Bitcoin is present everywhere today. The rapid rise in the price of Bitcoin and other cryptocurrencies have attracted the attention of investors, companies and the media.
More and more people become familiar with cryptocurrency and invest in Bitcoin.
But what is Bitcoin actually about? Why is Bitcoin virtually every day in every financial news program? And what can invest in Bitcoin or other digital currency mean to you?
In this article you will learn everything you need to know about Bitcoin and you will get some useful tips if you decide to trade in Bitcoins.
Content of this article
- What is Bitcoin?
- How does Bitcoin work?
- Bitcoin mining: cost-effective?
- The benefits of Bitcoin
- How you can use Bitcoin to make money
- Tip # 1: Bitcoin Faucet (Bitcoin tap)
- Tip # 2: Take a safe wallet
- Tip # 3: Beware of unknown altcoins
- Tip # 4: Spread your chances at least in cryptocurrency
- Tip # 5: Sell high and buy low
- Tip # 6: Follow the market cap (not the price of a crypto coin)
- Tip: # 7: Only invest money that you can miss
- Tip # 8: Search for the added value
- Tip # 9: Realize that the highlight has not yet been reached
- Bitcoin course
- Looking for a simple working and reliable broker?
- Investing in Bitcoin
- My last but most important tip: trade through a reliable broker
What is Bitcoin?
If you are new to Bitcoin then it is useful to know more about Bitcoin itself.
To begin with, Bitcoin is a digital currency that enables people to both send and receive money via the internet.
In fact Bitcoin is a currency such as the euro or dollar, only via the internet. It is the largest digital currency that exists.
The idea, originating from Satoshi Nakamoto , dates back to 2008 and has been in operation since 2009.
Satoshi Nakamoto is the name used by the unknown person (or by several people) who designed the digital currency Bitcoin. The designer remains anonymous until today.
A white paper from 2008, written by the pseudonym Satoshi Nakamoto, introduced the Bitcoin concept.
The design principle behind Bitcoin is:
A peer-to-peer electronic money system that allows online payments to be sent directly from one party to another without the consent of a third party (government or banks).
Before the creation of Bitcoin there was no electronic money. We have stored digital money in the database of a financial institution, such as a bank or Paypal.
However, certain rules must be followed in order to open and use an account and whose permission is required to move your own money.
Bitcoin is a new form of digital currency that can be used without the need for a central bank.
How does Bitcoin work?
Bitcoin is an implementation of cryptocurrency.
So it is based on cryptography, which means that transactions are encrypted in a code that gets longer or changes.
Bitcoin uses peer-to-peer connections and is therefore decentralized, which means that there is no central server through which all information flows.
Bitcoin users use the blockchain instead of such a server. The blockchain is a worldwide database in which transactions are stored, but also all new Bitcoins are kept.
The blockchain is thus able to monitor how much Bitcoins someone has at any given moment.
Transactions with bitcoins require one or more inputs that must be signed. Bitcoins can also have multiple outputs, which is equivalent to multiple payments.
Should the final quantity of bitcoins that are transferred be greater than the intended quantity, the surplus will be returned to the original owner.
Bitcoin also uses virtual wallets. In such a wallet the information is stored that is needed to transfer bitcoins. In fact, it is storage space for bitcoins, hence the name 'wallet', or wallet.
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Bitcoin mining: cost-effective?
Some people would like to invest their money in Bitcoin. Others make minuses to obtain their Bitcoins and earn money.
Bitcoins are not printed like banknotes by appointed printers.
Creating Bitcoins works slightly differently.
New Bitcoins come 'on the market' by solving complex mathematical calculations, via extremely powerful computers, and adding the resulting data - the blocks - to the blockchain.
Since this does not come through a central hub, but the transactions have to be verified, this gives individuals the opportunity to participate in this process. Especially when they are paid for it.
People who do this are also called 'miners'. Every time a so-called 'miner' adds a block to the blockchain, it receives a compensation for this.
Ultimately, a maximum of 21 million Bitcoins can be made - in contrast to traditional currencies such as the dollar and euro, which can be endlessly printed.
This is a method where you have to be very careful with what you do, because setting up this system may cost you some money. That is because the network has become larger and more complicated.
This means that the algorithms have also become more difficult, which in turn means that you will often have to acquire specialized, expensive hardware.
For example, you can compete with, for example, the power consumption that a normal PC needs to efficiently reduce. You can also form a team with other people to form a mining pool and thus combine the forces of the computers.
Mining is very competitive and the volatility (mobility of the course) makes it difficult to make money with mines. This is only profitable if it is done on a large scale. You will not be able to save it with two old computers.
