What are Bitcoins?
Bitcoin is digital money that has no physical form. In fact, this is just a record that you have a certain amount of cryptocurrency on your account. At the same time, bitcoin is becoming more and more common, and you can use it to buy many goods and services in Europe, the United States, Canada, Australia, and Japan.
The difference between Bitcoin and other digital currencies is its decentralization. Information about bitcoins is stored simultaneously on all computers that are connected to the cryptocurrency network. In addition, anyone can view the history of transactions with all bitcoins for the entire period since its creation using blockchain technology, which makes this cryptocurrency one of the most secure in the world.
Mining or how to earn bitcoins?
One of the ways to earn bitcoins is through bitcoin mining, which is the settlement of bitcoin payment services around the world. For this, the system calculates a specific reward – some amount in bitcoins. It is better to mine bitcoins with the help of special equipment – ASIC, after purchasing which you will still need to install a program for mining bitcoins (miner), create a bitcoin wallet, and also connect to an exchanger or cryptocurrency exchange to deposit bitcoins. As soon as all these stages are completed, you can start mining.
Since the equipment for mining bitcoins is quite expensive – costs from $ 1,000, consumes a lot of electricity, emits a lot of heat and is quite noisy, and the competition in mining is only growing – mining bitcoins at home gives way to industrial mining (the creation of large computing capacities in countries that are favorable for this) , as well as cloud mining (when you become a minority investor in large mining farms with the help of special service sites).
It is worth noting that earning money from bitcoin mining is a rather complicated matter. There is no serious mining of bitcoins without investment, and the profitability of the process, considering the cost of purchasing equipment or investing in a cloud company, has recently decreased and exceeds 1 year.
What is a bitcoin faucet?
Bitcoin faucet is another way to earn bitcoins without investment from scratch, which can be done on a regular home PC or a regular Android phone. Bitcoin faucet is an Internet portal, after registering on which you are periodically credited with a small amount of bitcoins. Sometimes for this you need to do some action, for example, click on a button or enter a number from the displayed picture into a line.
Such sites act as a kind of advertising platforms promoting the services of bitcoin exchangers and exchanges. The administrator of the portal is a bitcoin faucet, receives income from advertising and shares a part of it with registered users. Therefore, you can make money on bitcoin faucets, but you won’t get much, unless you register on hundreds of them.
How to buy bitcoins?
At the same time, you can still try to buy bitcoins and earn from the change in their exchange rate. The most popular way to purchase bitcoins is with the help of special trading platforms, which are popularly called bitcoin exchangers. They usually offer to exchange bitcoins for your local currency, for example, hryvnia, ruble, or dollar, as well as electronic money. Coinmama, Changelly, Indacoin, Cardbit, Matbi, BestChange and 365Cash are among the most popular platforms for exchanging bitcoins.
But, if you want to buy bitcoins at the best price, you should use the services of specialized cryptocurrency exchanges that bring together sellers and buyers in one place. The advantages of exchanges include the opportunity to buy bitcoins directly from the seller, which can provide you with a more favorable transaction rate. However, exchange rates are more volatile than bitcoin exchanges. Exchanges can also set higher requirements for transaction participants, for example, it is necessary to deposit 1 bitcoin. CEX.io, Binance, BitMart Livecoin, BTC Trade, Kuna, etc. are worth highlighting among proven and reliable bitcoin exchanges.
You can also buy bitcoins at special ATMs and terminals, of which there are still few in Ukraine. At the same time, they can be easily found using specialized sites, for example, coinatmradar.com.
You can find a buyer or seller of cryptocurrency on your own, for example, on a forum (they are popularly called bitcoin talk) or use a service for P2P exchange of cryptocurrencies, for example, LocalBitcoins, which is special for such cases. In this case, you will not have to pay a commission to the intermediary, which can reach 10% of the transaction amount, but the risk of running into a fraudster here is quite high.
In the same way, you can sell bitcoins by making an operation in the opposite direction.
