What is Bitcoin in simple words: another electronic currency or a new generation of money? Why is Bitcoin so expensive?

Many Internet users are wondering: what is Bitcoin (bitcoin, btc, btk, cue ball)? In short, it is a decentralized (which means it cannot be counterfeited or banned) electronic currency, completely protected from wear and tear. In the first 2 years of its existence, the idea did not leave the boundaries of the World Wide Web itself. The population simply did not know about the currency or did not understand what Bitcoin was. But in a number of countries in South America and Japan it is already recognized as a means of payment. There, along with the state currency, you can use bitcoin.

Bitcoin what is it? What is Bitcoin? (+video)

What is Bitcoin in simple words? The first thing you need to know is that it is a virtual currency and it works on both computers and mobile devices. In addition, the Bitcoin currency does not have a central administrator or any control by people. As a result, this results in significant benefits for users.

The creation of Bitcoin was started in 2008 by a programmer under the pseudonym. The new currency came to world fame just 2 years later, demonstrating a steady upward trend. The name of the creator gave the name to the smallest particle (one ten-millionth part) - satoshi.

How do cryptocurrencies work (using Bitcoin as an example)?

So how does it work? To understand the principle of operation, it is best to compare it with an online bank, payment system or real bank. A transfer in traditional payment systems looks like this:

1. You send the bank a request “I want to transfer 5 rubles from account A to account B.”
2. The bank or server decides whether the payment can be processed and also charges a commission.
3. Money comes from your account to the one you specified.

This results in a large number of inconveniences for the user: a server malfunction, legal problems with the bank, or any other issues make both payments and, possibly, withdrawal of money from the account inaccessible. Now let’s see what Bitcoin is and how the system works.

The electronic currency bitcoin uses a special algorithm (blockchain), which evenly involves every computer working in the system in operations. Moreover, the devices themselves are not connected in any way geographically and can be located in different parts of the globe. Each device is also used to store information about current funds; everything is encrypted and duplicated many times.

Bitcoin payment algorithm

If we simplify and write it in the “bitcoin for dummies” style, then the sequence of events when sending a payment in cryptocurrency is as follows:

1. You create a request “I want to transfer 5 rubles from account A to account B.”
2. An algorithm decides which computer will process your transaction.
3. The information is “written in” and transferred to all devices in the system.
4. Bitcoins also go to B’s account.

How does Bitcoin work? Bitcoin what is it? All technical details (video)

How many are there?

Many people are interested in how many bitcoins there are in the world at the moment. Their approximate number is slightly more than 17.5 million (as of February 2019). The system provides for the creation of a new bitcoin by using a special device for computing operations and processing transaction data - . But it won’t be possible to “print” a lot of new currency in this way - the system sets a limit on the number of bitcoins created per day (3600 BTC).

There is a maximum allowable number of btc, upon reaching which mining (creation of new units of currency) will no longer be possible and it is 21 million. Using simple calculations from current indicators, it is easy to calculate that the increase in the number of virtual coins to the maximum will last for 150 years (approximately 2140), which means the questions “how many bitcoins can there be in the world?” and “how many zeros does it have?” You can simply not ask yourself.

What is Bitcoin and what is its practical significance for the end consumer? There is no even theoretical possibility of producing such a quantity of cryptocurrency that this would lead to a fall in its price for a long time. A striking example: the US dollar has fallen more than 300 times over the past 100 years due to the emergence of more and more new money. At the same time, only one structure had control over their release. As a result, the investments and savings of millions of people could and could become worthless at any time. In fact, this statement works for every classical currency and payment system.

How is Bitcoin different from electronic and paper money?

There are a huge number of differences between cryptocurrency and regular (fiat) money. Therefore, it is difficult for many to understand why bitcoin is needed. Let's try to figure it out:

• The theoretical impossibility of inflation. Even the creators of the system will not be able to “print” more bitcoins. Their number is specified at the program code level. If previously it was possible to create new units of currency (mining), now its quantity has irrevocably stabilized.
• The absence of any intermediaries when carrying out transactions with Bitcoin: no server or other user can either accidentally or intentionally block a transfer or stop the operation of the system - it is not subject to outside influence.
• Decentralization means that the operation of the system is ensured by each computer connected to it separately. In fact, the virtual currency Bitcoin will exist as long as at least one device is working. And now there are tens of millions of them in the world and the number is growing exponentially.
• The absence of a central hub, administration and management means that no legislative or regional prohibitions on Bitcoin Internet money apply. When making transfers within the system, cryptocurrency is not subject to the jurisdiction of any state or individual.
• Very high performance. Even international transfers take up to several minutes, regardless of the time of day and your location. And the commission for one transaction is minimal. In this component, the electronic currency Bitcoin has no equal.

