In this article, I will be discussing everything you need to know about Bitcoin in order to start using it or trading with it. I will be discussing the following:
- The history of Bitcoin
- What Bitcoin is
- The founder of Bitcoin
- How Bitcoin is mined
- How to create Bitcoin wallet (online and offline)
- Backup Bitcoin wallet
- Send and receive Bitcoin
- How to earn free Bitcoin
If you are already familiar with Bitcoin, feel free to jump to whichever part of the article you like. If you are a newbie, I’d recommend you be patient and read through the complete article; I bet you it’s worth it.
A Brief History of Bitcoin
As you already know, Bitcoin is currently the most popular virtual currency, but let me bring this to your notice, it isn’t the first. There have been tons of other virtual currencies that failed. As a matter of fact, Bitcoin is just the latest of the colossal number of virtual currencies built to replace traditional money. The following are some of the virtual currencies that existed before the emergence of Bitcoin. One thing these virtual currencies have in common is that they all failed in one way or the other. It is still quite surprising how Bitcoin survived up to this very moment.
E-gold had a stream of 5 million users in 2008. It was founded in 1996. It was similar to swapping gold ownership, but in an anonymous way. Due to its anonymous nature, the currency was patronized by a huge number of crime syndicates. It became an avenue for money laundering and all kinds of financial crimes.
This compelled the US government to get involved. After some court cases, the Feds froze all user accounts amounting to approximately $86m. This made the company to completely close her doors the following year. And that was the end of E-gold.
Beenz was launched in 1998. It was a virtual currency quite different from E-gold. The concept is that people could earn virtual currency known as Beenz for carrying out a variety of online tasks, such as shopping online or visiting some certain websites. The money (Beenz) earned could be used for various online shops; buying goods and other online services.
At some point, the company (site) saw itself as the web’s e-currency that could compete with world’s traditional currencies. But unfortunately, the company didn’t even last up to 4 years. The currency was short-lived.
Flooz was equivalent to Beenz in many aspects. It was launched in 1999 and closed her doors in 2001, the same year Beenz closed her doors. It was promoted by Whoopi Goldberg, a comedian.
Flooz operated the same way as Beenz, it tried to create an online currency basically for internet merchants, but it didn’t attract a lot of users, and on the process it failed just like the others.
This started from the Chinese internet service provider “Tencent.” It’s an instant messaging service which goes by the name QQ. The company developed its own internal virtual currency in 2002, it was called Q coins. With this currency, customers could purchase all kinds of virtual services and goods, such as virtual pets, online game avatars and extra storage space.
After some years, non-QQ merchants started using the coins as an official currency. With Q coins, people were able to buy real goods/services. The currency was able to garner a stream of more than 100 million users.
Due to its high popularity and patronage, it became a threat to Chinese traditional currency. Chinese government became very concerned and had it proscribed, never to be used in real world trading again.
Q coins still exists today, but it can no longer be used in the Chinese black markets or any real world trading platform, they are only used within the QQ service.
Linden dollars was a virtual currency basically used within online virtual worlds. If you are not familiar with the term virtual worlds, in a nutshell, they are online communities in form of a massive multiplayer video game. The users of these communities converse with one another using cartoon-like avatars, frequently participating in activities.
This is how it worked, when users want to buy items from the virtual world, items could be virtual housing, virtual clothing for their avatars, virtual entertainment and many more, they use their own unique virtual currencies that were only acceptable within the online world.
Second Life was one of the most popular virtual worlds. It was built in 2003 by a company called Linden Lab, and its virtual currency was nicknamed Linden Dollar. Linden Dollar could be purchased with U.S dollars and other renowned traditional currencies from LindeX (Second Life’s exchange platform), independent brokers and users.
The Linden Dollar gradually gained ground and became very popular and attracted a lot of attention from some top real world companies, such as Reebok, Ford and American Apparel. The aforementioned companies started accepting payments for both virtual and real-world goods/services in Linden Dollars. Its rapid growth also attracted a lot of serious investors from all walks of life.
The end of Linden Dollar
Unfortunately, she did not enjoy all these attention quite long. Second Life virtual investment bank collapsed in 2007, and her users were unable to retrieve tons of thousands of dollars (approximately $750,000) worth of Linden Dollars that were invested. This compelled Linden Labs to remove all objects relating to in-world virtual banking.
Gradually, Second life began to wane. Today, it’s still in existence but with no much participants. As a matter of fact, you can still trade Linden Dollars for U.S Dollars, but believe me, getting buyers is a pain in the ass.
