A Complete Guide about Bitcoin

A Complete Guide about Bitcoin

Bitcoin trading is the most famous digital currency which is created and held online. No one can control Bitcoin as they are not printed such as dollars and euros. Bitcoins are produced by businesses and people using software that are based on complex mathematical algorithms. Bitcoin was the first instance of increasingly popular type of money called cryptocurrency.

1How Bitcoins are Different from Normal Currencies?

Bitcoin may be used to purchase things online. In this sense, it is just like conventional currencies which are also traded electronically. The thing that makes Bitcoin different from conventional currencies is that it is truly decentralized.  No single institution or government controls the bitcoins. This may be a bit comforting for so many people because large banks cannot control this cryptocurrency.

Who Prints Bitcoin?

No one prints Bitcoin. The currency is not physically printed by central banks who usually print currencies in bulk, unaccountable to any authority and making their own rules. Such banks just print more and more currency to adjust national debt, hence devaluing the value of a currency which leads to widespread inflation and other economic problems. Bitcoin, on the other hand, is created electronically by people and businesses. Bitcoin is mined using computers in distributed network.

Unlimited Production of Bitcoins Not Possible

That is correct. Unlimited production of Bitcoin is not possible. The Bitcoin protocol – set of rules that govern Bitcoin- say that only 21 million Bitcoins can ever be mined, that’s the maximum limit of mining for Bitcoins. A Bitcoin can further be divided into relatively smaller parts; the smallest divisible amount is 100/one millionth of a Bitcoin and is known as Satoshi, named after the bitcoin’s founder.

Who’s the Founder of Bitcoin?

The idea of Bitcoin was proposed by a software developer named Satoshi Nakamoto. His idea was to create an electronic currency based on mathematical algorithms. He wanted the proposed digital currency to be independent of government influence and transferable online, ideally in no time, with minimum  or no transaction cost.

Basis for Bitcoin?

We all know that conventional currencies are mostly based on gold and silver. Theoretically, you know that you can exchange a dollar against gold from a central bank (although this is not a practical thing). Bitcoin, on the other hand is not based on gold or silver. It is based on mathematical algorithms. People from all over the world use software programs to mine Bitcoins. The software are freely available anywhere, making it very convenient for everyone to mine and trade Bitcoins. The software is open-source, meaning everyone can take a look and check if the software is exactly what it is supposed to be.

Characteristics of Bitcoin

There are some important characteristics that make Bitcoin distinguished from government influenced currencies. Below is a brief summary of such features;

  1. Bitcoin is decentralized

The network of Bitcoin is not controlled by any central authority. Bitcoins can be mined and transferred from any part of the world. Every machine which mines and processes Bitcoin transactions is a part of the bitcoin’s network and all machines work together. So Bitcoin users need not to worry about government or central bank interventions which may cause sudden rise or fall of prices.

  1. Easy to set up

Bitcoins are so easy to set up and trade or exchange as opposed to the conventional banking system where you are supposed to visit the bank’s place in person to open an account and then bear monthly or annual fees for the maintenance of your bank account. In case of Bitcoin, you can set up your Bitcoin address electronically within seconds – no questions asked and no need to pay any fees etc.

  1. Privacy

Users can hold more than one Bitcoin addresses with different exchanges and they are not linked to your personal id or residential address. This way Bitcoin allows users to send and receive electronic money with complete privacy.

  1. Completely transparent

Bitcoin records details of every single Bitcoin transaction that is ever occurred in the network in a huge version of a Bitcoin account ledger, known as the blockchain. The blockchain records all information.

Bitcoin is transparent from security prospective too; anyone can check from anywhere that how many Bitcoins are stored in a particular Bitcoin address.

  1. No Transaction Fee

Banks charge heavy fees in case of international payment transfers. On the other hand, Bitcoin doesn’t charge any fee for any transaction.

  1. It is Fast

Sending and receiving of Bitcoins is almost instant. Whenever someone sends Bitcoins on your address, you can receive them within few minutes. On the other hand, banking channel is very slow; you have to wait for days and weeks to receive international payments.

  1. It is totally non-refundable

When your Bitcoins are sent, there’s no getting them back, unless the recipient returns them to you. They’re gone forever.

These are some main characteristics of Bitcoin that make this cryptocurrency different from the mainstream currencies.

How to Buy Bitcoins?

So now you have learned the basics of Bitcoin…the next step is to buy some Bitcoins but the question is how? Don’t worry, we are going to make you expert on this matter as well, just keep reading this article.

There are two main methods to buy Bitcoins;

  • You can buy Bitcoins directly from different Bitcoin exchanges
  • Or You can buy Bitcoins from other people who already have Bitcoins

You can pay for Bitcoins with a number of payment methods, ranging from credit/debit cards to hard cash.

This may be a surprise for you that buying Bitcoins with credit/debit cards or PayPal is still not an easy or ideal way because such transactions can be reversed and there is no way to reverse the bitcoin transactions as we mentioned before.

However, the options have recently grown for consumers in some countries.

For the US, exchanges such as Coinbase and Circle offer Bitcoin purchases through credit cards. The use of credit cards at exchanges is quite secure because there are almost no chances of dishonest reversals/chargebacks from exchanges.  Similarly, CoinCorner, Bittylicious and Coinbase offer the same service in the UK, offering 3D Secure-enabled debit and credit cards on the Visa and MasterCard networks for Bitcoin purchases.