A few more differences

• Records of transfers are public and available to the public. You can track where your money went and where it came from. At the same time, anonymity remains at a high level.
• Easy registration: the Internet currency bitcoin does not require the disclosure of personal data. You don't need to go through complicated procedures to create one. The process takes a few minutes at most. The number of accounts is also unlimited.
• Division into ultra-small shares opens up completely new opportunities for trade and entrepreneurship that were previously unavailable. In most cases, there is no transfer fee at all or less than $0.01.
• No one can block your account under any circumstances. Once created, it will exist as long as the system itself operates.
• No one, not even the state, can take away the money in your wallet. If only you own the key to your account, then you have a real one hundred percent guarantee of the safety of your money. The digital currency bitcoin is completely safe.
• The number of transfers, the volume of bitcoins sent or received are simply not available.
• During all the searches in the system, we did not find almost a single critical bug; the client for work is constantly updated. The software is convenient even for those who do not know why bitcoins are needed.
• Soaring prices. No type of fiat money has increased by several thousand times in a decade. Compared to fiat, the Internet currency bitcoin, the rate of which is already over $3,600 per piece (February 2019), was able to easily increase demand and rise in price.

So, what are bitcoins and how to earn them in 2019. There are several ways to receive cryptocurrency:

1. On stock exchanges.

At the moment, there are many options that actually work and are usable:

The main part of the market (about 70%) is held by the btc-usd pair. Most of these services require authorization, which includes sending scanned documents for verification.

2. Exchange services for Bitcoin and other cryptocurrencies

• Telegram bot for Bitcoin
• Telegram for Bitcoin Cash
• Telegram for Ethereum
• Telegram for Litecoin
• Telegram for DASH
• Telegram bot for DOGE (Dogecoin)

They work on a principle completely similar to conventional exchange offices, charging a fixed percentage for the operation. Synchronize the rate several times a day with one of the exchanges listed above. Allows you to purchase btc using almost any traditional payment method.

3. Bitcoin -

Sites that give away a small portion of Bitcoin for free. There is no danger to the user in them - the service simply uses your computer for certain operations, such as mixing flows of funds. The amounts that can be received in this account are extremely small, but the process itself will allow you to answer questions like “Do you need the virtual currency bitcoin btc?”, “What is bitcoin and how does it work?” etc.

4. Buying second hand

On forums dedicated to bitcoins, you can find a large number of cryptocurrency owners in your city. It is important to carefully monitor the reputation of the seller and ask which services can be used to promptly verify receipt of funds. This is not difficult even for those who do not know how to work with bitcoins.

A few years ago, the above-mentioned mining (generation of bitcoins) could have been included in the list. But now the popularity of cryptocurrency has reached too high a level. With a limit on the daily rate of created blocks, this makes earning even a meager amount of money in this way an almost impossible task.

Bitcoin cryptocurrency: how can you use it?

And yet, what to do with bitcoins? There are many options both for those who like to make money and investors, as well as those suitable for less risky users who do not know what bitcoins are and why they are needed:

1. Storage

The best answer to the question, what are Bitcoins for? If we analyze the graph of the behavior of the currency price against the dollar, then the unconditional maximum was in December 2017 - $20,000. Virtual money Bitcoin, the rate of which exceeds $3,600 per 1 BTC (February 2019), periodically breaks value records. In addition, all trends indicate that the demand for cryptocurrency will grow very quickly and within 2 years they will displace international payments from the market. Where is the best place to store bitcoins is a controversial question and will be discussed in one of the sections below.

Considering the limit on the amount of currency in the system (21 million), with increasing demand, electronic money Bitcoin will inevitably increase in price. Another thing is that the security requirements for your computer are increasing significantly. Because all transfers in the system cannot be canceled. In fact, it is precisely the original limitation that Bitcoin is secured with. There is basically no chance of your investments depreciating in the long term. It’s worth thinking about how to store them now.

2. Make international payments

Among freelancers and remote workers, paying with bitcoins has become commonplace. It's cheap, reliable and anonymous, which is what he's always been famous for. The operating principle of which is based on decentralization and powerful encryption. In addition, this is a very simple process: even those who have no idea what electronic money Bitcoin is can figure it out in two minutes.

