcoin is far far more better compare to the loss. There are many ways in which one can purchase Bitcoin. One can trade or buy Bitcoins both offline as well as online. It is up to the individual customer to ensure that he chooses the right product and the right platform to trade. So that he does not get caught on the wrong side of the deal.