Social media sites have also ventured into the concept of virtual currency in one way or the other. Facebook, a social media giant began experimenting the concept of Facebook Credits in 2009. Facebook Credits was officially launched in 2011. With this credits, users could pay for in-game goods/services within Facebook website. 10 Facebook Credits were sold for 1 U.S dollar.
Unfortunately, the project ended even before it started. The project was terminated by Facebook in 2012.
The list continues…
This is just a few, there was a colossal number of virtual currencies with different concepts established in the past 15 years, but in one way or the other, they all failed. You can check out ecash, digicash, ecache, phoenix, webmoney etc.
Then Came Bitcoin In 2008
Bitcoin was first made known to the world in 2008. A paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was first published on the internet in October 1, 2008. This paper detailed the concept of Peer-to-Peer (P2P) to ease the process of electronic transactions. This paper was based on the idea behind Bitcoin.
If you wish to view this paper, click here (www.bitcoin.org/bitcoin.pdf). The author of the paper, and also the founder of Bitcoin is Satoshi Nakamoto.
On November 9, Satoshi Nakamoto registered bitcoin at www.SourceForge.net (as a project) – SourceForge as we know it, is a home of open-source software development.
Let’s Cut The Story Short
On January 3, 2009, the very first Bitcoin was mined by Satoshi Nakamoto. He released the first open-source Bitcoin Client (v0.1) on January 12. This first transaction brought about what is known as genesis block, the initial block in Bitcoin block chain. It was made up of 50 BTC. During this period, Satoshi Nakamoto kept on working thoroughly on the Bitcoin technology. At this period, there was no official exchange of Bitcoin. The exchange method that existed was between individuals on the Bitcointalk forums. And the exchange rate was 1,209.03 BTC equated to $1. In other words, $0.0007 = 1 BTC. Therefore, Bitcoin was practically worthless. But gradually, the value rose.
Between the years 2010, 11, 12 and 13, there were several Ups and Downs of Bitcoin, but fortunately, Bitcoin survived. In 2013, 1 Bitcoin became $31.91. As time went on, people started embracing Bitcoin, and the value began to wax. And today, no traditional currency can stand the value of Bitcoin. As a matter of fact, 1 Bitcoin is currently worth thousands of dollars. People from around the world keep embracing Bitcoin every day. The demand is gradually becoming high, which means the value is increasing day by day.
What Is Bitcoin?
Bitcoin is a peer-to-peer (p2p) digital currency, which can be used in place of hard cash when buying and selling goods and services online. Bitcoin is a cryptocurrency, therefore, it is not stored in banks like traditional currencies. Moreover, it is not printed or generated by any central bank. It is an open source technology. Anybody can generate Bitcoin using a method called mining which I will explain later.
In case you don’t know what cryptocurrency is, it is a type of digital currency that is based on cryptography (secret codes), such as SSL, DES, signing, etc.
Bitcoin is just like any traditional currency like Dollar, Pounds, Yen, and Euro etc. But the difference is that it’s not printed by any government or central bank. It is mined by people from around the world. Even you can participate in mining Bitcoin if you have what it takes.
So, whatever you do online with traditional currencies can also be done with Bitcoin. Therefore, Bitcoin is money (or stock, just like gold).
What Can I Do With Bitcoin?
With Bitcoin, you can do virtually whatever you do with traditional currencies, such as Dollars ($), Pounds, Yen etc. For example, you can use Bitcoin to buy goods and services from various online stores. You can trade them, you can give them as gift and many more…
How Many Bitcoins Can Be Created?
There’s a limit to how many Bitcoin will be created. The code and mathematical rules that Bitcoin is built on states that only 21 million Bitcoins can ever be mined.
Unlike traditional money, Bitcoin is deflationary. For example, the value of most currencies fall because the banks are constantly printing money to cover debt and fill loans. This is why there is inflation. However, in Bitcoin, reverse is the case, since only 21 million can ever be created. Therefore, Bitcoin is 100% deflationary. The price will keep rising as more people keep embracing the currency, since there is a fixed, limited supply available.
I know you think that 21 million is not enough. Believe me, 21 million is more than enough, even if Bitcoin should be adopted as a global currency.
READ ALSO: BEGINNERS GUIDE TO BINARY OPTIONS TRADING
How Bitcoin Is Mined
Bitcoin is created through a process called mining on either CPU or GPU. In order to mine a ‘block,’ individuals use computers to solve complex mathematical problems and algorithms. Anybody can participate in Bitcoin mining, because it is an open-source technology.