3. Pay for services using Bitcoin

At the moment, btc can be used to pay with Dell, Microsoft and Amazon. Not to mention hundreds of smaller stores and services. In the countries of the European Union, South and North America, as well as in the Far East, you can easily pay for food, clothing and other small goods with them. Bitcoins are in great demand around the world. Even in Russia, Rostov-on-Don, a famous cafe began to accept them.

4. Gamble, make sports bets

Play gambling, place sports bets, use them for trading on stock exchanges, even if they simply do not exist in your country. Here everything is limited only by the imagination of the developers of various projects and the possibilities of cryptocurrency. After all, what is Bitcoin in simple words? The ability to spend money anonymously and quickly.

Disadvantages of Bitcoin

Although Bitcoin has many advantages, the currency also has many disadvantages and it is worth considering them during the dating process:

1. If a virus erases your Bitcoin wallet file (this applies to accounts that are located on local devices) or is able to track your password, your money will not be returned. In addition, this includes a fairly large amount of space taken up. The entire transaction block (beginning of 2019) already occupies more than 200 GB. This is a consequence of how cryptocurrency is structured. Secure synchronization (database update) will also take some time. As a result, this will affect ease of use.
2. If you figure out why Bitcoin is needed and decide to invest money, you may experience a drop in price due to lack of demand. The value of a cryptocurrency is determined by capitalization and demand (and only by them) - this is a consequence of how Bitcoin works.
3. Bitcoin virtual money does not support refunds in case of password theft or fraud. As a result, no one has the power or authority to reverse a Bitcoin transaction unless the person who took it back returns it to you.

Bottom line

Now we have dealt with the question of Bitcoin - what is it - an interesting alternative to money, which has a right to exist. Yes, the currency also has a number of disadvantages, but they are completely offset by a huge list of advantages and the ever-growing demand for cryptocurrencies. Over time, its price and importance in the world will only increase.

Now we understand what the essence of bitcoin is. Tell us your opinion about this digital currency. How long has she come to our world and what will her future be like? Let's share our experiences and help each other with this.

Why is Bitcoin so expensive? Is it just the popularity of this cryptocurrency? In fact, no one really knows how much Bitcoin should cost. In addition to the excitement driven by stories of unexpected wealth, the price was also influenced by:

1. In December, the start of trading in Bitcoin futures on several exchanges at once (the arrival of large investors);
2. There are already 10 developers announcing the creation of the next fork (everyone loves a freebie);
3. Popularity and at the same time misunderstanding (it is difficult to meet a person who has not heard of Bitcoin and at the same time clearly understands what it is);
4. The average cost of mining one BTC in large pools has exceeded 2k.

Futures Impact

As for futures, it is not at all a fact that they will benefit Bitcoin, since they can short it large, and since the total volume is not large, they will easily pump it in any direction.

Bitcoin futures lead to speculative growth and decline, since it is not necessary to transfer bitcoins between wallets - they can change hands many times while in the same exchange wallet. To some extent, this will smooth out the problem of increasing transaction time between Bitcoin wallets.

Futures are an important step towards the recognition of cryptocurrency, but also a destabilizing factor. We just can’t imagine what will happen to the market. All we advise is to calmly look at the situation from the outside and then, having rebalanced the portfolio at current prices, continue investing. So, instead of catching trends, it is better to do a detailed study of coins and search for candidates to add to the investment portfolio.

Cost of Bitcoin

Cost is the price below which holders do not want to sell under any circumstances, based on logic - it’s better not to sell than to sell at THAT price. Miners may determine this price for themselves based on the cost of electricity spent on mining, and ordinary holders (not professional speculators) determine this value as the price at which they bought the asset.

The situation is similar in the real estate market, after the crisis of 2008 and 2014, the “market stood up”; the nominal selling price may not have fallen, simply because sellers were not ready to reduce prices, and there was no demand. The real price in the end was lower than the market, but only a force majeure circumstance could force the owner of the apartment to sell below the market at a loss.

A similar situation will be observed here - after the bubble is deflated, many will not sell bitcoins at all, and miners will not sell below the cost of electricity, which means the average bottom level will be slightly higher than the cost of mining. At the same time, the price may fall below this “average bottom” for a short time.

Real forecasts for BTC

5 Bitcoin analysts have long been making a small calculation and forecast of this Bitcoin pyramid. Most likely, BTC should rise in price to 30,000 green, after which the pyramid should collapse. Bitcoin will definitely collapse, but at what peak value - that is the question.

