What is the cryptocurrency bitcoin. What is Bitcoin - a complete guide. What to do with earned bitcoins

Virtual money Bitcoin was created in 2009 by programmer Satoshi Nakamato. He came up with the name of the cryptocurrency and the algorithm for its operation, based on mathematical calculations. The main objective of the new system was to ensure an instant money exchange process without centralized control and with minimal costs.

In simple terms, Bitcoin is a decentralized digital currency that operates only on worldwide networks. It cannot be controlled because emissions occur through certain operations carried out by computers located around the world using complex mathematical algorithms. You can use virtual money to pay for any purchases in cyberspace, as well as exchange them for currency traded on exchanges and cash out in rubles or another monetary unit.

An undoubted advantage electronic means is the lack of control, but this fact is the reason for distrust in virtual money. The creator of Bitcoin laid down the basic principles in the digital asset:

• limiting issuance, which protects the currency from inflation, since it cannot be printed and depreciated;
• Bitcoins are mined using mining, implemented on user computers or special farms;
• the presence of Tokens – components of Bitcoin;
• implementation of a financial transaction, adding information to the database and synchronizing it is carried out using all computers involved in bitcoin mining using blockchain technology;
• system users have a cryptographic account with a secret key, which is used to sign transfers.

How does Bitcoin cryptocurrency work?

The operation of Bitcoin is ensured by a generated database that does not have a main server, which gives it a decentralized character.
Its copies are stored in encrypted form by each participant in the system. The database contains information about all the operations performed, to which they all have access:

• mining;
• broadcast;
• purchase;
• sale.

Any operation is recorded in the database, converted into a record and synchronized with all copies of the system. No participant will be able to steal data, since with this solution he will have to make changes to all existing copies, which is expensive and pointless, since each block contains information about the previous block. The hash confirms the relevance of the element and certifies that it is intact, not counterfeited or altered.

Differences from electronic and real money

Cash can be expressed in paper, electronic and digital form. You can pay with paper money in a store, they can be deposited into a bank account or into the wallet of one of the electronic payment systems. When they are credited, an electronic record is formed, which is a guarantee of the issuance of money in paper equivalent upon the first request of the owner.

Electronic money is identified as records of financial transactions involving the deposit or transfer of funds. They move from one file to another, which indicates they are transferred from one account to another. The specific nature of the process means that there are no guarantees that operations will not be duplicated or changed.

Digital money does not belong to the category of electronic currency. Their only similarity is the conduct of operations on the World Wide Web. Electronic money is an analogue of real money money supply. They are subject to emissions and inflation. Digital currency is based on no paper money, since it is originally mined in the virtual space. A crypto coin is formed by a digital code obtained as a result of mathematical operations. Their algorithm pre-programs the number of coins planned for mining. For this reason, they are not subject to the risk of loss of value due to overissue or inflation.

Exchange rate dynamics

The Bitcoin price is strongly influenced by political news. Many of the rises and falls of digital currency are due to government announcements of certain facts or regulations. It does not matter which state head they were made of. Quotes are characterized by high volatility in the short term.

The value of an asset over a monthly period can change by several tens of percent.

After sharp impulse movements in quotes, a period of consolidation begins, during which the rate stabilizes. The market becomes non-volatile, the risks of losing funds due to transactions opened out of trend are reduced, as well as the investment potential of cryptocurrency.

The Bitcoin price chart allows you to evaluate its dynamics over the entire existence of the asset. It displays a real picture of changes in its value during certain time periods. The dynamics of quotes are clearly shown in the table.

Year	Quote, USD/BTC	Market condition
2009	0,008	flat
2010	0,5	pulse
2011	32	pulse
2012	32	consolidation
2013	600	pulse
2014	310
2015	355
2016	1000
2017	3242
2018	Growth to 20,000 and a sharp drop to 5,450

Where to buy, how to store and use

Participants in the virtual currency network can make instant financial transactions without the involvement of intermediaries. The transaction is carried out directly between its participants. Bitcoin coins are identified by cryptographic hash codes. Each currency unit is unique and cannot be used twice.

New cryptocurrency elements are constantly created through mining. To implement the process, powerful servers and computer equipment are used. Bitcoin mining is a technologically complex process. Alternatively, they can be obtained:

• by making a purchase from digital currency owners;
• by exchanging cryptocurrency for another asset from a private person;
• receiving payment for goods sold or services rendered.

Bitcoins are stored in wallets, which can be hot or cold. For constant use of digital currency, a hot wallet is convenient, to which the user has quick access from a computer. The leaders of such wallets are “Jaxx” or “Blockchain.info”. It is safer to use a cold wallet. Its program code must be installed on your computer and synchronized with the Bitcoin blockchain network. Of this series of wallets, “Bitcoin Core” is popular.

Currency prospects: is it worth investing?

The financial market is rapidly being conquered by cryptocurrency, which promises to soon become as commonplace in everyday life as the Internet, social networks and electronic payment systems. The value of an asset is determined by its demand. For this reason, investing in Bitcoin determines the development of the industry and the possibility of receiving high interest rates in the future.

In the long term, cryptocurrency prices are expected to rise as its popularity gains momentum. Today, the asset is characterized by price consolidation, so traders are recommended to invest in order to make a profit on short-term movements. In simple words, investing in an asset is profitable no matter how the market situation develops. At the same time, it is important to accept correct solution on the timely sale of an asset at a favorable price.

We should also not forget that the world’s central banks and governments are trying to take control of the digital currency sector, create rules and restrictions on transactions, and in some countries even ban the circulation of cryptocurrencies. Many people consider Bitcoin to be a bubble that will burst sooner or later, and do not consider it as a serious investment option. But no one can deny that blockchain technologies, which underlie the operation of cryptocurrencies, have already become firmly established in our lives and are gradually replacing traditional data exchange. And Bitcoin, as the most famous virtual currency, is supported by constant demand.

