What is bitcoin & how it works?
Bitcoin is the most famous of a new class of digital currencies called cryptocurrencies.
The bitcoin cryptocurrency uses a distributed network, peer-to-peer technology, and cryptography to manage transactions without relying on central authorities.
For many years, the internet was restricted to banking and shopping by using credit or debit cards with centralized systems.
Now it’s possible for people to send money digitally without being tied to banks. And it’s all done with decentralized technology.
It’s called a cryptocurrency because its mathematical principles and algorithms are similar to methods used by gold miners that use processing systems like computers to accept and process financial transactions in the form of valuable coins.
Bitcoin is a digital currency, just like money in PayPal and most other online payment systems.
It can only be used in person or transacted between people directly through the peer-to-peer system.
There are two important elements to Bitcoin’s system: a decentralized network and blockchain technology.
The decentralized network is like a worldwide database that is distributed among all the computers that run bitcoin software.
When someone sends bitcoin, it’s entered into the system’s blockchain, which acts as a public ledger for all bitcoin transactions.
This ensures that each unit of bitcoin is recorded with its current value, allowing anyone to track its history and authenticity.
The next element of the process is what makes Bitcoin unique: blockchain technology.
The blockchain acts as a public ledger, recording every transaction ever made.
The simplest way to describe the blockchain is with an example: If Bob buys something from Alice with bitcoins, that transaction is sent out to the entire network for validation, and if Alice did not make that sale, the transaction is rejected.
The blockchain is constantly growing as each new “link” in the chain of transactions must be approved by a majority of other users online in order to make it through.
Each new transaction requires several hundred or thousands of confirmations (by the users in the network) to be added to the chain. The longer it’s on the blockchain, the more secure it becomes.
As more and more people use bitcoin and as exchanges (companies that buy and sell Bitcoin with their own local currencies) are created around the world, the value of each unit is determined by supply and demand.
How to Make Money with Bitcoin?
The most important thing to understand is that bitcoin is created by a new kind of mining process.
The Bitcoin mining process works differently than most people know: instead of digging up the earth to find gold (real gold, the non-digital kind), as a miner for bitcoins, you must set up an account and download the Bitcoin software.
Once you have this, your CPU will run mathematical equations on a blockchain (more on this later) in order to find bitcoins.
The Bitcoin network automatically copies and verifies these transactions, making them inescapable. Once more people start using Bitcoin, the harder it will be to mine Bitcoins.
Once your CPU completes its math problems, it sends a message along with the transaction to other users of the system.
The blockchain is then updated, and any new information about the transaction is transmitted into all of the user’s bitcoin accounts, and they are able to spend them directly.
It’s at this point we can see that miners aren’t digging for gold but finding a matching set of numbers (characters) as part of decrypting code in order to decrease security while increasing their chances at making a very profitable transaction.
The process of mining is a system that gets harder and harder as more people join in the search for bitcoins, and it requires a lot of CPU power.
As the network grows, the math problems get increasingly more difficult to solve, making mining operations more complex and time-consuming.
Bitcoin mining
There are two ways to mine bitcoins. The first is called bitcoin mining, and the other is called cloud mining.
Unlike CPU mining, which can be done by individuals and businesses to get bitcoins, bitcoin mining requires special equipment that is designed for this purpose.
Bitcoin miners use computers with powerful processors that are able to solve complex math problems very quickly while also being able to verify the integrity of the Bitcoin system by running mathematical equations on the blockchain.
Cloud Mining differs from Bitcoin mining in that you don’t have to do anything but pay for it!
You can just set up an account and wait for your mined bitcoin to be sent back to you.
Bitcoin trading
Bitcoin trading is similar to trading in stocks and commodities, but it’s all done with bitcoin.
There are many Bitcoin exchanges where users can trade Bitcoin for cash, services, or other cryptocurrencies.
Once someone owns bitcoins, they can use them to buy anything. But the most popular way to use bitcoins is to buy goods and services through an online exchange called a bitcoin ATM.
This allows users to swap their dollars for bitcoins at hundreds of locations globally without providing any identifying information and usually without any fees.