At $50,000 per unit, it's too good to be true. We think the rate will still rise until the end of the year, and then most likely many will take profits and exit Bitcoin, at least partially. Unfortunately, we cannot provide any facts to support this, only theoretical analysis. Professional exchanges are professional players, and big players. But big players are a completely different game, and accordingly there will be a huge shake-up. The majority of traders and cryptocurrency holders must lose, this is the essence of any markets.

Some even believe that Bitcoin is a kind of “vacuum cleaner” to remove excess dollar mass from the global economy. After some time, a “random financial catastrophe” will happen to him, and along with him the dollar surplus will disappear.

They paid off as promised: +70% since December, if you count up to $5577, the 2018 minimum. Now the crypto sector is experiencing a small but intense rebound (up to +10% per day), and the question is not whether to sell Bitcoin at all, but whether to continue selling it. According to the managers of Golden Hills - Kapital AM, the answer to this question is affirmative.

It is generally accepted that the cryptocurrency rate is something like a casino. It is usually said that the rate may rise due to limited supply and the relative security of transactions. This coincides with the material known to every college graduate, and is therefore perceived as reliable knowledge. But reality is far from these theoretical constructs. The crypto market is more dangerous than just a casino because people are unreasonably confident that it is a cache generator.

In our opinion, the crypto sector actually sometimes shows absolutely extraordinary growth of 9-10% per day, but this is an argument not “for”, but “against” purchases by conservative investors. Imagine if tomorrow everything you are used to buying suddenly rises in price by 10% - how could that please you? What doesn't bring people pleasure sooner or later becomes cheaper.

What makes Bitcoin tick?

One of the reasons why our managers' views on cryptocurrency have not yet improved is that various analysts are unable to put together a single picture. Agree, it is unlikely that the same movement of Bitcoin should be explained in completely different ways. Either it is connected with purchases of a new exchange-traded fund for Bitcoin by banks and large funds, or with Blackrock’s participation in the purchase of relevant instruments, or with something else.

It is wrong to explain the growth of Bitcoin either by the appointment of a well-known crypto trader as the head of the investment division of a large bank, or by the emergence of payments for cryptocurrency in online stores, although both have occurred in recent months, because individual details only partially reveal the essence of the issue about the reasons for the growth and prospects of Bitcoin.

Cryptanalysts explain the increase in the price of their main product in different ways. This may be fine for those who deeply understand the subject, but it does not add to their credibility, especially considering that even experts are still unclear how high Bitcoin will fly.

Part of the expert community considers it possible to grow to $80,000, another part - to $1 million. It does not add clarity to the fact that if you look at what is happening through the ratio of trading volume and prices, as some experts do, then, generally speaking, it is difficult to judge them , since Bitcoin is a “black box” in which transaction participants are not visible.

It is more realistic to explain the growth of Bitcoin by actual and potential ramifications of the progress of the crypto industry (SegWit, MAST, Schnorr), increased security and transparency of payments.

What's really happening is that with every surge in demand, agitators rush in for a new money surrogate. For this reason, I would like to repeat: be vigilant and do not give in to universal temptation. It is likely that from week to week another round of reduction in cryptohype will begin. At the end of July, Bitcoin had already started to fall from a local maximum of about $8,000.

Why Bitcoin is Doomed

Our managers are confident that serious investors will not mess with Bitcoin and will short it at the first opportunity. In this regard, the relevant question is why is this digital asset growing in price and why is it doomed?

Firstly, the implementation of the SegWit “fork”, which took so long. SegWit is a device for protecting signatures from hackers. In essence, signatures are simply removed from the transaction into a separate structure.

This is a key topic for systems with increased openness, which include distributed networks such as cryptocurrency ones. The public part of the key remains so that only the owner of the address to which the funds are transferred can use it.

It is paired with an additional field that acts as a lock that opens access to the open cipher and provides proof of address ownership. This is a very old idea that was gradually implemented in order to make Bitcoin a sustainable payment system.

But as a result, we all understand well that almost every miner views cryptocurrency as a space for growing ordinary currencies, or fiat, like cucumbers in a greenhouse. As a result, the “fork” once again proved that Bitcoin is a type of multiplayer computer game in which protecting money is one of the functions of the participants, for the implementation of which they are always coming up with something, but they have never found a universal solution.

Secondly, this is MAST - breaking a smart contract into parts using a code structure. If we simplify it to individual elements that are stored in different places, then valuable information is more difficult to steal entirely, since the loss of one block changes little.