When considering investment opportunities, along with cryptocurrency, it is worth analyzing other options: for example, or.

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More than nine years have passed since Bitcoin was announced to the public. Many of those who then invested in an unknown digital currency have become dollar millionaires today. And although today the community’s attention is increasingly directed to new promising alternative coins (altcoins), Bitcoin remains the first cryptocurrency that sets the trend for the entire market. It is a locomotive and the rate of all other cryptocurrencies so far depends on its rate.

Despite the apparent popularity of the cryptocurrency topic, less than 1% of the world’s population uses Bitcoin and other cryptocurrencies. Cryptocurrencies still cannot be called a mass phenomenon. To better understand what Bitcoin is, how it works and how to use it, we wrote this instruction.

What is Bitcoin?

Bitcoin was first introduced to the community in 2009 as an open source project. The open source of a product means that anyone can see how it works, copy it for themselves and change it as they wish. Bitcoin is the world's first cryptocurrency. Very briefly it can be described as digital currency that exists only in electronic form.

Bitcoin is decentralized. You've probably heard this term. Decentralization means that Bitcoin has no control center. There is no single coordinating body that would manage the operation of the entire system. There is no emission center that would single-handedly control the issue and circulation of new coins, as happens in banking sector. But nevertheless, the Bitcoin network works clearly and there is order in it.

All a user can do on the Bitcoin network is send a transaction to another user. This transaction will be recorded on the blockchain, which is essentially a huge ledger. This ledger records information about every transaction that has ever taken place on the Bitcoin network, dating back to the very beginning of its existence. Blockchain (block chain - chain of blocks) consists of blocks that are organized according to the Merkle Tree (Hash Tree) principle. This technology is used in part to prevent changes to databases and to find damaged files. If even one file in the chain is damaged or changed, the blockchain will protect the remaining files in the ledger from corruption.

Instead of Central Bank, which prints money and controls the financial system, on the Bitcoin network, everything is controlled by code. This code determines how many new coins will be issued and where they are located. It is he who guarantees that the transaction on the network will be completed.

There are currently about 17 million bitcoins in circulation. As already mentioned, there is no emission and control center. Everything is controlled by code. The total number of coins provided in the Bitcoin blockchain is 21 million BTC.

21 million is a fairly arbitrary limit, because one bitcoin can be divided into almost infinitesimal parts. Its smallest particle 0.00000001 bitcoin is called satoshi. It is named after the creator of Bitcoin.

It is believed that Bitcoin is a new generation of money. It was originally created as a deflationary currency, as opposed to classic inflationary ones. Inflation is used by governments and banks as a hidden taxation to redistribute wealth. Many believe that Bitcoin and blockchain in general will help ordinary people gain more financial freedom from central banks and money-printing politicians.

How Bitcoin works

One of the key features of Bitcoin as a digital currency is its very strict transaction verification process, which reduces the risk of fraud to zero. In Bitcoin's decentralized architecture, transactions are verified by miners. They also update the blockchain by adding new blocks to it. Once several transactions are verified, they will be recorded in a block, which will be added to the blockchain.

What is mining?

Instead of a single server that verifies all transactions, the Bitcoin network allows the average user to verify and confirm transactions. Such users are called miners. In simple terms, mining is the computational process of confirming transactions and recording them in a block. In addition, the computational process of creating a block occurs according to an algorithm called Proof of Work (confirmation by action or proof of work). POW means that in order to create a block, it must be verified that a minimum amount of energy was expended to do so.

Calculations are based on Proof of Work (POW), or proof that a minimum amount of energy was expended to obtain the correct answer.

Computational work is performed not by people, but by machines—special mining equipment.

The built-in reward mechanism pays miners compensation for each new block in the chain. The way Bitcoin's code works is that this reward "halves" every four years. Currently, the block reward is 12.5 bitcoins.

The computational complexity for Bitcoin mining is growing very quickly along with the number of unmined coins. Currently, calculations are only possible on powerful hardware called ASIC (Application-Specific Integrated Circuit). An ASIC performs the same tasks as a regular CPU processor, except that it is designed to perform only one type of calculation. ASIC can mine bitcoins and nothing else.

Bitcoin mining currently requires financial costs(purchase of equipment) and other resources (room, cooling, electricity). If you are new to the game, then you will face acute issues with launching farms, their placement and maintenance. All this will require initial capital.

What is a Bitcoin transaction and how does it happen?

It seems that the Bitcoin network is complex. In fact, for the average user everything is much simpler. To transfer funds to another user, you only need to know his wallet address and nothing more.

Today, there are many programs and applications that allow you to safely store cryptocurrency and make transactions for other users without any problems or difficulties.

On the Bitcoin network, each wallet address is a string of 34 upper and lower case letters and numbers. For example 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa. This address is called the Public Key. You can share this address with other users so that they can send you bitcoins.

To manage your wallet, you must have a Private Key. The private key consists of 64 characters and confirms that you are the owner of the wallet. Whoever has the private key can make transactions. That's why never, under any circumstances, give your private keys to anyone.

Bitcoin storage wallets

So you have some (or a lot) of Bitcoin or any other cryptocurrency. Cryptocurrency cannot be put in a pocket or a regular wallet. Therefore, you need to clearly understand several key terms applicable in the crypto world:

1. Cryptocurrency exchange. This is a platform for exchanging and trading cryptocurrencies (Bitcoin, and others). Can also be used for storage, but it is not 100% safe.
2. Cryptocurrency wallet. Essentially, it's like a bank account that only you control.
3. Hardware wallet. A gadget that allows you to store cryptocurrency even without an Internet connection. It is considered the safest way.
4. Public key. This is your wallet address. You can share this address with other users. Knowing the public key, you can send bitcoins to it.
5. Private key. This key allows you to create transactions and send them to the network. Whoever owns the private key also owns the bitcoins that are in the wallet. Never, under any circumstances, give your private keys to anyone.