Is it possible to buy a part of bitcoin from ?
You can buy a small fraction of Bitcoin, such as a half, a quarter, or even one thousandth of the cryptocurrency. This makes investments in bitcoins more attractive, because the price of 1 bitcoin in October 2022 in hryvnias exceeded 707 thousand hryvnias or 19.1 thousand dollars. On the Internet, you can find many bitcoin converters / calculators that will help you calculate the amount of the planned transaction in the desired currency.
When should you buy bitcoins?
The price of bitcoin changes every moment, day and night, and the exchange rate is quite volatile – there can be big jumps both up and down. Therefore, it is quite difficult to choose the optimal moment for buying cryptocurrency. You can apply technical analysis (chart studies) using a variety of analytical tools (eg Bitcoin Wisdom, Cryptowatch) and track important Bitcoin-related news.
Where to see the exchange rate of bitcoins ( to the hryvnia, dollar, ruble)?
The exchange rate of bitcoin against the hryvnia, dollar, ruble and other currencies can be viewed on many trading platforms and financial portals, among which we can highlight: ru.tradingview.com, ru.investing.com, Libertex, Fx Club, Alpari and others.
Many of them offer the opportunity to see the price of bitcoin online in the form of a graph not only for today, but also historical figures since the currency’s inception. This will help you apply technical and analysis and try to make a forecast of the value of bitcoin for the near future in order to make money on the cryptocurrency exchange rate. On these same portals, you can often read the latest bitcoin news that may influence your decision regarding a deal with cryptocurrency.
Should you buy physical bitcoins?
Cryptocurrency on a physical medium is a coin with an embedded key. Although the ability to see and “touch” the currency makes this deal attractive, we do not recommend that you buy physical bitcoins. After all, the risk in this case will be higher, since the seller can release several coins with the same key. Therefore, if you encounter a fraudster, he can “withdraw” your crypto savings at any time.
How to create a bitcoin wallet?
To buy bitcoins, you need a bitcoin wallet to store cryptocurrency. The easiest way is to register an account online on special trading platforms using an ordinary mobile phone (for example, on Android) or a computer (PC). But along with convenience, this method also has a significant drawback – trading platforms can break. Therefore, it will be more reliable to purchase a hardware wallet (a special “flash drive”), which is practically impossible to hack, since it is not connected to the Internet. But, in this case, the time of the operation and the labor costs for its conclusion will increase – because it will be necessary to constantly transfer bitcoins from the hardware to the online wallet and back.
We choose a method of transferring funds
The most popular way to pay for a transaction when buying bitcoin is by using a bank card. Its advantages include accessibility, as many Ukrainians have a bank card. And also – speed of transfer, bitcoins will arrive in your account almost instantly. You can also increase the deal amount by paying with a credit card. For example, you can transfer money from a payment card using Kiwi or send the transaction amount through Privat24.
But this method has a number of disadvantages – first of all, the higher cost of the transfer and even higher interest and commission rates if you decide to use the credit limit. Also, this method will not suit you if you do not want to “shine” your income. Among the most popular trading platforms in the world and in Ukraine, which accept a bank card for the purchase of bitcoins, it is worth noting:
- Coinmama
- Coinbase
- BitPanda
It is quite convenient to pay for the transaction using a bank current account, access to which, like payment cards, can be provided using Internet banking. However, the bank commission in this case will usually be lower, and the transaction limits will be higher. At the same time, you will usually have to wait a few days for the cryptocurrency to be credited here, especially if you send a payment by SWIFT transfer. BitPanda, Coinbase, and Gemini can be noted among the popular trading systems that support payment methods using a current bank account.
If you don’t want to “shine” your income, you can buy bitcoins for cash. This method is quite popular in Ukraine. The cryptocurrency will be credited quickly enough, but the commission of the intermediary will be maximum – 5-15% of the transaction amount. And, of course, the main disadvantage of this option is the high risk of fraud. Therefore, to search for counterparties, you should use only forums on well-known trading platforms (for example, Wall of Coins, LocalBitcoins) and strictly follow the rules of participation in the transaction recommended by them.
