WHAT IS BITCOIN?
A New book is coming soon and it will be ABSOLUTELY FREE! Here is the first chapter of it. The topic is Bitcoins and other cryptocurrencies and everything you need to know to get started with them. Enjoy the first chapter and subscribe to get the full book for FREE!
What is Bitcoin?
For those of you who have never heard of Bitcoin, it’s a software-based payment method first introduced to the world in 2009. It utilizes a public ledger so that everyone is kept up-to-date with all transactions. Payments made with Bitcoins are recorded in this public ledger which is based on a peer-to-peer system rather than utilizing a middle-party (bank or financial institution). Bitcoin is a cryptocurrency.
Bitcoins are generated to reward users for processing payments. This process is known as mining and involves using computer power to verify and record payments to the public ledger. Mining is not the only way to earn Bitcoins; they can be exchanged for products, services, or even fiat money. Users send and receive Bitcoins electronically by using a virtual wallet.
In other words, two users will each have a wallet that holds their Bitcoins. User A can send Bitcoins to User B by means of an electronic address randomly generated by the wallet. Once payment is sent, it is considered pending and added to a block chain. Once that block chain has been verified by a miner, then the transaction is considered confirmed.
Bitcoin continues to grow as a viable payment method, extending out to larger companies that are looking for an edge on their competition. Online merchants have an added incentive to accepting Bitcoins. Bitcoin fees are much lower that the fees that credit card processors charge of 2%-3% per transaction.
On the downside, Bitcoin has been the subject to some extreme scrutiny. One of the most common concerns is that it can be used for illegal activity. My response to this is that cash can also be used for the same illegal activities. Sites like Silk Coin have been the cause of this scrutiny but was shut down since it was a black market.
A Block Chain
The most important aspect of the Bitcoin system is the public ledger since it records all transactions. So long as mining remains decentralized, Bitcoin will accomplish its neutral stance. Here’s a more detailed look at how it works.
A transaction is recorded to a public ledger and grouped together. Each group consists of multiple transactions. Every 10 minutes, these groups are mined, verified, and added to a block chain. So a block chain is essentially a group of verified transactions. These blocks are quickly published to all networks.
This process allows Bitcoin software to determine when Bitcoins are spend and fairly distribute them. It prevents double spending in a neutral environment without a need for a central authority. There is no single institution or person controlling Bitcoins. Everyone controls them equally.
Mining is the process used to maintain a block chain. Users are rewarded with newly created Bitcoins and transaction fees paid by the transactions for mining blocks. Miners can be located anywhere. They process payments by verifying transactions and then adding them to a block. In 2014, the reward for adding a block to the chain was 25BTC. New block creation is limited to every 10 minutes to regulate the Bitcoins available on the market.
Transaction fees are optional but will speed up confirmation of a payment since miners can choose which transactions to process first. Naturally, they are going to mine ones with a transaction fee first since they are worth more Bitcoins.
Ownership of Bitcoins
Pay close attention to this section because it’s very important. The ownership of Bitcoins is associated with a specific private key. So when a transaction is sent, it is mixed with this private key in order to prove that the user owns that amount of Bitcoins. If this private key is lost, then so are the Bitcoins. You must keep it safe at all times since lost Bitcoins cannot be recovered. This private key should also be protected since theft can occur.
Security, Theft, and Loss
Since all Bitcoin transactions are recorded on a public ledger, there is a justified concern for anonymity. Therefore, users are able to use different addresses for each transaction. This helps to protect their privacy.
Preventing unauthorized transactions from a user’s wallet is paramount to Bitcoin security. A private key acts as a safeguard for the owner. Again, protect this key because you can lose your Bitcoins if you lose this private key. The best way to protect this key is to always back up the key to an offline computer and use paper printouts. It’s better to be safe than sorry.
With that said, Bitcoin is still relatively new so now is the absolute best time to start using them. This book will show you how to get started. I’m going to walk you through the creation of a wallet, show you how to mine, and also show you where you can spend those Bitcoins. There are so many opportunities here that are just waiting to be seized.