Now that the basic terms are clear, we can describe the structure of cryptocurrency wallets.

If you see news that a hacker hacked something and stole bitcoins, most likely we are talking about hacking a cryptocurrency exchange. Since it is almost impossible to hack the Bitcoin network. The likelihood of the blockchain being hacked is almost zero, and many experts seriously say that the Bitcoin blockchain cannot be hacked.

Cryptocurrency exchanges are another matter. Probably the most striking example would be the hacking of the Tokyo exchange MtGox in 2014. Unknown people stole 850,000 BTC from exchange wallets for a total of more than $350 million. unknown persons hacked the platform and gained access to wallets through it. Therefore, we can talk about hacking the site itself, but not about hacking the Bitcoin blockchain.

Many analysts believe that MtGox has become a sacred victim for the development of Bitcoin and the blockchain. Using his example, many sites understood what security really means in the cryptocurrency world.

Although many storage platforms are considered very secure, news of hacking attacks has some users feeling paranoid.

Advantages of hardware wallets. A hardware wallet for storing cryptocurrency is usually a USB device. This device allows you to store private keys offline without transmitting them to the Internet. Your private key is only in your hardware wallet and cannot be stolen (unless your device is physically stolen)

Hardware wallets are so secure that there are many stories of people losing them and being unable to regain access to the hundreds or thousands of bitcoins stored there. For this reason, many users prefer to store bitcoins in a “paper wallet.” Literally, this means that your private key is written down on paper and you manually enter it to complete the transaction.

Why use Bitcoin?

Very often Bitcoin is called the future world monetary system and here's why:

• • It is decentralized. Money belongs to people, not banks. Bitcoin appeared in 2008, immediately after the global financial crisis, and instantly attracted the attention of those who were disillusioned with the existing financial system. The idea of ​​decentralization has captured the minds and hearts of those who view politicians and bankers who print money with distrust. Now a new ideology is being formed, which is called cryptoanarchism. That is why .
  • Freedom. Anyone can conduct a cross-border transaction of millions and billions of dollars, pay for any goods and do not need to wait for confirmation and approval from the bank.
  • Safety. To send money you do not need to have a passport or confirm your identity. Unlike banks or traditional payment systems, where strict verification is required. This minimizes the risk of losing personal data.
  • Low cost of money transfer. Banks or payment systems like PayPal charge huge commissions for monetary transactions. For example, PayPal charges up to 6% per transaction. On the Bitcoin network, the transaction cost is much lower, and with the launch of new updates, it should decrease even more.
  • Immutable registry. The Bitcoin blockchain is a public ledger that cannot be changed or tampered with. The community has accepted the new technology and trusts it because blockchain is a mathematical software code. It excludes the human factor and cannot be corrupt, unlike officials.

Weaknesses and problems of Bitcoin

Despite all the obvious advantages of Bitcoin, it has a number of significant problems that the community is currently working on solving.

Perhaps one of the main obstacles to the global use of Bitcoin by civilization is its abnormal volatility (rate fluctuations). But this is not the main problem, there is something else:

1. Partially outlawed. It is impossible to talk about complete legalization as a completely illegal status of cryptocurrencies. Bitcoin is rather in the “gray” zone. Up to a certain point, big governments remained on the sidelines. This has led to the technology becoming quite advanced. Now the adoption of blockchain for governments and regulatory authorities is tantamount to a loss of power and control. However, the price of Bitcoin is still very sensitive to news of regulations and bans. This is skillfully used by speculators and manipulators. The adoption of cryptocurrency at the legislative level is only a matter of time. The question is who will be the first to harness the new technology and extract the maximum benefit for their state.
2. Cryptocurrency exchange hacks. As already noted, hacking an exchange does not mean hacking the blockchain. However, the market still reacts to such news, although to a lesser extent. Cryptocurrency exchanges, in turn, are developing and improving their security systems, recognizing the risks.
3. Volatility. This is one of the reasons why traders and stock speculators became interested in Bitcoin. Those who view Bitcoin as speculative instrument basically trying to predict future price behavior. But the cryptocurrency market is unpredictable now. One thing is certain: in the long term, the price of Bitcoin will only rise.
4. Weak adoption of technology by business. Bitcoin's high volatility is the biggest obstacle for businesses to accept Bitcoin as a means of payment. A growing number of users and a more stable exchange rate would significantly increase business interest in Bitcoin as a means of payment.

Another problem is that although many have heard about Bitcoin, only a small part of users understand what Bitcoin is, how it works and what opportunities it brings to civilization. Instructions like this should help people expand their knowledge of the technology and ultimately grow the community.

The larger the community, the stronger Bitcoin. The more people know and use Bitcoin in everyday life, the stronger and more stable its price will be. This benefits everyone except speculators.

How to buy Bitcoin

In the early years of Bitcoin, there were no reliable cryptocurrency exchanges. Their number began to increase along with the growing popularity of cryptocurrencies in general. There are a lot of really good, community-oriented marketplaces on the market right now.

Today the situation is such that many cryptocurrency exchanges receive huge investment injections from venture investors. These sites are monitored quite strictly and comply with the laws. This indicates their relative stability and security. We have a detailed article about where you can buy Bitcoin for rubles. But now we will briefly talk about the two most reliable exchanges where you can:

Who created Bitcoin?

It is believed that the creator of Bitcoin is Satoshi Nakamoto. But the identity of this person has not yet been established. According to one version, Satoshi Nakamoto lives in Japan. He was born on April 5, 1975. But there are a number of investigations that claim that this is not even one person, but a group of programmers who are well aware of the field of programming and cryptography. This group is geographically dispersed throughout the United States and Europe.