Along with the division of the code, its length decreases and free space in storage blocks increases, and security also increases. At the same time, changing the code structure further reduces the data array of individual blocks and simplifies checking the ownership of individual sections of the smart contract.

From our point of view, MAST is a stimulus for the development of blockchain, but not necessarily based on cryptocurrency. It is much more profitable to purchase a portfolio focused on blockchain and sell it on time than to see growth potential for cryptocurrency in every step of a new technology. The past few months have proven that this potential is not commensurate with the risks.

Thirdly, Schnorr (in Russian, Shnorr) is a new digital signature scheme that implies joint approval when transferring money in the payment system. This is not to say that Schnorr has already appeared; rather, it is in a state of development.

This is a technology that supports the accumulation of keys into one that is made available for verification instead of open source. It is believed that this innovation will cause the most modern and powerful change for Bitcoin since the “fork” that separated the public part of the key from the fuse. The world is on the verge of moving to new cryptographic ciphers for storing and sending Bitcoins based on a multi-party signature.

The Bitcoin community is positioning Schnorr as a way to fight for increased security of personal content and for scalability, but it seems to us that this is just a new challenge for hackers and spammers (Bitcoin networks are subject to spam attacks). A multiparty signature differs from a regular electronic digital signature only in that it involves several participants, which makes hacking a little more difficult, but does not guarantee against it.

Unlike a conventional signature, a multi-party linear Schnorr signature forces the key to be included in the cipher's security field. If the transaction is not from an address participating in this multi-party scheme, then the data storage space risks becoming longer, not shorter.

How to be

Will SegWit, MAST and Schnorr force us to rethink the future of Bitcoin as a savings tool? Hardly. As an alternative investment, you can consider, for example, shorting individual cryptocurrencies.

The main arguments for their sale and, in particular, for quickly getting rid of bitcoins, remain a serious excess of cost, which, according to various estimates, is no higher than $3,000, and the price is too high for the convenience of transactions in whole lots.

Neither SegWit, nor MAST, nor Schnorr will protect the crypto sector from theft, from the lack of connection with goods from the real sector or services beyond those that are completely prohibited, as well as from the destructive anonymity of payments, which forces states to unexpectedly introduce new regulatory levers.

It remains to add that experiments are already underway around the world to create state-owned cryptocurrencies and it is unlikely that anyone will want to compete with the authorities in the field of money issuance.

After Bitcoin fell by 70% from the highs of December 2017, even dynamics of plus 10% per day must be perceived in the context of increased risks. It is much more effective to invest in securities of companies going public with high capitalization and an expected return of about 33% per year.

Its over 300 times and not planning to stop. Even self-proclaimed experts cannot reveal the secret of Bitcoin. However, this is not stopping investors from investing in what is often called the largest bubble in modern history.

If you happen to ask these investors what Bitcoin is for, you'll likely only get confused looks and raised eyebrows. Gold, for example, is used in mints, in jewelry, as a conductor for high-precision electronics, and as a material for medical implants. Determining the spectrum of Bitcoin use is somewhat more complicated. If Bitcoin is a true commodity, its value must consist of more than just the value of an investment instrument. So what is Bitcoin used for?

As an alternative means of payment

If you spend enough time online, you may have noticed a growing number of projects accepting Bitcoin as a means of payment. Major players in the market, including Overstock.com, Expedia, Newegg, DishNetwork and Microsoft, do not disdain this.

Some companies only accept Bitcoin. Why? Sometimes entrepreneurs do things that go against the grain of traditional financial institutions, be it providing VPN traffic, selling marijuana, or showing adult videos. Since Bitcoin uses a p2p system, such services do not have to worry about blocking their accounts. It makes sense for their users to get themselves a Bitcoin wallet.

In general, Bitcoin has become quite popular. It is accepted by more than 100,000 merchants online and offline, and their number is growing every day.

As an alternative to a debit card

Bitcoin provides features similar to banking services. In some regions, people already have access to Bitcoin ATMs, where they can withdraw funds from their wallet or transfer them to a Bitcoin card. Such cards can become an alternative to debit bank cards. There is even a tangible Bitcoin coin, but it is more of an expensive souvenir than a practical thing.

As a permanent transaction ledger

In January 2009, when Satoshi Nakamoto bought Bitcoin, he left the following entry in it: “The Times of January 3, 2009: Chancellor on the verge of another bank bailout.”

