ALL ABOUT BITCOIN IN EASY WORDS
Excessive hype on cryptocurrency is largely provoked by solid demand for bitcoin (Bitcoin). Many people recognize it as a full-fledged means of calculation. But, in order to clearly understand what Bitcoin imagines, where it comes from, you must first understand the history and technical aspect of its creation. Initially, it is worth learning that bitcoin is a digital currency. In comparison with dollars, rubles, hryvnias, it is not supported by a material base.
Bitcoin creation is awarded by Satoshi Nakamoto. Officially, he is credited with the idea of a cryptocurrency based on computing. The digital origin of the currency guarantees decentralization – no one dictates the rules to the owners of the currency, bitcoin is evenly distributed in the world, and any owner of it is a full-fledged participant in the totality.
WHAT DOES BITCOIN SUPPLY?
Previously, national currencies were backed by gold, silver, at the moment – GDP. In theory, you can go to any bank in the country and exchange paper money for its equivalent in the form of gold bars and vice versa. While Bitcoin is not backed by anything, this is easy mathematics. Throughout the development of bitcoin, the main idea was to create not an analogue of real money, but a semblance of gold – that which provides modern money. How does gold differ from American dollars, rubles, zlotys, euros and others? The amount of gold is clearly limited in nature. It will not be possible to extract more gold than is available. And it will be very difficult to create it synthetically, and this process is unstable.
In order to extract gold from nature, it is necessary to spend people’s time. As a result, 1 kg of the mined useful metal can be tied to the labor costs required for its extraction and used in the future as an equivalent of free labor, in other words, money.
Something similar is characteristic of bitcoin. The number of cryptocurrencies is limited to 21 million coins. At the time when the total amount reaches this number, then the subsequent emission will be stopped, so that inflation does not happen. Mining coins lacks specific costs. In the event that the labor costs of people go away for the extraction of gold, then computer resources are spent to obtain Bitcoin.
THE USE OF BITCOIN IN REALITY
The high level of dynamism of the cryptocurrency rate attracts investors who prefer highly volatile assets. Bitcoin is just beginning to be used as a means of payment, but many Forex brokers are monitoring the situation and, apart from currency pairs, have introduced tools like BTCUSD. Traders, who previously dealt only with real money, now have the opportunity to supplement their portfolio with a modern tool. As a result, a couple of income options for this cryptocurrency appeared:
the acquisition of assets in order to wait for a significant increase in the exchange rate in relation to this currency;
purchase / sale on the Forex market and the rate on the options market – as a result, it will be possible to take profit when the rate falls and rises;
direct transactions for the sale / purchase of Bitcoin with tireless monitoring of the exchange rate.
The advantage of this digital currency is that much less material resources are needed to obtain it than a direct exchange of money. As a result, payment for the work of the performers is carried out at the expense of the funds obtained “free of charge”
WHERE DOES BITCOIN COME FROM?
It is possible to acquire a cryptocurrency using certain methods – purchasing or exchanging for US dollars and other real currency, receiving bitcoin as a reward for the work done. But the very first source is mining , which is the generation coins through mathematical calculations. In theory, the owner of any computer is able to install a mining program in order to start receiving digital currency.
In practice, mining has the following highlights:
The level of economic rationality of mining depends on the power of the computer. The PC must have the most wonderful gaming card, then it is possible to start mining.
Before starting round-the-clock mining, it is necessary to measure the rate of production, then compare it with the real costs of electricity with the income brought.
It will be possible to significantly intensify the production of cryptocurrency when combined into a pool with other miners. Then non-specialized mining will be carried out using the computing resources of the entire group.
The solid complexity of computational processes slows down the mining of cryptocurrency, the generation is limited by the limited power of standard personal computers (also in game models). As a result, in order to start experimental BTC mining, they take special equipment. It is able to generate coins at a faster rate because the software and hardware are made specifically for this task.
HOW TO START INDEPENDENT BITCOIN MINING?
Special equipment is used for one purpose – to increase the speed of calculation. Bitcoin is generated during the accumulation of “satoshi” – these are shares of digital currency, which are generated in a shorter time frame. Satoshi by themselves does not imagine a treasure, based on this, miners will be able to take expensive experimental equipment or team up with other miners. The combined teams are leveraging the benefits of cloud development, which make it easy to deploy remote power over the Internet. Sometimes cryptocurrency mining can reach industrial scale.
Local farms for mining cryptocurrency can be created in several ways:
The use of a motherboard that has a pair of slots for video cards. It is necessary to fill all the slots, along with this, you need to take the best devices, which have great computing potential.
Operation of special boards with video chips. They allow you to easily achieve the required speed of computational operations.
A farm based on branded ASIC processors, created specifically for the rapid mining of cryptocurrency.
Equipment with a standard video card will come out cheaper, but in addition, this acquisition should pay off. For this reason, more attention is usually paid to the potential of cloud pools. These services have a specific working group, but they work all day, do not waste electricity at home. In addition, there is no risk of power outages or breakdowns.
HOW TO STORE BITCOIN?
If it is clear with simple money that you have the opportunity to hold cash or give it to the bank for crediting to the account and the upcoming settlement, then with bitcoin everything is not so easy. If you lose all the nuances, then bitcoin is the wallet.dat file, in which all digital coins are saved. It is possible to keep this file in “cold storage”, in other words, it should not be connected to the network, or in another storage that can be disposed of using special software.
In order to calculate with cryptocurrency, you need to have a digital wallet. It can imagine itself as an application for a phone, a computer, or it can be a third-party virtual service that will do everything on its server. After you start your own wallet, it is possible to create a bitcoin address for yourself. It is worth knowing that this address sometimes needs to be changed, because it is published in the general list of transactions and can be passed on to third parties. The number of addresses is not exhausted.