It is believed that Satoshi Nakamoto created the first block (Genesis block) in the Bitcoin blockchain. There is also a version that Nakmoto was single-handedly involved in Bitcoin mining at the very beginning and mined an impressive amount, which is still in his account.

Despite the fact that the identity of the creator of Bitcoin has not been officially established, this does not prevent the technology from developing. Hundreds and thousands of new cryptocurrencies are appearing, and governments are constantly making attempts to “ride” the technology in one way or another.

Conclusion

Bitcoin is still a very young digital currency and technology. But nevertheless, it is increasingly finding application in all spheres of life. This technology fundamentally changes the understanding of monetary relations between people. The more people learn about Bitcoin's potential, the greater and faster its adoption by businesses and governments.

Bitcoin is the flagship of all other cryptocurrencies. Understanding its potential leads to the discovery of amazing new uses of blockchain technology in our world.

Old monetary system, full of crises and contradictions, seems like a lumbering old dinosaur in front of the new transparent blockchain architecture. Bitcoin opens the door to a world without intermediaries in the form of outdated financial institutions and corrupt officials. Welcome to the new era of cryptocurrencies.

Before answering the question of why Bitcoin is needed, you need to know what it is. Bitcoin is an innovative technology that is rapidly gaining popularity in society. Every day more and more people learn about this type of earnings, such as cryptocurrency mining. However, not everyone fully understands what Bitcoins are and why they are needed. Let's try to understand this issue, and also try to understand where such demand for digital currency came from.

Where can I pay with bitcoins?

If you are planning to become a professional miner, you must understand that in Russia you will not be able to officially pay with cryptocurrency. For example, if you want to buy a car, real estate, or just a mug of hot coffee, you will have to pay in the state currency - the ruble. No seller will be able to give you a receipt if you are going to pay for the goods with Bitcoin, as this violates current legislation. However, you should not give up on Bitcoin mining ahead of time, since by the end of 2017 the situation may change for the better. The State Duma, with the direct participation of the Ministry of Finance and the Central Bank, is already working on creating a bill that will control existing types of cryptocurrencies and allow every citizen to make transactions using digital money.

This raises a logical question: why do you need Bitcoin if you can’t buy anything with it today? You can buy it, but only on the shadow market. All transactions take place quite quickly, safely and anonymously. You can pay for almost any product on the Internet without any commission or go to one of the resources that offers the exchange of cryptocurrency for money familiar to most people, such as euros, dollars or rubles.

Where does cryptocurrency come from?

Bitcoin is the result of highly complex computer calculations. There are more and more bitcoins every day, which leads to the complication of computational processes and an increase in the time for their processing. At the same time, emissions are constantly decreasing, and in 2021 they will be zero. The limited quantity and difficulty in mining cryptocurrency leads to the fact that the cost of Bitcoin is constantly growing. This is precisely why there is increased interest in this currency.

Why are bitcoins needed and who buys them?

As a rule, citizens are interested in purchasing electronic currency eastern countries and Europeans. For example, in Germany you can legally purchase real estate by paying the seller with bitcoins. In Japan, you can have a good meal at a restaurant by paying the bill with cryptocurrency. This is very convenient, because you don’t need to have a lot of time and lose huge percentages for a completed transaction.

However, not everyone is in a hurry to spend their savings, which are stored in the form of digital currency, in this way. Most Bitcoin owners who buy coins from miners, deep down in their hearts, hope that the rate will suddenly rise and there will be an opportunity to sell the cryptocurrency profitably. This is one of the ways to make money using Bitcoins. Thus, many of those who bought the digital currency as soon as it began to gain popularity were able to make a fortune.

How to withdraw digital currency?

Before you start mining cryptocurrency, you need to know how to withdraw bitcoins. There are special wallets for this purpose. In them, you can create an unlimited number of addresses to which a certain cryptocurrency is transferred, in our case, Bitcoin.

In order to make a transaction, for example, buy bitcoins, give the seller of digital coins your wallet address. As soon as a deposit arrives in your account, the system will notify you about it. Now we know why we need a Bitcoin wallet. Let's figure out how to create it on the official website.

How to get a wallet?

Most novice miners spend a lot of time on various resources, looking for information on how to create a Bitcoin wallet on a computer. There's nothing complicated about it. Just go to the official website and download the software client. This method is considered the safest. A wallet installed on a computer allows you to both withdraw bitcoins and store them (accumulate).

It is also worth considering the fact that when installing a wallet from the official website, you need to have access to the Internet, since information about all completed transactions will be downloaded. Available hard disk space must be at least 100 GB.

How to get Bitcoin?

There are several ways to become a happy owner of Bitcoin:

• Mining.
• Buying from hand.
• Exchanges.
• Exchangers.

Most often, people who know why Bitcoin is needed and how to turn it into a source of income use Internet exchangers. However, it is worth considering the fact that each exchanger offers its own conditions for making a transaction. It is necessary to carefully study all available information, so as not to run into exorbitant commissions, which inventive entrepreneurs disguise behind an attractive exchange rate. As a rule, many exchangers offer up to $5,000 for Bitcoin, although the real price to the ruble is 1:228,000.

You can mine digital currency yourself using the power of your computer. This method is called mining. As a rule, in order to increase the mining speed, so-called farms are made, which are equipped with several powerful video cards that allow more calculations per second. According to unofficial statistics, a productive farm can pay for itself within a year, and maybe sooner, because the bitcoin exchange rate to the ruble is constantly growing.