Some ATMs take money only in cash, while others have a limited range of payment methods, and some allow users to purchase just bitcoin, while others also accept cash and credit cards.
There are also some businesses that accept bitcoin as payment for products and services, but there has been a lot of resistance from many government officials and citizens.
There are many stories about people using bitcoins to buy drugs or launder money.
Some countries have outlawed Bitcoin because it’s not regulated by the government, while others have accepted Bitcoin as legal payment.
Immediate Edge gives a broad idea about bitcoin trading.
Many people now want to invest in bitcoin (similar to the early days of buying gold), and that is leading other companies to develop ways for investors to buy into the cryptocurrency market through stock market trading, similar to how stock options work for regular stocks.
Different trading strategies of bitcoin trading
The most popular way to trade bitcoin is to buy and hold a certain amount of cryptocurrency that you believe will be worth more in the future.
This strategy is often used by investors who want to choose a straightforward path of investing but don’t know much about investing or trading bitcoin.
The second strategy, called day trading, involves the use of technical indicators and charting principles and can be used by day traders on sites like BTC-e or BitFinex.
A trader using this strategy will buy low and sell high on a cryptocurrency while also taking into consideration the price activity over a 24-hour period, which may involve buying several times per day at regular intervals.
The third strategy, called swing trading, involves traders buying and selling only a few times per day in an attempt to avoid the downside risk of having huge amounts of money tied up in a single asset.
In this strategy, traders will buy low and sell high but only switch their positions during volatile market events.
This is a good strategy for traders that want to control their emotions over-trading.
Advantages of Paying with Bitcoin?
There are many reasons why people choose to use Bitcoin as a payment method.
Some of the main advantages are that users can remain anonymous, and no personal information is required for purchases.
All exchanges are encrypted, and no identifying information is required, which protects the buyer’s identity and is useful if you want to hold money in an exchange account but don’t want anyone to find out how much money you have.
Bitcoin transactions can also be done very quickly, usually within 10 minutes or less than an hour.
This is great for people that want to purchase items online or receive payment from large corporations much faster than potential processing delays can allow using traditional banking methods.
There is also no charge for using the bitcoin network in contrast to some other payment methods where users are charged a fee if they make a purchase with their credit card.
Bitcoin transactions are also very secure and can allow you to use your bitcoin as an investment without being concerned about getting scammed.
This is because there is no middle man between the buyer and seller, so no one has anything to gain by stealing money from another user.
Why Invest in Bitcoin?
There are many reasons why you should invest in bitcoin. Some of these include:
You can invest in bitcoins and make money. Bitcoins are not limited to one person or a few companies, so it’s possible for everyone to make money from owning some bitcoins.
With most stocks and even real estate, it’s very difficult for all the owners to share in the profits of the company or property.
But with bitcoin, every single person owns a piece of the currency and can make money from trading bitcoins.
If you’re tired of paying high fees to pay your credit card bills online, you can use bitcoins as an alternative payment method without worrying about any extra fees when paying your online bill.
The price of bitcoin is very low right now, so it’s very easy to afford if you’re using a payment method that charges high fees.
If you’re a software developer, then you can use bitcoins as payment in exchange for your computer or server time.
You can also buy bitcoins by creating trading software or by buying them from other users through an online exchange.
This way, you can build a portfolio of different cryptocurrencies and have a consistent income stream from them.
If you’re an investor, then you can use bitcoins as a way to invest in companies that accept bitcoin as a form of currency.
There is no limit to the amount of bitcoins that you can buy and hold, so you don’t have to worry about running out of money in the long term.
Conclusion
Bitcoin is a unique currency that can be used as both an investment or a payment method.
If you’re looking to make money, then you can use bitcoin as an alternative payment system to pay your bills or to invest in bitcoin and make money with it as the price continues to increase.
Some people are using bitcoin just because they believe that it’s going to continue increasing in value over time, and they want to enjoy the profits as much as possible before the price peaks.
You should never invest more than you are willing to lose because bitcoins can drop in value very quickly if there are any negative news events about cryptocurrency.