Bitcoin (capitalized) is an independent digital payment system based on what began as open source software and ended up revolutionizing the way we think about money forever.
The currency used in this payment system is also called a bitcoin (not capitalized), and it is decentralized, meaning that there is no central administration that administers or controls the currency in any way.
Bitcoin is based on the peer-to-peer model, making it government independent. Furthermore, since there is no one controlling organ, or a company associated with the currency, the government can’t really shut it down.
That being said, some governments (like the Chinese) have prohibited the use of the currency for the purchase of real life goods, as well as their use by financial structures. Still, most of the world is OK with bitcoins and even though some people have their concerns, the obtainment, spreading and trading of bitcoins is legal in most of the world.
The creation and trading of bitcoins is controlled by something called a “block chain”. The block chain is something like a public ledger where every member of the network has a copy and all members update their ledgers whenever a transaction occurs.
The whole concept is based on this ledger and this is what makes the idea so reliable and secure – since it’s not controlled by one single person, the likelihood of fraud or someone adding non-existent funds to their balance is minute.
Every block in the chain is a combination of different pending transactions that are processed from the network through mathematical operations.
The bitcoin difficulty of these operations depends on how fast the current operations are conducted. The aimed speed for solving one block on the network, on average, is 10 minutes. The difficulty is increased every two weeks in order to make sure that this timing is kept. The operations confirming the transactions in the block are called mining.
Mining is the main source of bitcoins in the network. Every solved block is worth 25 bitcoins but the reward goes to the one who solves it first. Keep in mind that everything explained thus far in the article is an oversimplification (putting it mildly) as the whole Bitcoin idea is insanely complicated.
Making a profit is based on the total amount of bitcoins mined, as well as the bitcoin price minus the money spent on bitcoin mining hardware, power (as the process is really power-hungry) and other costs.
One of the main aspects of the profit is the hash rate speed of the computations (measured in hashes per second).
A hash is the result of solving the block. The more hashes per second your hardware can dish out, the faster (on average) it will solve blocks.
The current hash rate of the whole network exceeds 1 petahash per second. The more of those your mining rig can make, the bigger profit you will probably generate, but there are other factors.
It’s generally impossible to predict your profits beforehand since there are many mathematical variables in the equation.
The use of bitcoin mining calculator is needed if you want to have a general idea of how long it might take you to generate a block and translate the mathematical values into an understandable profit.
The Bitcoin calc websites use different algorithms and take many variables into account so they can give you an estimated value of your profit (or potential profit).
Keep in mind that the values are estimated– many people use a bitcoin calculator before investing into a bitcoin hardware and when the actual numbers differ from what they imagine (and the numbers will be different), they start to wonder why that is and blame the system.
The truth is that a bitcoin profit calculator cannot possibly tell you 100% what your profit will be because it uses perfect values – this means that all potential problems like power outages and down times are out of the equation.
Furthermore, if you’re a part of a pool, results may also differ. So even though bitcoin calculators are a great way of getting an estimate, keep in mind that the actual numbers will probably be different.
Mining is the process of solving blocks in the block-chain that is the backbone of the whole Bitcoin network. Without mining, the network wouldn’t be what it is today, nor would it be able to properly function.
Mining requires a lot of intense calculations to be conducted by computer hardware in order to determine the validity of the transactions in a certain block. Every block comes with its own mathematical problem that has to be solved and the prize goes to the miner (or group of miners) who manage to solve it first.
In the beginning, bitcoin mining hardware was fairly simple as people used their normal computers and CPUs in order to make the computations.
However, the bitcoin difficulty (the difficulty of the problems that have to be solved) increases in order to make sure that the blocks aren’t being solved too quickly (an average speed for solving a block is about 10 minutes and this is how it’s supposed to stay).
Thus, the adequacy of the CPU (central processing unit) wasn’t enough at one point, but people discovered that GPUs (graphics processing unit) are much better suited for the job of the bitcoin miner.
In particular, AMD GPUs were considered superior to NVidia, and HD5870 series was considered one of the most cost-effective. Bitcoin mining rig setups were based around multiple GPUs. Since they consume a lot of power, they heat up quite quickly and many of them weren’t held in normal PC cases, but beer cases and other make-shift casings.
The main idea behind bitcoin mining hardware is that it’s dedicated the mining software non-stop without any downtimes. This means that the required power is quite significant and a good PSU (power supply unit) is needed.
Good cooling is also required. All of this worked for a time, but was soon not enough – too much power was consumed for too little result, and the heating problems couldn’t be solved easily. Hence the bitcoin mining hardware setup had to evolve.