The most reliable and easiest way is to buy Bitcoin on one of the major exchanges. But to make a similar transaction with bank card will be problematic. That's all for today banking institutions, which are under the jurisdiction of the Russian Federation, have an extremely negative attitude towards transactions of this kind. No risk management department wants to get involved with gray currency, so they prefer to block such financial transactions, the number of which has increased sharply recently as people have become more aware and know what Bitcoin is for.

Reliable protection

The most common payment method in online stores is a credit card. However, it is worth considering the fact that when “credit cards” were created, no one even imagined that the Internet would appear, much less that financial transactions would be made on it. That is why credit cards cannot be called reliable. By purchasing any product and leaving personal information, you risk losing control over your funds in your bank account.

Despite the fairly high cost of Bitcoin, a transaction in this currency does not involve the disclosure of personal data. All you have to do is enter a public and private account. A public account can be known to many people, including the person with whom you are making a transaction. However, private - known only to you. Only when these two keys interact does it become possible to sign a check and make a transfer.

No inflation

The most common problem facing all world currencies is inflation. It occurs when the country's economy is in a critical condition and it is necessary to inject money to maintain it. As soon as the state starts up its typewriter, inflation immediately sets in. Such measures lead to the fact that the monetary unit loses its value by exactly the same percentage as new banknotes were issued.

Bitcoin is reliably protected from such a negative phenomenon, since the number of coins that can be created is strictly limited. According to official data, the maximum number of bitcoins is 21 million coins, which will be mined in 2021.

Anonymity

Sometimes people strive to ensure that no one knows about a particular purchase. Using cryptocurrency for payments, you can reliably hide your personal data. Despite the fact that information about your wallet and how many bitcoins are in it is available to any user, no one will know the real name of the owner. The payment system does not oblige users to enter personal data when registering.

Decentralization

By keeping your money in a bank, you show your trust in it. financial institution. However, as practice shows, you can only trust yourself, since any bank has every right to dispose of the funds in custody at its own discretion. Situations often arise when you need a substantial amount of money, but you cannot get it either at an ATM or in an office. The procedure for issuing cash is deliberately delayed in order to gain time.

If you have bitcoins, then you are truly independent from the services of all kinds of intermediaries. Your funds are always available, and you can spend them at your discretion at any time.

Access

Unlike other payment systems, a Bitcoin wallet will never deny you access to your personal funds. Take a look, for example, at Yandex, which can at any moment decide that you are spending funds incorrectly or limit your functionality, explaining that the security service doubts that the owner is in control of the wallet. In this case, you will have to identify yourself in every possible way, which takes a colossal amount of time and effort.

A few more advantages of cryptocurrency

A huge advantage of using Bitcoin for calculations is speed. Unlike banking services, when when paying a check or during a transfer you have to wait several days before the money arrives in your account, the cryptocurrency comes to your balance almost instantly.

Minimum commissions or their complete absence. People making transactions using credit or debit cards, constantly pay a certain percentage of the amount for bank services. Using Bitcoin as a unit of account, commissions are almost never charged, with the exception of some cases.

Afterword

Now you not only know what bitcoins are and why they are needed, but you also understand the principle of operation of the system, and also become familiar with the main ways to make money on cryptocurrency. Unfortunately, no one will give you a guarantee of how successful this digital currency will be even in the near future, so carefully review the possible risks and only then invest your personal savings.

Hello! In this article we will talk about cryptocurrency and try to give all the most important information about it.

Today you will learn:

1. What cryptocurrencies exist?
2. Why are they so popular?
3. How can you make money on them?

What is cryptocurrency

Let’s figure out what is hidden under the term “cryptocurrency”, what it is in simple words, and why it is called that way. The name Crypto Currensy itself, meaning “cryptocurrency,” appeared in Forbes magazine in 2011. And since then the name has firmly entered into everyday use.

Cryptocurrency called a special type of electronic payment instrument. Strictly speaking, this is a mathematical code. It is called that because when circulating this digital money, cryptographic elements are used, namely an electronic signature.

The unit of measurement in this system is “coins” (literally “coins”). Cryptocurrency does not have any real expression such as metal coins or paper bills. This money exists exclusively in digital form.

The fundamental feature that distinguishes crypto money from real money is the way it appears in the digital space. Thus, real means of payment must first be deposited into a specific account or online wallet, and cryptocurrency units appear in electronic form.

The “issue” of digital money occurs in various ways: this is ICO (initial coin offering, system), and mining (maintaining a special platform for creating new crypto-money), and forging (formation of new blocks in existing crypto-currencies). That is, cryptocurrency literally emerges “from the Internet.”

Another important difference from conventional currency is the decentralization of issue. The issuance of electronic currency involves the generation of a mathematical code followed by an electronic signature.

Only the Central Bank has the right to issue real money, but anyone can issue crypto money. In order to make transactions using cryptocurrency, you do not need to contact any third-party organizations (banks).

Payments using digital money are carried out in exactly the same way as regular electronic transfers via a cashless payment system. The only exceptions are exchanges through which crypto money can be monetized, that is, converted into regular means of payment.

The circulation of such currency occurs according to the “blockchain” system (literally “closed chain” in English). This system is a database distributed across millions of personal computers around the world. At the same time, the storage and recording of information when circulating cryptomoney occurs on all devices at once, which guarantees absolute transparency and openness of the transactions performed.

Why is cryptocurrency so popular?

The popularity of cryptocurrency is due to the demands of the time. In the age of ubiquity information technologies There is an extremely high demand for universal means of payment, which could be used to pay in the electronic space without being tied to a specific country or institution. Cryptocurrency became such a means.

For payments with virtual money, only their number is used, so cryptocurrency does not need real expression. Digital means of payment are protected by cryptographic code, which makes them more reliable than “real” money. And due to the absolute decentralization of the emission of virtual coins, they can neither be counterfeited nor banned.

Another feature that contributes to the popularization of crypto payments is complete anonymity. When conducting transactions, no one will receive any information about the payer or recipient; of all the data, only the electronic wallet number will be used.