This reference to the modern banking system reflects one of the core elements of Bitcoin. The blockchain records all transactions of this cryptocurrency. More importantly, because records can be entered with third-party data, Bitcoin can be used to exchange information and values ​​that are not related to itself. This mechanism is much better implemented by altcoins like Ethereum, but it was Bitcoin that first proposed this concept.

Instead of fiat currency

Bitcoin is a ready-made solution for those who do not want or cannot use fiat currency, who have lost faith in central banks, live in a country with a deteriorating economy, or in a region where there is no stable currency. Bitcoin's recent hyper-volatility aside, it currently represents a good investment and a healthy alternative to fiat currency.

Of course, no one knows what the future holds for Bitcoin. However, the use cases described above are valid for now and, apparently, will be valid for some time to come.

23.08.17 253 517 0

And is it possible to make money from them?

Since the beginning of 2017, Bitcoin has increased in price by 4 times.

Money that does not exist is worth more than oil and gold. I'll tell you how you can make money on this.

Antonina Asanova

I tried trading bitcoins on the exchange

In May of this year, I tried trading bitcoins. In 2 weeks I earned 30%. Then I lost 15% in a month. While this article is being prepared, I may trade 15% again, or I may lose even more.

Trading cryptocurrency is a risky business. Here's what you need to know if you're a risk taker.

ATTENTION

What is Bitcoin

Bitcoin is digital money. This currency does not physically exist, there are only special registers that keep records of how many bitcoins someone has and who transfers them where. These ledgers are called blockchains.

This is similar to how cashless payments in banks work: when you pay with a card in a store, you also do not transfer any physical money or gold to anyone. Your transaction is simply recorded somewhere in the bank register.

Bitcoins differ from regular currency in that registers are not stored centrally in banks and payment systems, but simultaneously on all computers that are occupied with bitcoins. Anyone can with all the bitcoins in history.

The registries are protected by cryptography. It is impossible to fake them for everyone at the same time. It is impossible to rewrite data in blocks and say that someone now has millions. Bitcoin is quite secure in this sense. True, there is already an attack that allows you to pay twice with the same bitcoins, so it is impossible to say that bitcoin is absolutely safe.

Where do bitcoins come from?

Regular currency is issued by the government. It is very indirectly connected with gold reserves, but in fact it is not connected with anything - as much as the state needs, it will print as much.

Bitcoins are not associated with any one state. New units of Bitcoin are created as computers on that payment network serve the needs of that same network.

For example, somewhere in China a person paid for pizza with bitcoins. This operation must be recorded in the registries on all computers connected to the Bitcoin network. To record a transaction in the register, you need to seal it with a special signature, like a wax seal. This signature needs to be calculated, which is a complex computer task.

Somewhere in Venezuela there is a computer that services the Bitcoin network. He just figured out this cryptographic signature. As a token of gratitude, the owner of this computer receives a reward in the form of a bitcoin penny.

For a Venezuelan who has set his computer to the mode of calculating cryptographic signatures, it looks like this: his computer is rustling something, and bitcoin pennies are dripping into his account. The computer appears to be mining bitcoins, although in reality it is simply encrypting and sealing other people's transactions. This is called mining - like “mining” bitcoins.

In fact, it is not the bitcoins themselves that are mined, but sealing wax to protect the ledgers. Bitcoins - this is a reward for service.

Mining is a separate big topic. In a nutshell: the equipment is expensive, efficiency is low, and you will have to compete with megawatt Chinese mining clusters that are built on the basis of power plants. We will write a separate article about mining.

Why do we need Bitcoin?

Cryptocurrency allows you to transfer money under a pseudonym and without the participation of banks. This is relevant for transactions with people and companies from countries outside the CIS.

For bitcoins you can buy an Airbaltic ticket or a Dell computer. You can even donate funds to a Buddhist temple in Seoul.

Bitcoins are traded on the exchange and money is invested in them.

Since 2015, Bitcoin has risen in price from $200-300 to $4,000 and continues to grow. This has made cryptocurrencies interesting for investment and speculation.

Success stories fuel interest. In 2009, Norwegian student Christopher Koch randomly bought $24 worth of bitcoins. He remembered the investment 4 years later, when his fortune reached 885 thousand dollars. And I bought an apartment in Oslo with part of the money invested.

Bitcoin wallets are used for transfers and payment for services. They store the digital keys needed for transactions. If you lose your private key, your money is gone forever. They cannot be returned by calling the bank. The Bitcoin system has no single center or regulator.

