I'm kinda new to the cryptocurrency space but I've done a lot of research and played about with quite a few exchanges/wallets in the time I've been here (as hinted at in my first post).
My aim:
With the influx of new users/investors and the lack of a solid, up to date, easy to understand guide for us based in the UK, I thought I'd start creating one. For now I'll focus on the original crypto, bitcoin.
Before we start, here are some definitions that may help:
- Blockchain - a digital ledger in which transactions are recorded chronologically and publicly
- Decentralised - distribution of powers, people or things away from a central location or authority
- Off-chain - movement of value outside of the blockchain
- Fork - when developers take a copy of source code from one software package and start independent development on it, creating a distinct and separate piece of software (or cryptocurrency in this case)
Newbie questions:
What is bitcoin?
An overview of bitcoin (also known as BTC and XBT), can be seen in the abstract below, taken from the bitcoin white paper.
So, basically some unknown person/group called Satoshi Nakamoto created bitcoin with the intention of creating a low fee, decentralised, borderless, censorship resistant peer to peer cash system.
Why the price volatility?
With an asset that is as young as bitcoin is, it's bound to be volatile. The market cap is relatively small compared to most other assets and as a result, the price can be influenced greatly by the news, rumours, and even a big whale (someone with a lot of money, not an animal).
What the f*#k is mining?
Mining is the process of validating transactions on the blockchain. When validating a block of transactions, the miner gets rewarded with new bitcoins. This reward halves roughly every four years to decrease the supply steadily, creating a deflationary currency (the cap is 21,000,000 coins).
You don't need a hard hat, bitcoin uses a PoW mining protocol which means that to validate transactions you have to burn electricity. This creates a blockchain which is resistant to service abuse as it would require such an insane amount of computing power to falsify a block that it simply won't happen.
How do I buy bitcoin?
Carefully.
You can buy bitcoin from someone online/in person, using a site such as localbitcoins.com or use a bitcoin ATM to keep yourself anonymous.
However, mostly you'll be buying them on an exchange, these generally require AML and KYC checks (verify your ID). In the UK there are several options of exchange and each has their own merits.
- Coinbase - This is the biggest exchange and probably the most easy way to buy bitcoin, however, they are slacking when it comes to implementing new technology and have been filling up the mempool as a result (making bitcoin transactions cost more). They also have a pretty hefty withdrawal fee (this can be avoided by using their sister company, GDAX, to withdraw the funds). When I signed up with Coinbase (for the second time.. it's a long story) it took about two - three days to verify my ID, hence why I went looking elsewhere to purchase my bitcoin. Coinbase's current fees can be found here and GDAX's can be found here. Something to bear in mind is that your bitcoin will be insured on coinbase. I don't know of anywhere else that provides this peace of mind
- BitPanda - BitPanda is who I've used most recently as they are super simple, and have implemented both SegWit and batched transactions. This is a big bonus for me as they are clearly wanting to keep on top of all of the innovations we're seeing in bitcoin. I was very impressed with the process of verifying my ID, as I created my account I simply went on a video call with someone who could verify it, there and then. It must have taken about 10 minutes before I was able to purchase bitcoin. BitPanda's fees are included on the price you see, as stated here, so no sneaky hidden charges with these guys
- CoinFloor - These are who I made my initial purchase with, they used to provide an instant buy option which they scraped recently, as well as introducing a trading fee and increasing the minimum deposit from £1000 to £2500. Ouch. I had a very plesant experience using CoinFloor but be sure to check out their current fees here
- BitFlyer - This is a huge Japanese exchange that has recently launched in Europe. I haven't had any interactions with this exchange but I believe it is a good one, I will be checking them out as soon as I have some more money... Currently trading is FREE, check out their fees here
Storing bitcoin:
There are several storage options, ultimately the most secure option is to store them offline on a hardware wallet, such as the Ledger Nano S. Storing them on an exchange is risky as they are a honey pot for hackers and are prone to hacking. With the exception to Coinbase, if your coins are stolen from an exchange you are unlikely to get your funds back. On top of this, if you store them offline and you own your private keys, you will also be eligible to receive all of the bitcoin forks in the future.
A few good mobile bitcoin wallets are Coinomi, mycelium and airbitz (soon to be edge).
I will probably post a bitcoin storage article soon.
How do I send bitcoin?
To send bitcoin you must have some bitcoin in a wallet, as well as the receiving address/QR code. You can either type in the address (triple check it's correct!), or scan the QR code, enter the amount of bitcoin to transfer, select the fee and send. To decide on the transaction fee, use a tool such as bitcoinfees.earn.com.
Abbreviations in the space:
- FUD - Fear, Uncertainty and Doubt (often used to refer to fake news)
- HODL - Misspelling of hold, originating from this post
- P2P - Peer to peer
- ASIC - Application Specific Integrated Chip
- KYC - Know Your Customer (regulation)
- AML - Anti Money Laundering (regulation)
- TX - Transaction
- PoW - Proof of Work
- PoS - Proof of Stake
Avoid the FUD:
There is so much FUD spreading about bitcoin. A lot of this FUD is misinformation posted before it can be confirmed.
As well as this, there are people trying to steal the bitcoin name. I'd suggest avoiding bitcoin.com, their bitcoin wallet and the bitcoin handle on Twitter as they are all associated with bitcoin cash and are confusing new users into buying bitcoin cash instead of bitcoin. Bitcoin cash is not bitcoin, if you want to buy bitcoin cash that's fine but this confusion needs to stop.
Be careful in this space and don't belive everything you read, make sure you fact check everything.
Podcasts worth checking out:
Resources:
- bitcoin.org (not .com)
- Jameson Lopp's bitcoin resources
- Bitcoin explained (simply)
Thanks for reading!
I'll be in the comments.