Individuals who are able to solve these complex mathematical problems using their computers get Bitcoin as a reward.
Bitcoin mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions. This ledger of past transactions is called the block chain because it is a chain of blocks. Bitcoin node makes use of the block chain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
Bitcoin mining is purposely designed to be resource-intensive and difficult so that there will be steady limited number of blocks found each day by miners. In order for individuals’ works to be considered valid, their blocks must contain a proof of work. Bitcoin uses the hardcash proof-of-work function. This proof of work is usually verified by other Bitcoin nodes each time a block is received by them.
The main purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus. Bitcoin miners are paid transaction fees as well as a ‘subsidy’ of newly created coins. This therefore, serves the purpose of spreading new coins in a decentralized manner. Also, it motivates individuals to provide security for the system.
Bitcoin mining is similar to the mining of other commodities; it requires exertion and it gradually makes the availability of new currency at a rate that is quite similar to the rate at which other commodities, such as gold are mined from the earth.
Is Bitcoin Mining Still Profitable?
Bitcoin mining used to be a gold mine back in 2009, 10, 11 12… Back then, one can easily mine Bitcoin using average computer hardware. But today, in order for you to mine them, you need a very powerful and expensive hardware, and you also need to be a techie. Some of these hardware cost thousands of dollars.
Some of us who have the money to acquire these hardware do not have the technical know-how, and some of us who have the technical know-how do not have the money – this is the major barrier in Bitcoin mining today.
To buttress my point, there is a lot of work in Bitcoin mining today. You need to be a techie with a computer with super hardware (ASIC Card) in order for you to be able to mine Bitcoin. Even at then, the profit currently attached to it is not worth all the stress at the moment. But in case you want to become a miner, I’d recommend you join a mining pool so that you can join forces with other successful miners. That way, you’ll be able to obtain quick result.
Getting Started On Bitcoin
In order for you to dive into the ocean of Bitcoins, the first thing you need to do is to obtain a wallet. The wallet is the file data needed to send and receive Bitcoins. This file contains our Bitcoins. But in reality, it contains cryptographic keys (secret, unique, private keys) that make us the owners of our Bitcoins and allow us to authorize transactions (payments).
In a nutshell, wallet is an equipment that keeps track of your Bitcoins and gives you the privilege to use them.
Introduction To Bitcoin Wallet
All cryptocoins have wallets associated with them. It is through these wallets that you can transact with other users. Using wallet gives you ownership of a Bitcoin balance that you can send and receive. The way we send and receive emails is similar to the same way we can send and receive Bitcoins using its wallets.
Once you register or install a wallet, you can generate an address to send and receive Bitcoins. You can create a wallet at www.coinbase.com or www.blockchain.info. After you register, you can generate an address through which people can send Bitcoins to you. Also, in order for you to send Bitcoins to people, you also need their addresses. Let’s take email address as an example, in order for two people to converse through email messages, they must both have email addresses (the sender and the receiver). The same thing applies to Bitcoin, every user must have a wallet in order to be able transact. I will go into details about this below.
How To Create Bitcoin Wallet
There are two ways you can get a Bitcoin wallet. You can install the official Bitcoin client on your PC (Windows, Mac or Linus) from www.bitcoin.org. It will automatically create a wallet and download the blockchain (transaction history). In order to send Bitcoin through this wallet, you must be connected (online), but if you are just receiving, then you don’t need any internet connection.
This method is commonly used by the most sophisticated Bitcoin users (not too many people use this method)
Another way to get a Bitcoin wallet is through web wallet. This is the most common and easy way. Initially, it takes a person with a high degree of technical know-how to be able to use Bitcoin. But today, trading with Bitcoin is as easy as eating a piece of cake. Getting a wallet with this method is quite easy. If you’re wondering if it’s safe, yes, it is completely safe. The level of security is high. The unique, secret private keys which makes you the owner of your wallet are encrypted in your browser. Therefore, even your service provider will never have access to your Bitcoins.
You can create a Bitcoin wallet right away at www.blockchain.info or www.coinbase.com. To make trading with Bitcoin a lot easier for you, these companies have Smartphone applications you can install on your phone and have access to your wallet anytime/anywhere.
Step-By-Step Guide On How To Create Bitcoin Wallet
- Go to www.blockchain.info/wallet and click on “Wallet.”
Next, click on “Sign up.”
- Now, fill out all required information.