If you have savings in your PayPal account, you can use this system to buy bitcoins. But along with the difficulties of replenishing a PayPal account in our country, you should be prepared for a rather high commission, which can reach 12% of the transaction amount.
The confidentiality of the transaction will be ensured by the purchase of bitcoins with the help of special ATMs and terminals, however, there are very few of them in our country.
What should you pay attention to when making a deal?
When choosing a payment method for buying bitcoins, you should pay attention to the following factors:
– the value of bitcoin
This is probably the most important factor. There is no single exchange rate for bitcoin, it is set by each seller individually. But if you want to assess how much the seller’s offered bitcoin price is market – compare it with other offers or with the average price on the market, which, for example, can be viewed on sites such as Preev, BitcoinAverage, CoinDesk and many others.
– additional costs
You will be charged all kinds of commissions for carrying out the transaction: for replenishing the account, exchanging and withdrawing funds, etc. Bargain with the seller if possible, some of them will agree to lower the rate for large deals.
– reliability of the seller
How much can you trust this seller? Ask how long the counterparty has been on the market, whether there are reviews from real customers and how positive they are. If the operation will be carried out in cash – choose a crowded place for the transaction.
– transaction limit
The maximum transaction amount is usually limited and differs for different trading platforms and brokers. And if you want to buy a large amount of bitcoins, you should clarify the restrictions on transaction limits before conducting the transaction.
– purchase speed
How quickly do you want to perform the operation? It is most likely to buy cryptocurrencies at special ATMs, which are very few in Ukraine. However, it is also possible to quickly buy bitcoins from some brokers and on trading platforms in case of sending funds using a payment card.
– confidentiality of the agreement
Such popular methods of sending funds as a transfer from a current bank account, credit or debit card, or international transfer systems (Western Union, MoneyGram, PayPal) are not suitable if you want to ensure the anonymity of the transaction. In this case, it is worth using ATMs, some trading platforms, for example, LocalBitcoins, offer this service.
How to avoid the risk of fraud?
The record growth of the price of Bitcoin and significant volumes of transactions make this currency a “sweet deal” for many fraudsters. Therefore, you should be extremely careful when trading bitcoins, in particular:
- carefully study the information about the trading platform / broker before entering into a transaction with him
- on some platforms, the rating of traders is published – it is worth using them
- it is useful to read real reviews of customers who have made a deal with this counterparty before, which can be found on specialized forums
- don’t invest in bitcoin pyramid schemes
- do not send money for bitcoins in advance, use escrow services
- store cryptocurrency not on trading platforms, but use hardware bitcoin wallets. They are more reliable, while platforms can be prone to hacking attacks. For example, as a result of the Bitfinex hack, its users lost the equivalent of $70 million
Investing in Bitcoins
In addition to the fact that you can pay for goods and services with bitcoins, you can invest in them. From September-2011 to October-2022, the cryptocurrency rate (average according to various exchanges) grew from almost zero to $19,100 per unit (and in the fall of 2021 it exceeded $43,000).
However, the price at which “coins” are bought and sold on different exchanges can differ from the average rate by twice or more in any direction. Therefore, bitcoins can be a profitable investment tool: both for long-term investments, in anticipation of the growth of the exchange rate, and for short-term speculative operations.
However, it is worth considering that the bitcoin market is quite new, and this asset is fundamentally different from other currencies and securities. Accordingly, predicting rate changes is not an easy task, especially for a novice investor.
The growth of the bitcoin rate is primarily determined by trust in it, including the ability to pay with “coins”. The more such opportunities, the greater the demand for bitcoin and the higher its rate. On the other hand, hacker attacks and technical problems on exchanges can shake the course of cryptocurrency.
For example, in February 2013, several large exchanges where bitcoins are traded (Bitstamp, Mt.Gox, BTC-E) were subjected to DDOS attacks at once. As a result, exchanges announced delays in removing “coins” from the exchange, and the price of bitcoin collapsed almost in half: from $ 1,237 to $ 645 per unit.