Under a pseudonym is not anonymous

Bitcoin transaction registers contain the entire history of transactions for all times across all wallets. If you bought something bad for bitcoins, and then somehow it became known that this wallet was registered with you, then an interested person will be able to see all your transactions.

For example, if you bought a plane ticket for bitcoins and indicated your personal data when paying, then the interested intelligence agencies will already be able to identify you.

There are, of course, means of completely anonymizing payments, but they are expensive.

It is legal?

The Central Bank and Rosfinmonitoring warned against the use of bitcoins. At the same time, the State Duma is preparing a bill that would legalize the purchase of cryptocurrencies for use abroad and trading in bitcoins.

Until the government regulates the circulation of bitcoins, banks and other companies cannot sell them. Cryptocurrency exists in the world of the dashing nineties. They can be purchased from individuals, online exchangers or trading exchanges.

Important clarification

We provide a basic scheme for buying and selling bitcoins through an exchanger and stock exchange. All examples are in rubles, to make it clear.

There is no universal way. If you have your own recipe for trading cryptocurrency, come in the comments.

How to buy Bitcoin through an exchanger

Internet exchangers work on the same principle as street ones that exchange euros and dollars. They buy bitcoins at a price below the exchange rate, and sell them at a higher price. They make money on the difference.

There are many popular exchangers: Bestchange.ru, Okchanger.com, Localbitcoins.net. There you can exchange rubles for major cryptocurrencies.

I compared the rate on different platforms and chose Localbitcoins. Buying cryptocurrency took 10 minutes. It took another 20 minutes for the bitcoins to arrive in my wallet.

How to use. Enter in the search the amount for which you want to buy bitcoins. We choose the lowest rate and suitable payment method. Most often, exchanges are offered to Sberbank and Qiwi account holders.

If the seller agrees to the deal, he reserves the required amount. When you transfer rubles to him, he will send bitcoins to your wallet. Now you can buy something or transfer coins to a more secure wallet on your PC or flash drive.

Minuses. The rate at exchange offices is very high.

Commission. Localbitcoins charges a withdrawal fee of 0.00039629 BTC. I invested a thousand rubles and received bitcoins worth 826 rubles. Transactions absorbed 17.4%.

For larger amounts the commissions are lower. You can negotiate individual terms with exchangers.

No one regulates the exchange market on the Internet. No one guarantees the security of transactions. If in doubt, do not transfer money or try to exchange a small amount first. Take into account the huge commission of exchangers when purchasing goods or investing money in bitcoins.

How to buy Bitcoin through an exchange

Exchanges are online platforms for trading cryptocurrency. Sellers and buyers of bitcoins meet there. If there are more sellers, the rate falls. If there are more buyers, it grows.

To register on a small cryptocurrency exchange, all you need is an email address. Large sites require you to enter your name, address, date of birth and telephone number. The larger the amount you change, the more personal data you will have to disclose.

At the end of July, the largest exchange that worked with rubles, Btc-e.com, closed. There are smaller exchanges left: Exmo.me, Livecoin.net, Cex.io. When choosing, pay attention to two points: the currency sale rate and the money input system. Some exchanges accept Yandex Money and Qiwi.

If you need to exchange several thousand dollars, choose a large exchange. Smaller sites may not have enough sellers. The most significant exchanges are Bitfinex.com, Kraken.com, Bittrex.com.

We write not only about digital money, but also about other investment instruments, ways to save on common things and accumulate a financial cushion.

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My experience. The Eksmo exchange suited me. I transferred rubles to her through Qiwi. Although this method has now been eliminated. It took almost 2 hours for the money to arrive on the exchange. Transfer to Bitcoin is instant.

How to use. First, we top up our account on the exchange. We put rubles into an electronic wallet. On the exchange website, click the “top up in rubles” button. We choose a payment method, amount and transfer money.

Now let's buy bitcoins. On the exchange website, select the bitcoin-ruble currency pair. Find the block “Purchase, BTC” and enter the required amount.

Minuses. Exchanges sometimes block withdrawals for 1-2 days after replenishing your account. This is explained by the rules of payment systems. Information about blocking is indicated on the money entry page.

Commission. Exchanges charge 4-6% for entering rubles. Exchanges also charge a commission on each transaction. As a rule, this is 0.1-0.3%. There is also a commission for withdrawing bitcoins - 0.001 BTC. As a result, out of a thousand, 805 rubles remain.