When picking a password, make sure that it is at least 10 characters, avoid using words or names, also, use numbers, lowercase and uppercase letters and other special symbols. Let me bring this to your notice once more, do not use regular (common) words, for the sake of security. Some robots try to guess passwords using what is known as “dictionary attack.” Your password should be something like this jdiohho$jksli1 and not like this felicitysmoke1. Also, whatever you do, do not forget your password, it cannot be recovered. Blockchain does not save your password in its database. Therefore, if you lose it, you will lose your Bitcoin wallet (including all the Bitcoins in it).
- You will receive a welcome message. Click on “Get started,” and you will be taken to your wallet homepage.
The URL should be something like this https://blockchain.info/wallet/#/home. Note: An email message has been sent to you for verification. Go to your email and verify your account before you proceed.
How To Back Up Your Bitcoin Wallet
Now, the next thing you need to do is to back up your wallet (very important). You can do this through your email address or directly from your wallet’s homepage.
Back up Your Bitcoin Wallet Via Email
You can do this by typing your email address in the box when requested. You will receive a confirmation code in your email, which you should type in the “confirmation code box,” under where you typed your email. Once your email address is verified, you will receive your wallet’s back up in your email inbox. So the best thing to do now is to copy the file and store it somewhere safe. You can use cloud storage (like Google Drive) if you like.
Back up Your Bitcoin Wallet Via Your Wallet Homepage
If you don’t like the idea of backing up your Bitcoin wallet via email, then this is another alternative. To begin, go to your wallet homepage. At the bottom (right), you will see a ‘Backup’ option, alongside some buttons to download your wallet’s backup. If you use the ‘Download’ button option, your backup will be stored directly to your PC (computer). But if you choose the Dropbox or Google Drive option, it will connect to your account and save the file there.
So, you can back up your Bitcoin wallet on your computer, Dropbox, Google Drive or email.
How To Receive Bitcoin Into Your Wallet
The hard part is over. Now you can start receiving Bitcoins with your newly created wallet. There are two ways you can get Bitcoin to your wallet: You can buy Bitcoins from exchangers using traditional money or someone can send it to you as gift. Also, if you sell goods or services online, you can add an option that will let your customers know that you also accept Bitcoins. That way, people can pay you with Bitcoins.
To receive Bitcoins, you need to use your wallet address. It is the address that you’ll send to whoever wishes to send coins to you. It is best you copy and paste it in order to avoid making mistakes.
You can generate as many addresses as you like. Each address will point to your wallet. In order to keep your wallet or transactions organized, you can have different address for different transactions. For example, you can have 1 address for your business, another for personal use or Bitcoin purchases.
How To Create Bitcoin Address
Firstly, go to “Receive Money.” You will find your default address there. Scroll down to the bottom corner and click on “New Address.”
Now, a small window will pop up with the newly generated address. You can label it as you wish. For example, you can name it “Business.” The new address will be added to your address list. Whenever you want to receive payment that is business-related, you will use this address, so as to keep your payment separated.
How To Send Bitcoin
To send Bitcoins is as easy as receiving them.
From your wallet home, go to “Send Money.” Here, you’ll find two options: “Quick” and “Custom” send. If you want to send some coins and you’re not concerned about where it will be deducted, then use the quick option. But if you want to send some coins that is somehow related to your business, then you might want to deduct the money from your business address. For this purpose, select Custom send.
Now, after selecting Custom send, you’ll need to select the address you wish the coins to be deducted from. For example, let’s select the business address.
Next, in the “To” box, enter the address of the person you wish to send the Bitcoins to. Like I said before, it’s best you copy and paste in order not to make mistakes. If you wish to send to multiple addresses, then click on the “+” button on the right side.
Next, you need to enter the amount you wish to send. For example, 1.50BTC. You can add a note if you wish. Lest I forget, let me bring this to your notice, when adding note, be careful what you say; anybody will be able to read it in the blockchain.
After all these, click on “Review Payment” and confirm if the information is correct. To view the history of all your transactions, go to “My Transactions” at the top of your wallet’s home page.
How To Store Your Bitcoin
If you’re in for a long term, I would advise you keep all of your Bitcoins offline. You can store them on your PC, then copy the data file from your PC to a flash drive or any safe storage (if possible, use multiple storage system, just in case one fails) and then delete the file completely from your PC.
That way, some hacker won’t hack into your system and steal your data file and get all the coins in that wallet. Imagine if you are dealing with tens of thousands of dollars’ worth of Bitcoin then you definitely want your money to be safe.