And also the attractiveness of cryptocurrency is that you can get it yourself. That is, digital currency can be obtained almost out of thin air. But you can also buy and sell, as well as invest in cryptocurrency. At the same time, crypto money can be exchanged for traditional cash, as a result of which they are able to generate quite tangible income.

Types of cryptocurrencies

Digital money first appeared in 2008, and by now there are already several thousand varieties of it. There is a large category (almost 50%) of crypto money that is actually not backed by any content. These are the so-called soap bubbles. Let's not take them into account.

The most common types of cryptocurrency:

1. (BTC, bitcoin, at the moment one bitcoin is equivalent to 4200 US dollars). Bitcoin cryptocurrency, in simple words, is the very first digital currency, on the basis of which all subsequent ones were developed. Bitcoin developer (developer group) – Satoshi Nakamoto. This currency has a stated quantity limit of 21,000,000, however, it has not yet been reached.

2. Ethereum(etherium, equal to 300 US dollars). This is the development of Russian programmer Vitaly Buterin. This currency appeared relatively recently – in 2015. Now it is quite popular along with bitcoins.

3. Litecoin(litecoin, LTC, equal to 40 US dollars). The currency was developed by programmer Charlie Lee and has been issued since 2011. Litecoin is considered an analogue of silver among cryptocurrencies (and Bitcoin is an analogue of gold). The issue of litecoins, like bitcoins, is also limited and amounts to 84,000,000 units.

4. Zee-cash(Z-cash, 200 US dollars).

5. Dash(dash, $210).

6. Ripple(Ripple, $0.15).

In addition to the indicated names, Darkoin, Primecoin, Peercoin, Dogecoin, Namecoin and many others are also used in electronic circulation.

The most popular of all cryptocurrencies is Bitcoin. Its name is made up of the words “bit” - the smallest unit of information and “coin”, which means “coin” in English. For BTC, or bitcoin, not only a program has been created, but also a special digital wallet in which this currency can be stored.

In addition, now there are even special ATMs where you can transfer bitcoins into regular paper money, and a number retail chains and stores accept this currency for payments along with regular bills and coins.

Advantages and disadvantages of cryptocurrencies

According to its main characteristics, digital money differs significantly from conventional money. This entails not only continuous advantages, but also some disadvantages for users.

Pros:

1. Anyone can get this kind of money using specially organized activities (mining). Since there is no single emission center and no bodies controlling this process, no one can prohibit ordinary citizens from obtaining crypto money online.
2. All operations with cryptocurrencies (so-called transactions) occur completely anonymously. The only open information in this case is the electronic wallet number. And all information about its owner is closed.
3. Decentralized issuance, in addition to the possibility of everyone earning money, also determines the lack of control over this process.
4. Each type of cryptocurrency has an issue limit. Thus, excess emission is impossible and, as a consequence, there is no inflation in relation to this money.
5. The cryptocurrency is protected by a unique code like , so it is copy-protected and therefore cannot be counterfeited.
6. There are practically no commissions for transactions, since when conducting transactions using cryptocurrency, the role of a third party in the relationship - banks - is excluded as unnecessary. Therefore, such payments are comparatively cheaper than using regular cash.

With all the variety of positive characteristics, cryptocurrency also has disadvantages.

Minuses:

1. If a user has lost the password for his electronic wallet, this means for him the loss of all funds in it. Since there is no control over transactions using digital money, there are no guarantees of their safety.
2. Cryptocurrency is characterized by high volatility due to the specifics of its circulation (volatility means frequent changes in its value).
3. In relation to cryptocurrencies, attempts may be made to exert various negative influences on the part of national monetary regulators (for example, the Central Bank of the Russian Federation).
4. As the process of mining cryptocoins becomes more and more complicated over time, mining using the equipment of individual users becomes less and less profitable.

Each of existing species Cryptocurrency has both advantages and disadvantages inherent in them all together.

In general, all crypto currency units are characterized by the same features as modern money, namely:

• They are versatile;
• They are a means of exchange;
• They can be accumulated;
• Perform a calculation function.

The value of digital money varies depending on supply and demand.

How to make money on cryptocurrency

Currently, there are a number of ways to make money on bitcoins and other virtual currencies:

1. Buying and selling cryptocurrency. This is done on special exchanges or exchangers electronic money. The principle of operation is to buy a currency when its value decreases, and sell when it increases. Most often, such trading is associated with bitcoins, since their cost is higher than other types of cryptocurrency.

2. Cryptocurrency investments. are made by transferring a certain amount of electronic money from one person to another in trust. Usually questions trust management brokers do it.

3.Extraction of electronic money (mining). Cryptocurrency mining in simple words is the process of obtaining cryptocurrency using a special software. It will not be possible to produce large volumes of cryptocurrencies on an ordinary home computer; quite significant power is required, and, consequently, the purchase of additional equipment. A powerful video card and processor are required. In addition, special devices are used - so-called mining farms, which produce cryptocurrency.

4. Cloud mining. For such digital currency production, you do not need to buy additional devices. For this purpose, there are special services where you can sell and purchase computing power. That is, the service generates cryptocurrency for you, and you pay for the power expended.

5. Cryptocurrency giveaway. Such services are usually provided for attracting referrals or entering letters from pictures (captcha), that is, in fact, for increasing site traffic. These are the so-called gateways, taps or distributors. There are also special Bitcoin games in which you can earn electronic money. Earnings on such services are small: a small portion of Bitcoin (Satoshi) is distributed per hour.

Conclusion

Thus, cryptocurrency is a new word in money circulation. Its emergence is due to the needs of the time. Despite the fact that crypto money has no real expression, it can participate in various market transactions almost on a par with traditional currency units.

