What is Bitcoin? Guide for Beginners

Bitcoin is very popular nowadays. Authors use this term in their articles and on web pages, while people around mention word in their conversation. Though Bitcoin was not so popular some years ago, it is not among geek’s interests anymore. That is hard to imagine world trading without its first cryptocurrency today. For those who are interested in digital money using or Mining information about Bitcoins is priceless.

Who Created Bitcoin?

There is no clear chronology of Bitcoin creation process. Specialists of cryptography area were searching for the unique decentralized system based on different mathematical calculations for many years. After collecting main ideas of predecessors and their own ones, Satoshi Nakamoto and Hal Finney created Bitcoin. That happened in 2008. Bitcoin was the first crypto currency ever. Later Satoshi Nakamoto published file describing digital currency protocol and main characteristics of innovative payment system. The smallest fractional part of a coin was named after its author.

There are several reasons of Bitcoin creation. Authors wanted to make an anonymous, decentralized, secure and available for everyone system. So Bitcoin was created to guarantee fast transactions without third part like bank or cash desk participation but with high level of security.

How Bitcoin Works?

Bitcoin system is based on using of blockchain. Term ‘blockchain’ means a continuous chain of all transaction blocks. Every block becomes closed after choosing a special digital signature. Then the new one is formed. Also there is a simple explanation. Every transaction can be imagined as a separate book page. Sequence of pages forms a chapter – block.

There is a necessity to go through all privies pages and chapters (transactions and blocks) to write a new page (to make a new transaction). That means that every transaction is carried out by chain. Also there is no ability to rewrite or delete a chapter which means that all blocks are stable. Moreover, every member of the system can reach the blockchain.

Blockchain is also can be described as a big open data base where encrypted information about all previous transactions is saved.

Blockchain and its perspectives are the main reasons of Bitcoin popularity and things which increase the course of currency.

What is Bitcoin Cash?

There are several differences between digital Bitcoin and traditional money:

• Bitcoin is virtual and has no real form. There are coins with special QR-code or storage devices where Bitcoins are saved. But they are not money. Bitcoin – is a set of numbers generated by algorithm. Digital currency can’t have form of paper banknote or metal coin.
• Rate of real cash directly depends on economic and political status of country or confederation it is related to. Actually, money of more than one hundred countries depends on dollar. Price of Bitcoin is determined by demand and does not directly depend on economic processes.
• Theoretically, real money has no emission limits. They can be printed again and again. Bitcoin has limits. From the very beginning its system allows only 20 999 999, 9769 existing coins. There are forecasts that amount can be reached in 22 century.
• Direct transfers. If we are talking about virtual version of real money, transactions require a third party. Conversely, operations with Bitcoin are held directly.

That is hard to evaluate Bitcoin objectively. Its special characteristics may be both advantages and disadvantages. Irreversibility of operations is a great example. On the one hand, there is no harm during system errors. User gets his or her cryptocurrency and transaction cannot be blocked. On the other hand, characteristic is often used by swindlers or members of the “black” market.

Main pluses of Bitcoin currency are:

• Transaction members know only Bitcoin addresses or special QR-codes of each other. Other information is not public.
• Decentralized system. All users are independent and have equal possibilities.
• Hacking of wallets, data substitution and interception of transfers are impossible.
• Bitcoin allows transactions between users from different countries and time zones.
• There is a way to get Bitcoins yourself. That is a great opportunity to have passive profit.

High speed of operations may be one of pros too. But not always. Transactions can last for 10-20 minutes or even an hour. Six confirmations of other users are needed to finish the process. They are held automatically. Unfortunately, high load causes transaction slow down.

One more minus is regulatory activity in different countries in relation to crypto-currencies. For example, there are prohibitions in Vietnam, India, Ecuador and China.

Bitcoin has some other disadvantages:

• Unstable course. That decreases Bitcoin potential in sphere of payment options.
• Bitcoin is very safety. Unfortunately, there are fake exchanges, mining projects and viruses.

How to Get Bitcoins?

As well as any other crypto currency Bitcoin can be extracted through the use of computer hardware including processors and video cards. The process is named mining. There was a possibility to use personal computers for Bitcoin mining in 2009. Anyway, its harder to get currency today. So special powerful installations – farms are used. Farms unite hundreds or even thousands processors of ASIC type. Equipment is very expensive and requires extra services and technical skills. That is why this kind of mining is unsuitable for beginners. Firstly, it requires too much money. Secondly, there are too many problems. Also there are countries where mining is not allowed.

Some other ways to get Bitcoin:

• There are online services where user can buy crypto currency for usual money. For example, AlfaCashier is quite popular. This service provides high security and has great customers’ feedback.
• Crypto currency burses. These services are special resources where everyone can buy digital currency. The largest burses are CEX.IO, EXMO and Livecoin. But prices there may be different.
• Bitcoin Cranes. This services give visitors crypto currency for free. To receive a small amount of BTC user should fill in the captcha or make another simple thing. Current resources are variable and person can choose which one to use.
• Trading platforms. There is a possibility to sell goods for Bitcoin. Amazon and Ebay are popular platforms where using of BTC is allowed. Also there is a specialized web site – Purse.io.
• Self-service terminals. User can get Bitcoin through usual terminal. Also there are BTC ATMs which have better course and modern technologies. Unfortunately, they are not widespread nowadays.

How to Use Bitcoin?