While the Ukrainian market is not yet adapted for Bitcoin, one should use this tool very carefully and not invest large resources in it. The volatility of this instrument is high, the amplitude of fluctuations is more than 50% of the value of the asset. That is, during periods of strong movements, you can both earn and lose about 50% of your funds. To avoid additional risks, experts advise testing this tool in volumes that are not critical when receiving a loss from the operation.
No drugs
Of course, Bitcoin is also subject to criticism. The first reason for this is the unfair initial distribution – the first “miners” got coins much easier and in larger quantities than those who “entered the game” later.
Although bitcoins are difficult to steal, and the cryptographic code of the currency is almost impossible to crack – at least, for now – they can be lost if you somehow destroy your bitcoin wallet. This can be done, for example, by a computer virus. The same will happen if you forget your wallet password. On the other hand, the risk of this is about the same as getting rid of a regular wallet with cash.
As already mentioned, the exchange rate is unstable and difficult to predict. In addition, the system software is still in testing mode and theoretically, critical errors may still be detected in it – then the entire system will collapse.
Prospects and forecasts
Bitcoin’s outlook is mixed. On the one hand, he is prophesied about the future of the new world currency, which will eventually be able to replace traditional money. This should be achieved due to the fact that transactions using it are carried out instantly and are very cheap. In addition, Bitcoin is not subject to inflation, because its emission is limited.
On the other hand, the bitcoin rate and its future depend on trust in this currency. Practice shows that informational attacks (for example, rumors about hacking of the system by hackers) are capable of greatly collapsing the bitcoin rate, as well as restrictions on its use. Thus, after the ban on cryptocurrency in China, the bitcoin rate fell by 40%, although technically this did not affect its circulation, since transactions with cryptocurrency are anonymous and it is extremely difficult for regulatory authorities to calculate a user, and with a proper approach to security – impossible.
In addition, anyone who wants to have the necessary knowledge can launch their own cryptocurrency and develop it in a similar way – those who earn the most trust of market participants will be distributed.
Will BitCoin be the currency of the future?
Recently, there has been a lot of heated controversy surrounding the payment web service BitCoin (literally “bit coins”, sometimes called simply “bits”), which appeared in 2008. Some argue that it is the ideal Internet currency of the future. Others dream of a complex scam. But in reality, no one knows the exact answer. And it will take a few more years before the situation becomes more or less clear. But what is virtual money BitCoin (bitcoins), how does it work, and why exactly this payment system has attracted so much attention?
Anyone who has been using the Internet for a long time has heard of such payment systems as WebMoney, Yandex.Money or PayPal. All of them have already become commonplace, huge sums of money pass through them every day. As for BitCoin, it is not just another system, but something fundamentally new. And its main difference is the absence of centralized management.
The fact is that BitCoin works on the peer-to-peer principle, well known to the modern user thanks to torrents. Centralized management is simply not needed, the system exists thanks to a global network consisting of users’ computers that enjoy equal rights and are distributed around the world. That is, all information about the system is stored (of course, in encrypted form) by its users. Thanks to this approach, it is impossible to ban the use of BitCoin or block user accounts, the system is extremely reliable.
As with other payment systems, BitCoin can be used to pay for goods or services in cities that accept this currency. At the same time, all operations take place directly between users, intermediaries such as banks or any other processing centers are simply not needed. As a result, commissions are very small.
Another feature of BitCoin is complete anonymity. Users are not asked to enter their real name and passport data. All you need to use the system is to install a free open source client program and create an electronic wallet. The exchange of “bitcoins” for ordinary “papers” and vice versa is carried out through special exchangers or exchanges.