Currently, there are a number of ways to earn cryptocurrencies, as well as options for making a profit from them, which is what the most advanced users use.

In general, cryptocurrency in its characteristics is largely similar to traditional money, however, it also has a number of fundamental differences that allow digital money to increasingly gain popularity in the modern information space.

In print and electronic sources it is growing exponentially. Against this background, more and more people are becoming directly or indirectly familiar with this term. Bitcoin has long ceased to be a sphere of interest for “geeks”, but has become quite firmly established in life ordinary people. And sooner or later you will have to deal with Bitcoin directly. We invite you to prepare for this meeting and get to know Bitcoin better through this guide for beginners.

What is Bitcoin and why is it needed?

Bitcoin (abbreviated as BTC) is an electronic payment system, in which virtual “money” (bitcoins) circulates. You have plastic cards VISA or Mastercard? Both Visa and MasterCard are also electronic payment systems. However, they use the currency we are familiar with - dollars, euros, hryvnia, rubles, and all transactions undergo bank processing. Such currencies are called fiat. The Bitcoin system uses cryptocurrency - a purely digital currency that is not tied to any world bank or the economy of any country. It has its own cost (rate), which is formed against the background of demand.

Key features of Bitcoin:

The entire system is decentralized. This means that Bitcoin is not regulated by any bank, agency or government entity. All network participants are absolutely equal, regardless of nationality or other characteristics. For example, Visa and Mastercard have Gold cards, Platinum, Vip, systems like Webmoney or QIWI have user levels. There are restrictions on the size of transactions. And in Bitcoin, everyone is equal and there are no limits.

Pseudoanonymity. When transferring to BTC, participants do not reveal their identity. For transactions, an address (a hash of 27-34 characters) is used without disclosing other data about the recipient and sender. Think about transfers between cards or other electronic systems. Transactions often reveal the name of a person or the name of an organization.

Irreversibility. All operations in Bitcoin are irreversible. They cannot be canceled, stopped or blocked. Theoretically, a complete rollback of the system (blockchain) is possible. In practice, this is extremely difficult to implement.

Safety. It is impossible to hack a Bitcoin wallet. All data is stored in a special file that only you have access to. It is also impossible to “intercept” data during a transaction, as happens in banking system. Bitcoin uses cryptographic records - encrypted data that guarantees confidentiality and security.

Direct nature of operations. In Bitcoin, transfers are carried out directly between participants - the P2P (peer to peer) principle is used. The transaction occurs without the participation of a third party: bank, processing center, server. Therefore, no one except its participants can track a Bitcoin operation.

History of Bitcoin creation

The history of the creation of cryptocurrencies does not have a clear chronology. For decades, experts in the field of cryptography have been working to create a unique decentralized system, the work of which is based on mathematical calculations. Using the experience of their predecessors and their own developments, Satoshi Nakamoto and Hal Finney in 2008 created the world's first cryptocurrency - Bitcoin. Nakamoto received the main fame - he published a file with the Bitcoin protocol and briefly described the features of the new payment system. The smallest fractional part of the coin is named in his honor - 0.000 000 01 BTC.

Why was Bitcoin created? Part of the reasons for developments in the field of cryptocurrencies reveal their features: anonymity, decentralization, security, and general availability. Ideally, the Bitcoin ecosystem should guarantee fast transactions without the participation of a third party (bank, cash desk) with a high level of security.

An interesting point of view was expressed by the famous Russian entrepreneur Sergei Mavrodi back in 2013:

“All this hype about cryptocurrencies is due to their anonymity. People are tired of Big Brother watching their every move. Everyone is tired of this. And Bitcoin in this regard is a breath of fresh air.”

This quote answers the question why bitcoins are needed. Transaction privacy is the most important feature of cryptocurrencies.

How does Bitcoin work?

The entire Bitcoin ecosystem is based on the blockchain. To put it complicatedly, blockchain is a continuous chain of blocks of all transactions. The block is closed after selecting a digital signature. After this, a new block can be formed. Now let's decipher this in simple words. Imagine that each transfer (transaction) in Bitcoin is recorded on a separate page. The sequence of pages forms a chapter of the book - a block.

To record a new page (conduct a new transaction), we need to “turn over” all previous pages and chapters. That is, each new transaction is carried out along the chain - with the processing of old blocks (turning pages and chapters). A new chapter of a book can only be started after the old one is finished. And all the chapters form a book, and the blocks form a blockchain. Pages and chapters cannot be torn out or altered. And access to the blockchain is open to all participants in the system.
That is, a blockchain is a large open database that stores encrypted information about all completed transactions.

Blockchain and its potential are one of the reasons for the constant growth of Bitcoin’s exchange rate relative to fiat currencies and key feature BTC. Here are some other differences between “virtual” Bitcoin and regular money:

Form. Bitcoin is an electronic currency that has no material appearance. There are physical “coins” with a QR code or coin-shaped drives that store BTC. However, they cannot be called money in the truest sense of the word. We can say that Bitcoin is a set of numbers generated by an algorithm. No way paper banknote or metal coin.

Price. The exchange rate of a fiat currency directly depends on the economic and political development of the country or confederation to which it is attached. In fact, the money of more than 100 countries around the world is tightly tied to the dollar. The price of Bitcoin is determined by demand and does not directly depend on economic processes(although related indirectly).

Emission. Theoretically, ordinary money has no emission ceiling. You can print as many of them as you like. BTC has its own ceiling built into the system - 21,000,000 coins (20,999,999, 9769). According to forecasts, this figure will be reached in the middle of the 22nd century.

Direct transfers. Even if we are talking about an electronic version of ordinary money (card, wallet), the transactions are carried out with the participation of a third party. In Bitcoin, the transaction is carried out directly (P2P).