There are basic steps which allow to use Bitcoin correctly and maximally effective:

1. Understand.

Bitcoin is very different from usual daily things and real money. Before buying BTC client should learn basic things about crypto currency to use it safely and avoid common mistakes.

2. Choose crypto currency wallet.

There are versions of digital wallets for mobile phones and personal computers. Wallet are quite different and user easily can choose one of them.

3. Get Bitcoin

There is a possibility to get crypto currency while selling goods and services or buying them from other owners. User can also buy BTC directly in the exchanger using his or her bank account.

4. Spend Bitcoin

There is a great variety of companies where using of Bitcoin is allowed. Also BTC can be changed into real money and became a source of passive profit.

Is Bitcoin Legal?

Bitcoin is known to be a payment system. It can be used for goods and services buying. At the very beginning all transactions were conducted informally. Buyers and sellers used chats, social networks and forums to communicate. The most popular purchase of good for Bitcoin was held on forum. That case was also the first one. User with Laszlo nickname on 18^th may in 2010 offered 10000 BTC for two pizzas. That time it was equivalent to 30 $ only. One user from England agreed and offered food.

Not much time has passed since that moment but Bitcoin is used as a payment option worldwide today. For example, in summer, 2017 260000 shops in Japan agreed to accept BTC.

Common news is very popular nowadays. Coffee shops, bars and restaurants start to support payments in crypto-currencies. There are countries where client can use BTC to pay for a Taxi! Special Coinmap app shows shops and services where Bitcoin purchasing is allowed.

Where to Buy and Sell Bitcoin?

Main resources where Bitcoins are sold and bought are shown in the table:

What Can You Buy with Bitcoin?

Owner of Bitcoins can buy food, cars, flats, tickets or book hotels. Moreover, there are universities offering courses for Bitcoins. Also some astronomy spheres allow using of current crypto currency. For example, Virgin Galactic company offers space tourism services.

There are different companies offering goods for Bitcoins:

• Dell sells hardware equipment in USA.
• IT services are offered by AppStores and Microsoft in USA.
• Expedia allows plane tickets and hotels booking.
• Amazon and Ebay services provide goods trading.
• Sacramento Kings company takes Bitcoin purchases in sphere of sport.
• Wikipadia is famous everywhere and it also supports Bitcoin payments.
• RE/MAX firm provides real property in Great Britain.
• Victoria’s Secrets sells its exclusive underwear for Bitcoins.
• Tesla offers cars for crypto currency.
• Reddit and Valve/Steam have services in Internet sphere which can be bought for BTC.
• Subway offers food in USA.

Pros and Cos of Bitcoin

Bitcoin system is very popular nowadays. It is new and interesting for many people. Moreover, there are lots of advantages this digital currency has:

1. Same conditions for all users.

Every person who has joined Bitcoin mining process receives the same things and gets the same conditions. Rules which users have to follow are also the same. And that is quite different from real currencies.

2. No limits for payments

Users are able to send different sums from their Bitcoin wallet to others. There are no rules limiting transactions. And that is quite different from situation with real money, too.

3. Law commissions

Bitcoin network requires the lowest extra fees for transactions holding. Other online electronic payments and bank transfers have higher commissions. Users are able to avoid losing big sums of money and increase economy.

4. High security and safety level

Maybe, this plus is one of the most important pros. Bitcoin system provides the highest security level which allows user to feel they virtual wallets are in safety. By the way, most usual transactions are not so secure.

5. Transparency of payments

Trust of users is important thing. System creators made all the operations with Bitcoin maximally understandable and ‘transparent’. It client wants to he or she can track every step of Bitcoin transaction from the very beginning.

6. No controlling structures

Bitcoin payment system is totally decentralized. It has no structures for control. That is why rules of the system are stable and no one can change them.

7. Great business perspectives

More and more companies allow purchasing goods and services for Bitcoins today. That makes perspectives of business wider. Also there are possibilities to trade in places where banks and other payment system are absent. That is convenient for countries, where banking requires too high extra fee. The only thing user needs to buy or sell for Bitcoins is good Internet connection.

8. Possibility of crypto currency mining

Every user is able to buy Bitcoins or get them from mining process. There are also different way of crypto currency making. If user has no costs or technic education to mine from home, he or she can use services of Cloud mining.

Anyway system also has disadvantages:

1. Insufficient dissemination and recognition

Though Bitcoin system has many advantages, it is not used everywhere. There are many shops and companies where Bitcoin using is not allowed. Unfortunately, most of countries don’t use digital currencies in everyday shopping.

2. Changeable course

Bitcoin course has extremely increased in autumn, 2013. That was the reason of digital currency popularity. Many users started to buy huge amounts of Bitcoin. Unfortunately, that was unprofitable. Course of Bitcoin has been decreasing since that time. Only small part of Bitcoins is in the system today. So every big deal can influence course of currency and that is not a pleasant thing for other users.

3. Unpredictability

Bitcoin system also can be called startup. That is very hard or even impossible to predict how it will develop later. Only first stage is over today. And that is the main disadvantage of digital currency.

4. No real guaranties.

Owners of Bitcoins have no guarantees they will be able to return their investments. Course of currency is influenced by the whole market. There is also a possibility that after some global events course may fall to zero. Moreover, the only support digital currency has is computing power.

5. State bans

Different countries differently relate to the Bitcoin payment system. There is possibility that government can ban Bitcoin payments. If bans happen often, course of Bitcoin may decrease.

On the one hand using of Bitcoin is profitable and can be an alternative to real financial system. On the other hand currency still has disadvantages.