Good mining equipment costs money and does not forget the electricity. The annual settlement will still have to be paid, whether the price of Bitcoin is high or not.
The total energy consumption of Bitcoin mines in 2017 already cost more electricity than 159 countries in a year together.
The benefits of Bitcoin
Bitcoin and crypto currencies generally have many advantages over traditional payment methods.
For the most part, the key word here is privacy . Bitcoins are encrypted codes, and no real-world identity needs to be tied to them.
User actions are not recorded, only those of addresses. These addresses consist of a public key and a private key.
The public key is a kind of ID number. That is just known.
But the private key is more than a password: only the owner knows it.
Unlike traditional means of payment, such as cash and credit cards, cryptocurrencies are digital and encrypted; you can not be swindled in a transaction like with outdated payment systems, and it is much harder to steal cryptocurrency compared to a wallet full of money.
Both keys are needed to complete a transaction. It is therefore virtually impossible to enter a transaction as a third party. Bitcoins are therefore virtually impossible to steal.
But perhaps the most important thing is that you are the owner of your own Bitcoins!
There is no other digital money system where your account is not held by someone else. If, for example, the bank or Paypal - for whatever reason - decides to block your account, you can in theory whistle to your money.
With cryptocurrency you own the private key and the corresponding public key with your crypto address on it. No one can take that away from you, unless you lose the private key yourself or have your cryptocurrency managed by an online wallet that loses it for you.
How you can use Bitcoin to make money
Well, now that you are (again) up-to-speed with what Bitcoin is and what the advantages are, you can focus on trading in Bitcoins and making money.
Tip # 1: Bitcoin Faucet (Bitcoin tap)
A bitcoin crane is a reward system in which you can earn a small number of bitcoins by completing a captcha or simple assignment.
Bitcoin cranes come either in the form of a website, or in the form of an app. Setting up a crane can give you a reasonable income depending on how often it is used.
Now it may sound contradictory - you earn money by giving away bitcoins - but earning it is not in buying and selling bitcoins. It lies in the revenue from advertisements and advertisements that you place on your website or app.
The more advertising your crane receives, the greater the revenue. Through Google Adsense you can already put 3 spaces for ads on your site, and beyond that you can have more places if you want.
You can also earn some money through so-called referral links . For example: Not everyone has a bitcoin wallet.
Then you can put a link under the box in which they have to enter their bitcoin address in which you refer people to sites where they can buy bitcoins and thus build their wallets.
From those sites you ask a small fee for each person who is forwarded.
Then there is lastly something that is a faucet rotator , a kind of wheel of cranes. This simply means that bitcoin cranes also refer their customers to other cranes, to then get a small fee from the other crane per person who has been referred.
Tip # 2: Take a safe wallet
nano ledger s
Specific digital wallets (wallets) are used to store Bitcoin.
Here you can keep them safe until you are ready to issue them or exchange them for alternative coins (altcoins).
Wallets vary in platforms on which they can be used and also vary in degree of security. So it is important to choose a wallet that is reliable, cheap and safe.
For beginners, I recommend starting with a simple wallet that makes transfers easy. These wallets can be downloaded for free.
However, costs may apply to currency exchange when transferring crypto coins to other accounts. It is these small fees (fees) that these types of wallets earn on.
It is therefore advisable to move all coins in one go instead of two or three times. This saves you considerably on the transaction costs / fees.
A bitcoin wallet always consists of two keys.
The key you probably already know is the public key. This can be seen as your public account number, which other people can also send bitcoins to.
The other part of your bitcoin wallet is the private key. With this you can send bitcoins to other people.
The combination of the recipient's public key and your private key is what makes a cryptocurrency transaction possible.
It is important to know that if someone else has the private key of your wallet, they can withdraw your money. That is why it is extremely important that you do not store your private key in a public place.
Hardware wallet
In general, a hardware wallet is the safest form of a digital wallet to store your Bitcoins. But unlike a software wallet, they cost money.
Examples of hardware wallets are:
Ledger NANO S
TREZOR
Keepkey
You can compare them with a secure USB stick that connects to your computer and serves as an extra form of security. This means that you can not get Bitcoins or altcoins out of your wallet without owning the physical device and knowing the password.
Software wallet
A software portfolio is based on computer software. Software portfolios are available in three different formats: desktop, smartphone and online. Some can store multiple cryptocurrencies, others are designed to store only one.
