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Wednesday, December 13, 2017

Basics of Bitcoin | Bitcoin general information

  • So what is Bitcoin exactly? what are the Basics of Bitcoin?
  • Who invented and created the concept and development of Bitcoin?
  • Who and what is controlling the Bitcoin network and structure?
  • How does Bitcoin work?
  • Do people actually really use Bitcoin?
  • How can you get Bitcoins?
  • How hard is it to make a payment using Bitcoin?
  • List of the main advantages of Bitcoin?
  • List of the main disadvantages of Bitcoin?
  • Are you Able to make money with Bitcoin?
  • Is Bitcoin totally virtual and immaterial?
  • Is Bitcoin anonymous?
  • I lost my Bitcoin wallet, Now What?
  • Does the scalability of Bitcoin allow it to become a major payment network?

 

The Basics of Bitcoin are a topic we could talk about for hours , but we tried to narrow it down to what matters for you

Basics of Bitcoin

beautiful bitcoins

So what is Bitcoin exactly?

Bitcoin is a network based on a general agreement network that allows the creation of a totally new payment system based on only digital money. As it no central authority it is totally powered by its users making it the first peer to peer payment network and solution. You should see it as cash on the internet.

Due to the fact that Bitcoin is a Triple Entry Bookkeeping system this means it is actually seen as a more fraud resistance way of book keeping then the regular way of book keeping.

Explanation:

To make a transaction, you sign over a payment instruction to the person you do business with her public-key-based signature. Then the third party “the issuer “then packages the payment request into a digital receipt, after which that receipt is turned into the transaction.

This transaction is digitally signed by several parties, but it has to include at least one independent party. It then becomes a strong and clear evidence of the transaction.

The final receipt *is the entry*. Then, the *collection of signed receipts* becomes the accounts, in accounting terms. The collection replaces ones system of double entry bookkeeping, this is because the single digitally signed receipt is stronger evidence than the two entries that made up the transaction. The collection of signed receipts is a better record than the entire chart of accounts.

Who invented and created the concept and development of Bitcoin?

In 1998 by Wei Dai suggested the concept of a new form of currency that uses cryptography to control its creation and transactions, rather than a central authority.

Then in 2009 the first prove of concept (POC) was written en published by a guy called Satoshi Takemoto. (He quit the project a year later). The community has since grown tremendously with many developers working simultaneously on Bitcoin.

The Bitcoin protocol and software are fully open source and published so that any developer around the globe is able to inspect and review the code or make their own modified version of the Bitcoin software.

in this case the overall influence of any one programmer is limited and therefor no one really controls Bitcoin. This is a good thing, making it a community owned concept rendering the inventor obsolete and without control.

Who and what is controlling the Bitcoin network and structure?

There is no patent and no one owns the Bitcoin network. The reality stayed till now true to the concept and everyone, meaning all the users of Bitcoin are in control of the Bitcoin network. There are and always will be updates and improvements by programmers on the Bitcoin software, they are not able to make any changes to the protocol as everyone who uses Bitcoin is able to decide for himself what software and version they what and prefer to use.

In order to stay compatible with each other, all Bitcoin users can only use software complying with the same universal rules, restrictions and requirements. Bitcoin can only work correctly with a complete consensus among all users. As a result the developers and all of the Bitcoin users have a powerful incentive to protect this consensus.

How does Bitcoin work?

From the side of the user Bitcoin is just a computer program or a mobile application that offers a personal wallet which give them the possibility to receive and send Bitcoins from and to other people that also have a Bitcoin wallet.

Behind the scenes, the Bitcoin network is sharing a public ledger called the “block chain”. This ledger holds every transaction which is ever processed, allowing a user’s computer to check and verify the validity of each transaction separately. The authenticity and legitimacy of each transaction is protected by digital signatures corresponding to the addresses which send them, allowing all users to have total control over sending Bitcoins from their own Bitcoin addresses.

Do people actually really use Bitcoin?

Yes they are. More and more businesses and people are suing Bitcoin, the other day I read a story about this guy in Los Angeles that wanted to sell his mansion in order to just by Bitcoins. But also the regular middle class businesses that are not online. Thou it is still a new concept the Bitcoin market is growing rapidly every day.

At the end of August 2013, the value of all Bitcoins in circulation passed the US$ 1.5 billion dollars through the millions of dollars’ worth of Bitcoins exchanged daily.

How can you get Bitcoins?

  • You are able to earn Bitcoins as payment for goods or services.
  • You are able buy Bitcoins at a Bitcoin exchange.
  • You are able Exchange Bitcoins with someone near you.
  • You are able Earn Bitcoins through competitive mining.

