The price of one bitcoin was $913 at the time this guide was written in January 2014. This is slightly lower than the $1,200 record set earlier in December. Two years ago, the new cryptocurrency traded below $4. Major online and offline retailers have begun to accept the new currency as a method of payment. What is bitcoin exactly?
A Bloomberg poll found that only 42 percent of Americans correctly identified Bitcoin as virtual currency. Six percent believed it was an iPhone application.
Bitcoin is a peer to peer digital currency that was launched in 2009 by Satoshi Nakamoto. Satoshi worked alone on the project for two years before making it available to the public. After creating cryptocurrency, he disappeared. But before he left, a now-famous quote was posted:
“It might make sense to just get some in case they catch on”
Satoshi Nakamoto January 17, 2009.
What is so special about Bitcoin?
Bitcoin is a cryptocurrency. It’s a unique financial instrument that is unlike any other. Because it uses cryptography to control money creation and transfer, it is called a cryptocurrency. Bitcoin, despite its name, is not a physical coin. It is an entirely electronic form of money.
Bitcoin eliminates the ‘double spending problem’ that digital goods can present. If I have an ebook or mp3 file on my computer, I can copy it unlimitedly and send it to a million people. The possibility of unlimited copying for digital currencies would lead to a rapid hyperinflationary death. Bitcoin addresses this problem by creating a peer-to-peer network and recording every transaction in a public ledger known as the block chain. Let’s say I send John 1 bitcoin using my bitcoin address. The transaction is recorded in the bitcoin network block chain. I have lost that bitcoin. The coin was “moved” from my bitcoin wallet into John’s wallet.
What is so special about Bitcoin? Many people disagree on whether or not the new virtual currency will succeed. We won’t get into the details or discuss the politics of the project. We are only concerned with the potential profit opportunities offered by this new payment system. We will be discussing our thoughts on the new digital currency from the point of view of both a trader as well as a potential investor in the market.
Bitcoin is a peer to peer virtual currency. Transactions can be made without the involvement of any middlemen or central authority. It is possible to send bitcoins to any person anywhere on the planet. This eliminates the need for banks or money transmitters and removes the need for intermediaries. You can also bypass capital and AML restrictions with the cryptocurrency.
To send or receive bitcoins, you only need a bitcoin address. To process a transaction, you only need to be online for a short time. You can also receive bitcoins to your bitcoin account even if it’s not online. To ‘collect’ your coins, however, you will need an internet connection.
How to get bitcoin addresses
As we have already mentioned, you need a bitcoin address to send and receive bitcoins. Downloading the bitcoin client is one way to get a bitcoin account. Another option is to use an online wallet. Bitcoin-qt or Multibit are the most popular btc client. There is a significant difference in how large the block chains must be downloaded between the two clients. You must have at least 10 Gigabytes of free space on your hard disk for Bitcoin-qt. Bitcoin-qt, the official bitcoin client, is recommended if you have at least 10GB of free space. This page provides step-by-step instructions for installing BitcoinQt.
Multibit is a lightweight client for bitcoin. has more information.
Where can I find my bitcoins?
But where do the bitcoins go? Once you have installed one of these clients, you will be able to find your bitcoins within a file called wallet.dat. This file can be found in the application data section if you are using Windows. Your bitcoins will be lost if your computer is stolen or lost if you don’t have a backup of the wallet.dat file. This file should always be backed up.
Online wallets are also available for bitcoins. Many websites offer services for bitcoin wallets. These sites are a common target for hackers and it is not recommended to keep bitcoins in online wallets when you can store them offline on your own computer. You can store small amounts of bitcoins in wallets to make it easy to buy online. Blockchain, CoinKite are two of the most popular wallet services.
Btc exchanges offer a safer way to store your bitcoins than online wallets. They keep the majority of coins in what’s known as “cold storage”. Over 90% of bitcoins that are deposited on exchanges are kept offline. For immediate redemption purposes, a small reserve of 5-10% is kept on-site. You can find many guides online about how to store and secure bitcoins. It is always safer to do this yourself than to trust someone with large amounts of bitcoins.
Bitcoin offers many advantages over traditional money transfer services. Two of these advantages were already discussed above: the removal of third parties and the circumvention of restrictions.
The new cryptocurrency has another advantage: it is very affordable to send and receive bitcoins. Although transactions can be sent completely free of cost, it is recommended that you pay a small fee to expedite the process.
The transaction data size determines the fee amount. A 500-byte transaction will cost 0.0001 BTC. This is 9.13 cents at current bitcoin prices.
The fee will be the same for a $10 million transfer as it is for a $10 million transfer. A $10 transfer will incur a 0.913% fee, while a $10 transfer will incur the same fee. However, a $10 transfer will only be charged 0.000000913%.
Merchants also have the benefit of Bitcoin, because transactions that involve digital currency are safe and irreversible. Merchants have the option to offer their products at a discounted price, generating more sales and/or keeping the difference. Merchants will also be able to save on the percentage taken by Visa / MasterCard, as card processors are out of the picture.