You can save money if you use a dollar or euro card, as well as register with the international payment systems MoneyPolo or ADVCash and top up through them. In this case, exchanges can credit funds without any commission at all.

To choose the most convenient and cheapest exchange method, you will have to register on several services. Decide in advance where you will write down your passwords.

Anonymous methods of depositing and withdrawing money are more expensive than legal ones and much riskier. Using bitcoins is like walking down the street wearing a mask, but with transparent pockets. The system does not reveal the owner of the wallet, but all transactions are recorded on a public blockchain. Sometimes government services manage to connect Bitcoin wallets with real people by IP address or delivery addresses for purchases.

To achieve anonymity, users transfer money several times between new Bitcoin wallets, use the anonymous Tor network and Bitcoin mixers - for example Coinmixer.se. In the mixer, transactions from different users are split and mixed. As a result, it remains a mystery who transferred how much and to whom. The service costs 1-3% of the amount.

On Localbitcoins and forums you can find a person who will exchange bitcoins for cash. It is also almost impossible to track them. However, this method of exchange is very risky: on forums you can stumble upon scammers and be left without money.

How to sell bitcoin

Let's say that since you bought bitcoins, their rate has increased so much that it has outgrown all your costs for commissions and transfers. It's time to sell bitcoins and take the money you earned. In this situation, you can use exchangers again or withdraw money through the exchange.

Experience. I am withdrawing funds from the Eksmo exchange to my card. Of all the withdrawal methods, I choose the cheapest one - the Capitalist.net service. Transferring from the exchange to the card takes less than a minute.

How to use. Register with Capitalist. In the exchange wallet, select the withdrawal of rubles and enter the “Capitalist” account number. Then we transfer the money to a Visa or MasterCard card.

Commission. You can transfer bitcoins to an exchange wallet without commission. “Capitalist” charges 2.5% for transfers to a card.

Do not transfer bitcoins before they send you rubles for them. Bitcoin transactions cannot be reversed.

How to make money on bitcoins

On the Internet you can find many training videos, blogs and forums that promise an income of 20% per month. The general meaning: buy bitcoins at the minimum rate with minimal commissions and sell at the maximum rate, but also with minimal commissions.

It seems that trading currencies is simple, but you should not take risks right away. The Bitcoin exchange rate changes very quickly and dramatically. First, try trading with an amount that you don’t mind losing. When you can earn money consistently, you can play big.

There are the least risks when trading with a trend. To do this, you need to deposit money on the exchange, wait for the moment when the rate has fallen and is just starting to rise. And then buy bitcoins and wait for the rate to reach its peak. With this strategy, it is safer not to store bitcoins on the exchange, but to transfer them to a separate wallet.

Trading on the stock exchange is work. Players constantly monitor exchange rates and check with Chinese exchanges. To avoid missing rate fluctuations, you can download the Bitcoin Paranoid app. As soon as Bitcoin starts to fall or rise, the alarm will go off. Bells can be placed on Bitcoinwisdom.com.

You can also earn money from ICO. Initial Coin Offering is an analogue of crowdfunding or going public. You invest in a new company, a startup, and for this you receive tokens - something like shares. If you are lucky and the company grows, you will receive income.

At the time of writing this article, the ICO procedure, like many other things in the field of cryptocurrencies, is almost unregulated and not protected in any way. Companies can launch an ICO without a product or a real business, just to collect money from investors and ride off into the sunset. Therefore, invest in companies at your own risk.

They are also investing in new cryptocurrencies. In addition to Bitcoin, there are several hundred of them. The Monero currency exchange rate has increased 40-fold over the past year, from $14 to $585. Ethereum and Dash increased in price by 17 times.

Investments in ICOs and new cryptocurrencies are high-risk. To assess the prospects of a startup, you need to understand blockchain technologies and business.

Remember

1. Cryptocurrency is a risky business. Bitcoin is still not beyond the scope of the experiment. It is not legalized in Russia. No rights of yours are protected here.
2. Take care to protect your wallet and save your passwords securely. Lost keys cannot be recovered.
3. Check out the service fees before transferring funds. Transactions can eat up 10, 15, and even 20%.
4. Do not transfer bitcoins until you confirm that you have been transferred currency for them. Cryptocurrency transactions cannot be cancelled.
5. If you store money in bitcoins, monitor its exchange rate.
6. Start trading with an amount that you don’t mind losing.
7. Professional Bitcoin trading is a full-time job. If someone promises guaranteed income without effort, chances are that someone will make money for you.