Most Bitcoins exchanges do not allow funding to your Bitcoin account through the more convent9ional payment methods (you might find a few that do thou but you will have to look hard). This is due to cases where someone purchases Bitcoins with for example PayPal, and then reverses their half of the transaction. This is  known as a chargeback. This is an issue that most companies that sell or do business online are every worried about and so the conduct is set to avoid these issues and problems as much as is possible.

How hard is it to make a payment using Bitcoin?

This is one of the main advantages of working with Bitcoin. A payment is easier to make then with a debit or credit card, as you don’t need a merchant account.

Payments are made from an application that functions as a wallet, but is located and stored either on your computer or smartphone. When you enter the recipient’s address, the payment amount, and pressing “send” the transaction is done. To make it as easy as possible to enter a recipient’s address, many wallets can receive the address by touching two phones together with NFC technology or scanning a QR code.

 

List of the main disadvantages of Bitcoin?The Bitcoin software is currently still in beta with numerous x features which are still in active development and not yet completed. Every day new features, services and tools are being developed to make Bitcoin more secure and accessible to the masses. Most of the Bitcoin businesses are new and as yet still do not offer insurance. It takes time but it goes faster and every day it grows with its offering and more and more people accept it as a valid payment method.

Acceptance – as the new kid on the block many people are still ignorant and unaware of Bitcoin or worse do not understand the concept properly. Example on the end of January 2014 the Lithuanian government issued a statement in which they expressed their fear that anyone of the developers could just walk away with all the money ( I assume they were thinking about the wall street bankers).

Volatility – The total value of Bitcoins in circulation and the total number of businesses using Bitcoin are still very small compared to what they could be (thou growing in a healthy rate). Therefore, relatively small news events, trades, or certain business activities can significantly affect the price at that moment. Still the bigger it gets and the more people will use it the less volatile it will be. For this time will tell as this is like many things on the internet uncharted territory.

Are you Able to make money with Bitcoin?Bitcoin is not a “get rich quick” scheme and should be treated with respect, so don’t expect to be a millionaire over night the moment you enter this new arena.

Like every new business vertical there are opportunities but only those that understand and are innovating within the boundaries of what is possible will be the new Bitcoin millionaires. There are several ways to make money with Bitcoin such as mining, speculation or running new businesses. But keep in mind that all of these methods are competitive and there is never a guarantee of profit.

Is Bitcoin totally virtual and immaterial?Bitcoin is as virtual as the online banking networks and credit cards people use nowadays. Bitcoin can be used to pay online and in brick and mortar stores just like any other form of money. Bitcoin balances are stored in a large distributed network, and they cannot be fraudulently changed by anyone. In short, Bitcoin users have sole rights and control over their wallet and their funds cannot disappear just because they are virtual.

Is Bitcoin anonymous?Bitcoin is not anonymous and cannot offer the same level of privacy as the banknotes in your regular wallet. Cash is in general totally anonymous. The use of Bitcoin leaves extensive public records which actually is the reason why it works as a proper payment method. Different kinds of mechanisms exist to protect users’ privacy, and more will be added, keep in mind that as a community currency the developers have no hidden agenda and work in everyone’s best interest.

How to protect your privacy

  • Understanding Bitcoin traceability
  • Use new addresses to receive payments
  • Use addresses from “the change” when you send payments
  • Be careful with public spaces
  • Your IP address can be logged

Eventually it is assumed that Bitcoin will be subjected to similar regulations that are already in place inside existing financial systems.

I lost my Bitcoin wallet, Now What?

When a user loses his Bitcoin wallet, you have to see it as removing money out of circulation. Bitcoins that were lost are still in the block chain just like all the other Bitcoins. But the lost Bitcoins remain dormant forever, simply because there is no way for anyone to find the private key(s) that would allow them to be spent again., see it as a safe filled with cash that no one has the combination to.  Because of the law of supply and demand, in the event that fewer Bitcoins are available, the ones that are left will trigger an increase in demand increase in value to compensate.

Does the scalability of Bitcoin allow it to become a major payment network?

The Bitcoin network is able to process a much higher demand for its services, meaning number of transactions per second, than is actually being performed today. It is not ready to perform on the level of the major credit card services but the continue development will lift limitations that currently still are pressing on the network. Since Bitcoin is a work in progress and the most brilliant minds are working on it in a collaborating way the capabilities of the network will keep on growing for years to come. so this covers more or less the Basics of Bitcoin

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