It should be understood that the BitCoin system was not created as an analogue of physical money, but as a fully electronic currency of the future, and a global one at that. “Bitcoins” are not tied to gold or any real currency. Their emission takes place in a very original way, simulating the “rotation” of gold on Earth. It is based on a similar principle – because, as you know, the amount of this metal on the planet is limited, and extraction is becoming more and more difficult every year. And the day will come when all reserves will be exhausted and all gold will be in the hands of people.
Each “Bitcoin” has its own unique number, and existing sophisticated verification systems exclude the possibility of counterfeit coins. New ones appear as a reward to those who use the computing capabilities of their equipment to support the functioning of the system (they are called “miners” or “miners”). Computers are used to calculate complex mathematical problems, solving which new “bitcoins” appear. Moreover, the further, the more difficult the calculations will become, and fewer and fewer coins will appear at a time. So, if initially the size of the reward was 50 coins, now it is 25. It is expected that by about 2030, the emission will stop altogether.
The system is built in such a way that no more than 21 million “bitcoins” can physically exist in it. This is done to control inflation. By the way, it should be noted here that the calculations made in this way are used to increase the security of the system itself, to verify the transactions being carried out. And the complexity of these calculations is already so high that it is pointless to try to adapt a simple home computer to them. Another bonus for “miners” – they receive commissions when transferring.
The popularity of BitCoin in the world is constantly growing. And, nevertheless, there are a number of questions regarding the security of the system. Yes, the Internet is filled with all kinds of scary stories about the hacking of wallets and the loss of huge funds. Moreover, there is a lot of malware that hunts BitCoin wallets.
The history of the largest exchange Mount Gox, through which up to 90% of the exchange of “bitcoins” for real money, did not add credibility to the currency. As it was officially announced, hackers managed to break the security system and steal about 400 million dollars. However, there are well-founded suspicions that the exchange itself was an electronic financial pyramid. This story caused a significant collapse of the “Bitcoin” rate.
But needless to say, the very history of the appearance of BitCoin has many ambiguities. In particular, it is unclear who exactly created this project. His official name is one Satoshi Nakamoto. But it is very doubtful that such a person exists at all. At least, no one has seen him live, and he has not appeared on the Internet since 2010. It is quite likely that a whole group hides under his name, the motives and goals of which are unclear. Various assumptions are made: from enthusiasts to participants in a global conspiracy.
It is clear that BitCoin causes great irritation among those in power. Everything is too free and uncontrolled. And here there are two ways: to try to fight or to adapt to new trends. So, in Japan, the authorities refused to consider BitCoin as money. Banks of the country are prohibited from working with this means of payment. The reason lies in the risks caused by significant fluctuations in the exchange rate, which are in no way related to economic reasons. When “bitcoins” just appeared, their value was 0.001 dollars. Over the years of its existence, this currency managed to reach the level of 52,000 dollars for one “bitcoin” and fall many times. At the time of writing, the rate was approximately 43.2 thousand dollars. The value of the currency is regulated solely by the interest of the market.
“Battles” have also been banned in China, although private individuals may use them at their own risk. And in Singapore, the tax authorities will consider classifying BitCoin as digital goods and subjecting it to appropriate taxes. As for the USA, in this country they are trying to find the best way to regulate the circulation of this new currency.
The opinions of experts in different countries are diametrically different. Yes, some are sure that BitCoin is nothing more than a “soap bubble”. Others predict quotes in the amount of 40 and even 100 thousand dollars. The largest economic and financial institutes around the world are engaged in the study of the new currency. Economists have an added headache, the appearance of which they could not have even imagined a few years ago. There are assumptions that “battles” will become really popular no earlier than 2021-2025.
Thus, it is still too early to judge the future of the BitCoin system. But there is no denying the fact that she has already made a huge impact on the Internet community. Yes, it may well be that within a few years this system is waiting for a complete collapse. However, even in this case, it will serve as the basis for the emergence of a new electronic currency in the future, during the development of which all the miscalculations made during the creation of BitCoin will be taken into account. One thing that cannot be doubted today is that electronic currency with decentralized management has a great future. And whether it will be BitCoin or something completely different – the tenth matter.