Examples of software wallets are:
Bitoin Core
Exodus
Electrum
Paper wallets
Paper wallet
Another option is to use a paper wallet. These are private keys that are printed on a sheet of paper. If they are created and printed with a secure, offline computer, paper wallets are a safe option.
The biggest problem with a paper wallet is that if you lose the paper or are destroyed, you will not be able to access your Bitcoins.
It is therefore wise to keep a paper wallet safe in a fire-proof room that is moisture-free (think of a safe).
Tip # 3: Beware of unknown altcoins
Bitcoin is not the only crypto coin in which investments are made. In recent years new coins have mushroomed.
Altcoins are the alternative coins that can be purchased on the crypto market.
Examples of altcoins that have conquered their spot on the crypto market:
Litecoin
Ethereum
Cardano
DASH
Ripple
Etc.
There are many more unknown altcoins. Dozens of altcoins try to take a position on the market. Unfortunately, some of them are also called ' scamcoins '.
Scamcoins are brought onto the market with promising talk and technological possibilities.
But in fact they only have the right to exist by the grace of the developers and a small group of stakeholders, with the aim of making these people rich as soon as possible.
Do not use these coins. Do your research before you invest in an altcoin. See which team is behind it and with whom they have entered into collaborations.
You can compare the unrestrained growth of altcoins with the historic internet bubble (dotcom bubble) that took place between 1997 and 2001.
This was a period of extreme growth in the use of internet by both companies and consumers.
Golden mountains were promised. It could not be crazier. Until eventually the bubble collapsed and 80% of the companies did not survive the storm. Many people lost their savings.
This will probably also happen with 80% of the current altcoins. Not all coins add something.
This is because most investors do not focus sufficiently on the real added value that is created during a hype.
Everyone is afraid to miss something (FOMO, Fear or Missing Out) and oppresses his fear through greed. Greed makes you blind to financial risks and possible dangers.
The 80/20 rule, or the Pareto principle , is one of the few universal principles that applies to all areas of life, including in the crypto market.
For investors, it is crucial that they recognize the (future) added value of a crypto before they invest in it.
Tip # 4: Spread your chances at least in cryptocurrency
As you know by now, Bitcoin is not the only crypto coin. For example, there is Litecoin, which is also called crypto silver (if you would compare Bitcoin with gold).
Because of all those different altcoins you would think that it is wise to spread your opportunities as much as possible. But I do not recommend this. Especially as a novice investor it is not always clear whether you have to deal with a scamcoin.
Do not spread your money over too many coins and keep it with the famous cryptocoins like Bitcoin, Ethereum and Litecoin. I know, this is pretty unpopular advice.
Everywhere on the internet you read that you have to bet on multiple crypto coins. That way you would reduce the risk of loss. This also applies to virtually every form of investing.
Let me explain that. If you have less than 5000 euros to spend, stay at maximum one, two or three coins (eg 60/20/20). This is better than stopping 5% of your money in 20 different altcoins.
And make sure you do not suffer from FOMO when you see that a crypto coin is doing well that you do not own. Why? It is the law of decreasing returns (law of diminishing returns) and the law of Murphy.
So do not constantly switch with coins that are doing well at that moment. It will be expensive.
Tip # 5: Sell high and buy low
The basic concept of investing in value is to buy crypto coins when they get a relapse.
In particular cryptocurrency is experiencing extreme declines and peaks every week. The price fluctuates in waves.
It is therefore wise to buy Bitcoin when it has dropped significantly. That means not buying when the price is rising and nobody wants to miss the boat.
Although it seems very simple, this advice is sometimes difficult to implement, because nobody knows well when a certain price peak has been reached.
Tip # 6: Follow the market cap (not the price of a crypto coin)
Do not just look at the price of Bitcoin or another crypto coin.
It is a common misconception that the price of a currency is just as important as market capitalization when it comes to investing. You often see this with starting investors.
If you are looking for short-term trading in cryptocurrencies, the market capitalization is more important than the price of a crypto coin. For long-term investors (HODLers) who want to keep their coins for a long time, the market value is not necessarily important.
The market value of a crypto coin with potential should increase over time.
This means that it is still possible that an expensive crypto coin such as Bitcoin can be doubled in price within a year.
Tip: # 7: Only invest money that you can miss
This investment advice is as old as the road to Rome, yet many people make this fatal mistake.
Outsiders and companies carefully follow the future of cryptocurrency. But really mainstream is not yet cryptocurrency.
Fortunately, there are enough arguments to think of saying that the total market value is getting bigger and bigger. In theory, there is still potential to earn enough money.
But do you have to take out a second mortgage for it? Of course not!
