What is Bitcoin and can you earn from it – the most complete instructions and answers to all questions.
Opinion of a crypto trader
“I came across information about bitcoins in 2017. I know the computer topic well, so it was not difficult to understand the installation of the software. Having invested a lot of money, I bought several powerful video cards, a cooler, and “overclocked” my computer. My room became hot and noisy due to the operation of the equipment. However, using computer-mined cryptocurrencies, I played on their course and withdrew good money in hryvnia every week.
Virtual money has its history. The first idea of electronic currency originated in S. Brands and D. Chaum in 1983. Picking up the idea, A. Beck in 1997 created HashCash – the first blockchain prototype. Next, V. Dey came up with a rationale for electronic money, and N. Sabo created an algorithm for a virtual trading platform. H. Finney came up with an algorithm for connecting network blocks. Who invented this? In 2007, Satoshi Nakamoto set about creating a temporary network for this cryptocurrency.
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What is this in simple words?
Bitcoins are electronic currencies generated by programs that calculate monetary transactions in the system. The more operations the machine calculates, the more bitcoins the program will award to its owner.
Pros and cons of the Bitcoin system
Bitcoin is based on the principles of the blockchain system. This system has the following features.
- There is no single center: it is the whole system. It consists of using computers that process transactions.
- Availability to verify all transactions by any user’s computer.
- Anonymity: without having a wallet number, it is impossible to track who made this or that transfer. A unique access password is required for operations.
- Impossibility of hacking. To change account information, a code issued by the system is required.
- Information entering the blockchain is verified by all participants. Their computers calculate – “hash”. Data on all system operations are copied to users’ computers.
- High level of security. The system has two levels of protection and an access password. But if you are left without your password or wallet number, you will not be able to access it.
- Transactions are irreversible – it is not possible to freeze or return the sent.
- Bitcoin is not controlled by banks, it is not their system. Banks cannot prohibit specific cryptocurrency transactions; had the possibility of currency theft by hackers; no need to pay bank fees for services and transfers.
- There are no intermediaries in transactions, the currency is sent from one person to another through a peer-to-peer (P2P) system.
- To prevent inflation, the maximum number that can be issued has been limited to 21 million coins.
- All system participants have equal rights.
- There is no limit to the amount you can pay with Bitcoin.
- The lowest fees for using the service.
- Where there are no other monetary systems, a business can be conducted with the help of this- all you need is access to the Internet.
- The ability to independently issue bitcoins is “mining”.
- All popular exchange services accept bitcoins.
- Bitcoins cannot be counterfeited.
- Although digital currency has many drawbacks, it is accepted by some stores and even real estate agents.
- Low prevalence and recognition in the CIS.
- Unstable course. Since the number of released crypto coins is small, due to large transactions involving them, the value of the coins can change greatly, which will harm the participants of the system. Any information about the coin and transactions with cryptocurrency can seriously change its course.
- Forecasting difficulties. Bitcoin is a new system, and predicting its further development is quite difficult. It is not known what will happen to her next.
- There are no guarantees. The value depends on the market, so it can go down a lot.
- State restrictions. States can try to ban or take control of Bitcoin
- By 2017, due to the influx of users, the system load increased greatly. The increase in the number of operations revealed weak points. The processing of one operation began to take 10 minutes.
- When transferring bitcoin, the commission can be 10-30 dollars, which is a lot for small transfers.
- Taking advantage of novices’ inexperience, fraudsters try to gain access to their wallets.
- Because the rate jumps significantly, cryptocurrency is unattractive for businesses.
- The complexity of network calculations depends on the number of mined bitcoins and the influx of users. The operation calculation application now takes up 200 gigabytes and requires good computer power. Powerful processors and video cards are required.
- The system is not supported by any real business or government structures. In case of difficulties, for example, with the sale of coins or the recovery of a lost access key, people have nowhere to turn.
- Whoever has more computing power will get more bitcoins.
- What is Bitcoin backed by? Only by demand and computer capacity of users.
What is blockchain?
At the heart of the “Bitcoin” system is the principle of operation of the “Blockchain” technology. This technology was specially developed for Bitcoin. Blockchain in translation is a chain of blocks. All operations take place within this system.
Blockchain is built on a technology in which each block is connected and interdependent with all other blocks. This is a certain method of data processing that stores information about how this data was processed. That is, Blockchain has its unique data processing program.
In simple words about the system. You and your friends scored a few bitcoins each. You write down in your notebook how many you have. Let’s say ten. Your notebook with the entry is block number 1. Comrade number 2 comes along, writes your result into his notebook, and adds his 5 bitcoins to this entry, which he also makes a note of in his notebook. His notebook is the second block.
You check the result again and enter it in your notebook. Now all participants have the same entries in their blocks. Then friend number 3 comes along, copies the entries about your bitcoins into his notebook, and makes an entry about his 15. His notebook is block 3. You check and enter its result in your notebooks. A total of 30 bitcoins were mined. In this way, all participants receive identical copies of information about the acquired crypto-coins.
Suppose the 3rd friend decided to give his 5 bitcoins to the 2nd. Everyone is starting to check the possibility of this deal. The one with more computer power solves the task first and announces the result. The rest a little later confirm the validity of this conclusion. Everyone records their data according to the agreement. The amount of bitcoins of friend number 2 is also calculated.