Two Ways You Can Store Your Bitcoin Wallet
There are two types of wallets: online and offline wallet. With online wallet, you can store Bitcoins or USD. That way, you will have it available to trade through cryptocurrency exchanges. In online exchanges, your cryptocoins will also be stored so that you can buy and sell whenever you like. This way, you won’t have to worry about sending or receiving coins in order to carry out transactions.
If you are a regular trader, it’s quite reasonable to keep your online balances filled to the amount you need to trade. This way, you won’t have to worry about constantly funding your account, also, it will save you a lot of time.
If you are a one-time trader who wishes to hold on to some Bitcoins probably in anticipation that the value will increase in the nearest future (just like in stocks, gold or silver coins), then it is advisable to store your coins with an offline wallet on your PC.
Investing In Bitcoin
Investing in Bitcoin is quite similar to investing in stocks, gold, bonds, silver etc. You buy them and hold on to them, hoping that the value will rise. When the value rises, you sell them for a profit.
List Of Top Companies Around The World That Accept Bitcoin
Bitcoin seems to be a game changer as even governments from around the world are gradually accepting the virtual currency. Big companies in various industries from around the world have started embracing it as a legitimate means of payment. Moreover, more people from around the world keep embracing Bitcoin every now and then. Bitcoin is gradually taking over. And remember, the higher the demand, the higher the value.
Big companies like Dell, Amazon and the like have started accepting Bitcoin due to the marketing campaign carried out by Coinbase.
Below are some of the world’s renowned companies that are currently accepting Bitcoin
As we you know it, Microsoft is one of the major companies around the world. Microsoft is now accepting Bitcoin. This means with Bitcoin, users can now buy goods and services on Xbox and Windows store.
Apple’s App Store
Apple, another popular tech giant is also accepting Bitcoin. Users can now use Bitcoin to buy apps and music from Apple AppStore.
Amazon, a popular online shopping giant that sells virtually anything is also accepting Bitcoin. This means with Bitcoin you can buy goods and services on Amazon.
Bloomberg, a renowned online newspaper is also accepting Bitcoin. Now, with Bitcoin, people from around the world can buy services from this great company.
A very popular domain and hosting company is also accepting Bitcoin. With Bitcoins you can now buy domain names and host from this company.
The Japanese e-commerce giant, Rakutan is also accepting Bitcoin. With Bitcoin, one can now buy goods and services from Rakutan.
Shopify, an online platform that allows users to create online stores with ease is also accepting Bitcoin. With Bitcoin you can buy premium services from Shopify.
We all know Wordress. It is a popular company that allows users to create free blogs. With Bitcoin you can now buy premium services from WordPress.
Article giant, the free encyclopedia with over 4.5 million articles is also accepting Bitcoin. Users from around the world can now buy services from this great company with Bitcoin.
With Bitcoin you can buy premium services from Reddit. This website is an authority with a platform similar to forums.
Even the freelancers in Fiverr and other freelancing websites are also accepting Bitcoin. With Bitcoins you can now hire freelancers online.
We all know Dell right? It is an American privately owned multinational computer technology company. With Bitcoin, you can now buy goods and services from this amazing company.
A rival search engine to Google, Bing, own by Microsoft is also accepting Bitcoin. With Bitcoin you can now buy goods and services from this company.
It is a company that sells big tickets items at affordable rates due to overstocking. With Bitcoin, you can now buy thousands of goods and services from Overstock.
A popular adult entertainment provider, Naughty America now accepts Bitcoins for their monthly membership and other services.
MIT Coop Store
Massachusetts Institute of Technology, world’s most expensive university’s bookstore now accepts Bitcoion payment via Bitpay.
This is just a few, there are tons of them. And as day goes by new companies keep embracing this amazing virtual currency.
HOW TO EARN FREE BITCOIN
There are a lot of ways you can earn free Bitcoins. I will be listing the easy ways through which you can earn free Bitcoins online.
You can earn bitcoins by doing nothing. There are tons of websites called Faucets that give you free Bitcoins for doing nothing. What you have to do is just to sign up and Bitcoin, Dogecoin, Litecoin etc will be added to your wallet. The amount is not usually big though. But as a beginner, it can get you started. The good thing is that you can get Bitcoins from most of these websites multiple times a day. Go through the list below and start getting free bitcoin to your new wallet.
Where To Start?
The list is endless, I will stop here in order not to get you confused about which one to start from. So, go through the list above and start with any of them. My suggestion, you should start with 5 for now.