Only invest savings that you can miss. Do not invest everything you have. Experiment with a small amount and wait at least a quarter to see where the price goes.
If people want to invest in cryptocurrency, they often find Bitcoin too expensive. But you do not have to buy a whole Bitcoin to participate!
Many starting investors do not know this, but you can also purchase a part. For example, for 250 or 500 euros you can also buy a bit of a Bitcoin.
Another tip is to get your stake out as soon as possible when you make a profit with crypto coins. This does a lot with your peace of mind and you will probably also get a better sleep.
Tip # 8: Search for the added value
I see people around me as obsessed crypto coins as if their lives depended on it.
If I then ask them why they have opted for a particular crypto coin, they must remain guilty of the answer. You will not be able to save when you hit the unknown altcoins on the gamble.
Only buying cryptocurrency in the hope that they will yield returns is not sensible. Consider which problem can solve a particular crypto coin. What is the added value for the future? Which team of developers is behind?
The larger the problem that is solved, the greater the potential value (and hence price) in the future.
Tip # 9: Realize that the highlight has not yet been reached
A large part of the world's population is still unknown with cryptocurrency.
In other words, an absolute minority is currently trading in Bitcoins.
And that share will continue to grow. More and more people become familiar with Bitcoins and altcoins.
And this is also reflected in the market capitalization.
Market capitalization is a way to rank the relative size of a cryptocurrency. It is calculated by multiplying the price by the circulation stock.
Marktkapitalisatue = price X circulation stock.
In December 2016, the total market value of Bitcoin was approximately $ 15 billion.
In December 2017 this was more than 280 billion dollars, and a market value of 2 trillion dollars is expected by the end of 2018.
Research from Statista, one of the largest statistical portals in the world, shows that only 24% of Americans are familiar with Bitcoin.
The number of Americans actually using Bitcoin is 2%, while 25% think it will be used in the future.
The crypto market has thus far not reached its peak. This of course does not mean that making money with Bitcoin is very easy and that there are no risks.
Like all other investments, there is also a high risk involved because you can never predict exactly what the market will do.
So in summary: it costs a little upfront and carries quite a lot of risk, but there is a good chance that you can get a good return in the future.
Bitcoin course
The current Bitcoin price is currently:
Bitcoin (BTC)
6,757.62 EUR (7.94%)
1,00000000 BTC
RANK
1 MARKET CAP
€ 114.39 B VOLUME (24H)
€ 5.69 B
Powered by CoinMarketCap
Looking for a simple working and reliable broker?
I have been working with Plus500 for more than a year with which you can deposit via iDEAL. This company offers very low trauma costs to your actions are processed quickly.
Take a quick look at the promotion page and start trading with Plus500.
Investing in Bitcoin
So do you have to trade in Bitcoin? The answer to this is not that simple. It is not only a question of acting, but also a matter of daring to invest.
The crypto market is extremely volatile, or the price of Bitcoin and altcoins change strongly.
Not only investing in the value of bitcoins, but also working as a venture capital provider for starter companies that trade in or with bitcoins, can generate a good income. The big disadvantage is that, especially when you want to provide venture capital, it takes a lot of money beforehand to work properly.
So this is a method that requires some capital in advance, but can also generate a lot of money.
Therefore, you should read in carefully before investing in cryptocurrency:
What are the advantages and disadvantages of a particular currency?
Are the developers actively involved?
What does the cryptocommunity say about it?
What are the future possibilities?
Is there a white paper online?
If we look at the traditional market cycle, we have not reached the point of euphoria:
fear of greed
Bitcoin may not be the safest investment opportunity, but the return on Bitcoin does not currently equal any other investment.
There is also an increasing number of cryptocurrencies, which are now only considered by companies and governments.
That is why I believe that we are currently in the optimistic phase of the market cycle. That makes investing in Bitcoin and altcoins more than worth considering!
PS What is your opinion about investing in Bitcoin and altcoins? How do you see the future of cryptocurrency? Leave a comment below.
My last but most important tip: trade through a reliable broker
I have been trading with Plus500 for several years . This company is simple to use and uses low costs.
I am not the only one who thinks this company is good and reliable, because there are already millions who use this system.
In this market you see large differences in the price on a daily and weekly basis, today the price could still rise significantly.
That is why I am very pleased that Plus500 will implement your actions in the short term. After giving the assignment you can be confident that it will be executed quickly.
You can also deposit with iDEAL at Plus500.
Finally, I want to make you aware of the following required notifications:
Plus500 is a CFD service
Your capital risks trading (trade wise)
Plus500 is suitable for experienced traders and not for beginners