Consumers in the US can also use expresscoin, which was recently launched to serve this market. It accepts bank wire transfers, money orders, personal checks and other such options.

How to benefit from Bitcoin price volatility?

Financial technology companies have come in to the market to provide different options, some have progressed fintech to the point where new block chain type technologies have allowed for trading bitcoins or platforms which allow the trading on the volatility of bitcoin, this comes in the form of bitcoin binary options brokers who are trading on the price changes of bitcoin (IG Index et el) or providing a way for traders to profiting from the volatility by providing leverages products. In this instance no actual bitcoins are traded but the trader is betting on the movement of price.

If you are interested in trading using leveraged products, such as CFDs, then it’s worth looking at comparison sights like Top10Cryptosites.com for the best brokers currently on the market.

First Step – Get a Bitcoin Wallet

The first step is to get a place for storing your new Bitcoins. In the Bitcoin term, such a place is known as a “Wallet.” You can think of a wallet as a type of bank account.

It is pertinent to mention here that the level of security varies in wallets. Some wallets are highly secured with multi-layered protections while some are relatively less secure. Let’s discuss the main types of wallets;

  • A software wallet: It is stored on the hard disk of your computer
  • Web-based wallet: It is stored on a web server
  • Remote Wallet: It is stored offline in a remote computer system which is highly secured.

The software wallet is the most vulnerable among all three kinds of wallet. It is very important that you regularly maintain backup of your wallet to safeguard yourself in case hard disk gets corrupted.

Exchanges & Online Wallets

There are a number of Bitcoin exchanges and wallets – all competing with each other. Some are full-scale exchanges for institutional traders, whereas others are relatively simpler wallet providers with limited buying and selling options.

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A lot of wallets and exchanges can store any amount of digital or fiat currency for you, similar to a regular bank account.

Wallets and exchanges are the most suitable choice if you intend to make profits by trading and speculating Bitcoins without requiring anonymity and complex setup procedures that sometimes require identity and residence proof.

At this time, the largest full trading exchanges by volume are:

Coinbase is a famous wallet and exchange that also allows trading of US dollars and euros for bitcoins. The company offers web as well as mobile applications for online trading. Originally a US-only service, Coinbase has opened up to many European countries lately.

Warnings about Bitcoin Exchanges & Wallets

Despite adhering to the Know Your Client (KYC) requirement imposed by regulators and supervisory authorities, Bitcoin exchanges and wallets are still not as secure as the banks are. For example, there is no or limited insurance if the Bitcoin exchange goes bankrupt or is stolen by hackers as we saw in the case of failed Bitcoin exchange Mt Gox. Also Bitcoins do not enjoy any legal status as a currency in many countries so authorities are unsure that what exactly they have to do in case of Bitcoin thefts, this is a sad reality in most parts of the world.

Further, if a theft from your personal wallet occurs due to a security or password lapse on your part, you do not have any guaranteed way to recover your funds.

Online Shopping with Bitcoins

Once you have got some Bitcoins in your wallet, then it’s time to spend them. Let’s discuss how you can use Bitcoins for online shopping.

Microsoft: In December 2014, Microsoft added Bitcoin as one of payment options at a number of its online platforms. According to the company’s payment information page, “US-based customers can now use bitcoin to add money to their accounts, which can then be used to purchase content like apps, games and videos from its Windows, Windows Phone and Xbox platforms.”

Dell: In July 2015, the computer technology giant Dell announced that it had struck a deal with Coinbase according to which it would start accepting Bitcoins as a payment option.

Overstock: In January 2014, Overstock – the first major retailer- started accepting Bitcoins as a payment option for online shopping of everything from Jewellery to furniture to electronics.

Showroomprive.com: Showroom Prive – the largest European company started accepting Bitcoins in Sep 2014. It sells various products including clothes, cosmetics, fashion accessories and homeware.

How to Read Bitcoin Price Charts?

Whether you already own Bitcoins or planning to get some, you will definitely like to know what the current price of Bitcoin is and what levels it may touch in near future. So let’s discuss briefly how to find this information.

The best source to know the latest price of Bitcoin is the exchange you purchased them from (e.g. Bitstamp, BTC-e and Bitfinex being the most famous exchanges right now). Knowing bitcoin’s current price is one thing, but pretty soon you’ll want to know where prices will go in the future.

Methods for Forecasting Bitcoin Price Trends

Forecasting Bitcoin price is very much similar to forecasting price of other assets. There are two main methods to predict Bitcoin price in near future.

  • Technical Analysis
  • Fundamental Analysis

Technical analysis is used to predict future price movement by analyzing the past behavior of price. Technical analysis may be conducted through a number of methods such as drawing trendlines, inserting Fibonacci levels, analyzing candlestick patterns, marking horizontal support and resistance levels and comparing moving averages. On the hand, fundamental analysis is used to predict future price movement by studying economic indicators of a particular financial asset (which in our case is Bitcoin). So the fundamental analysis for Bitcoin will be focused on factors affecting its demand and supply. To perform technical analysis on bitcoin price, you will need bitcoin price charts that display data in a more readable manner than just plain number tables. Good places to start are the charts on Coindesk’s Bitcoin Price Index.

Conclusion

Bitcoin is the most popular and reliable form of digital currency. It has several advantages and disadvantages as mentioned before. Bitcoin is one the most lucrative investment options because of its high volatility. It can also be a great hedging option against the American dollar and other physical currencies.

 

 

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