Objectively valuing BTC is not that easy. Certain features of Bitcoin can be attributed to both its advantages and disadvantages. Let's take such a characteristic as the irreversibility of operations. On the one hand, you will receive cryptocurrency in any case - no system failure will block the transaction. On the other hand, this feature of Bitcoin is exploited by scammers or representatives of the “black” market.

The main advantages include:

Anonymity - the other participant in the transaction will only know your Bitcoin address or QR code. Other data is not disclosed.

The decentralized nature of the system - all network participants are equal and independent.

Security – hacking of wallets, data substitution, interception of transfers is impossible.

Globality - Bitcoin allows you to quickly carry out transactions between people with different countries, time zones.

Mining – there is an independent method of mining BTC, which is considered by many as a means of earning money.

Often the advantages of Bitcoin include the speed of operations. It's not that simple. The transaction can last 10-20 minutes, and sometimes an hour. To complete it, you need 6 confirmations from other participants. They happen automatically. When network load is high, transfers slow down. Another disadvantage is the regulatory activities of the authorities of different countries in relation to cryptocurrencies. Formally, BTC creates the same conditions for all potential network participants. However, in some countries (Vietnam, India, Ecuador, and partly China) bans have been issued.

Other cons:

Unstable exchange rate - because of this, the potential of BTC as a payment option decreases;

Fraud – Bitcoin itself is very secure. However, inexperienced people can fall for scams: fake exchangers, fraudulent investment projects, viruses.

Where to get Bitcoin

Bitcoin, like any other cryptocurrency, is mined through the use of the hardware power of computers, or rather processors and video cards. This process is called mining. If in 2009-2010. To mine bitcoins, you could use a regular computer, but now this requires powerful installations - farms. These farms combine dozens and sometimes hundreds of video cards or special ASIC-type processors. This equipment costs thousands of dollars and requires additional care and technical skills. This method of receiving BTC is not suitable for beginners. Firstly, there are a lot of costs involved. Secondly, there are too many nuances. And in some countries, mining is completely prohibited. There are other ways to acquire Bitcoin:

Exchangers. There are services online that exchange fiat currency for cryptocurrency. In the vastness of the RuNet, the AlfaCashier resource enjoys great authority. An absolutely safe and proven service offering cryptocurrency exchange services.

Cryptocurrency exchanges. Resources where cryptocurrency trading is conducted. Largest exchanges: CEX.IO, LocalBitcoins, EXMO, Livecoin, Poloniex, Kraken. Bitcoin rates on different sites may vary.

Bitcoin faucets. These are services that distribute cryptocurrency to visitors for free. To get a small amount of BTC, just fill out a captcha or do some other small thing. There are hundreds of them on the web. Read more about how to get started with Bitcoin faucets.

Trading platforms. You can also sell goods for Bitcoin. Where? Yes, at least on Amazon or Ebay. There is a specialized site in this area - Purse.io.

Self-service terminals. You can also receive BTC through regular terminals. There are also specialized Bitcoin ATMs - they have a better exchange rate and more modern technology. So far they have not received wide distribution in the CIS.

Read more about how to buy Bitcoin in our large guide.

How to use Bitcoin

Okay, we know what Bitcoin is and how to get it. Now it remains to get acquainted with the storage tools for this cryptocurrency. These are wallets. Hardware wallets are the most reliable because they store your private keys securely, that is, offline and without access to the Internet. The most popular and accessible device is a wallet. It allows you to store Bitcoin and 1000 other different types of cryptocurrencies and tokens.

In order to start using Bitcoin, you just need to set up and top up your wallet in accordance with the instructions.

What can you buy with Bitcoin?

Bitcoin is a payment system. Accordingly, purchases are made with its help. In the early years of cryptocurrency, all transactions were conducted unofficially. Buyers and sellers communicated in chats (mIRC, Miranda), social networks, and forums. It was on the forum that the most famous purchase of goods for Bitcoin took place. It is considered the first purchase of anything using cryptocurrency.

On May 18, 2010, a user with the nickname laszlo created a topic on the BitcoinTalk forum with the title “Pizza for bitcoins?” (Pizza for bitcoins?). In it, he asked who could order him two pizzas for 10,000 BTC. At the time it was the equivalent of $30. An English user agreed to the offer and ordered laszlo pizza. This is how the first and most famous purchase using BTC was made.

Not much time has passed since then, and BTC as a payment option has developed to a global scale. In the summer of 2017, it became known that 260,000 retail stores BTC will be accepted in Japan. This is an important step towards the globalization of BTC payments. Where to spend bitcoins in the world, read in this material.

Every month there is news that a coffee shop, bar or restaurant is opening somewhere in the world that supports payments in cryptocurrencies. In some countries, taxi drivers use Bitcoin. The Coinmap allows you to find stores and services that accept Bitcoin near you. To understand the payment capabilities of Bitcoin, we have compiled a table of popular companies that support the cryptocurrency.

Dell	Computer technology, IT	USA
AppStore	IT	USA
Microsoft	IT	USA
Expedia	Tourism (booking accommodation and air tickets)	USA
Amazon	Trade	USA
Ebay	Trade	USA
Sacramento Kings	Sport	USA
Wikipedia	Internet	USA
RE/MAX	Real estate	Great Britain
Victoria's Secret	Cloth	USA
Tesla	Auto	USA
Reddit	Internet	USA
Valve/Steam	Internet	USA
T-mobile Poland	Connection	Poland
Naughty America	Adult	USA
Subway	Nutrition	USA

BTC is suitable for buying food, a car, an apartment, booking a plane ticket or booking hotels. Moreover, some universities accept tuition payments in Bitcoin. In the US, supporters of the Republican Party can donate money for its development in BTC. Cryptocurrency has even reached outer space. It is used by Virgin Galactic, a company working in the field of space tourism.