Enter ASIC bitcoin miner! Bitcoin mining rig ASIC (application specific integrated chips) hit the market once the bitcoin mining hardware GPU was no longer enough. The complexity of the problem called for a dedicated software that was designed specifically for this purpose.
The investment in a specialized bitcoin mining hardware setup is worth it for some people but it’s too great a risk for others – it’s up to you to figure out which group you fall into.
The cost of the hardware is taken into consideration when using a bitcoin mining calculator. The upside to the specialized hardware is that you can compare bitcoin mining rig specs directly. For more information, you can check a bitcoin mining rig wiki.
When you mine bitcoins, you may or may not be the first one to solve the block, which means that your profits are not guaranteed.
It’s getting progressively harder for individual miners, especially if their hardware is a bit weaker to compete with people who have a more powerful hardware. Keep in mind that everything here is based on chance, or average values.
The fact that your hardware can generate a smaller number of hashes (the piece of code needed to consider a block solved and move to the next one) doesn’t mean that it won’t do it in a few minutes even if the average estimate is days, or even weeks. It simply means that the likelihood for that is much smaller.
In order to get around all of this, some miners have decided to create something called a bitcoin mining pool.
The mining pool sums up the efforts of more than one miner in order to achieve results faster, and then the profit is split based on the computational power you’ve provided to the pool. This means that you will not be getting all the profit from the solved block, but you will be getting paid more consistently.
When you think about bitcoin mining pool vs solo, you need to consider what would you prefer – a more risky approach where you get more, but less frequently, or a safer approach where you get less but more frequently. It is worth to mention that most miners consider the latter option better, which is why most of them work in pools.
It’s important to properly research a pool before joining them. Some pools require a fee to work with them, while others don’t. There are different rules you will have to comply with, and the payouts are also different.
If you want to be a solo bitcoin miner, that’s fine, but if you want to join a pool it’s a good idea to do your homework well before that.
In most cases you will have to maintain a proper connection to the bitcoin mining pool server so make sure that you have a good internet service provider before you begin.
If you have frequent connectivity issues, then it’s a bad idea to start before improving that aspect.
Also make sure that your hardware runs well, otherwise you may have problems along the way. All in all, it’s a good idea to join a pool but do your research beforehand.
How to get bitcoins for free has been the line of thought many people have pursued, especially given the challenge that comes with the primary method of bitcoins acquisition, mining.
The good news is, you don’t have to work out the long algorithms using the mining software, since you can now earn bitcoins in a number of ways for free, or almost for free.
Today, anyone can easily earn bitcoins free by visiting some websites like bitvisitor.
The concept here is similar to that of watching your favorite movie in a given Tv Channel, but while doing so, you get exposed to chosen advertisement for various products from different companies.
By simply taking time to visit these websites, you might be required to click on various advertisements, for which you will earn yourselves a few coins.
Of course, the more you visit these sites, the more coins you receive. It should be noted, that of the only cost that you have to incur is your time. You will need to spend some considerable amount of time going from one site to another, and clicking through ads you might not necessarily be interested with.
On the other hand, some websites try to regulate the mode in which you earn your bitcoins free, by limiting the number of coins you earn in a day. They may require that you visit their sites on a daily basis and within specified time frames, to earn a predefined amount of coins. Dailybitcoins is one example of such sites.
Some other websites are renowned for their creative diversity in helping people earn bitcoins. You get a few coins for visiting their sites, but you also make more coins for reposting the advertisements on their page.
One may also be required to complete other small tasks like visiting other websites and browsing through the paying site for a defined period of time. As proof of visiting other websites, you might be required to answer a few simple questions.
Other simple tasks for which you can earn a few bitcoins for free, or even more depending on how much time is at your disposal, would include conducting surveys and of course sending your findings, creation of public bookmarks in given sites, or answering questions in sites that have forums for questions and answers, or earn bitcoins playing games.
Note: Since mining could be a bit involving for most people, earning bitcoins fast is an option that is at your doorsteps.
These options give you an ample time to interact with bitcoins and learn the basics.
This interaction and some coins for your time isn’t a bad idea at all- plus you never know- you could be in for a sweet surprise since the value of 1BTC may just shoot real high when you least expect. So keep earning the coins for free, the better options!
How to make money with bitcoin is the challenge that most investors struggle with, but it shouldn’t be much of a problem.
Just like any other currency, there are a thousand and one ways of making money, either by working for someone, or investing your earnings in a given venture.
How to earn bitcoins fast would be a matter of personal efforts and initiatives, and some luck in various industries that one chooses to venture in.
Joining a Pool
You would remember that the primary method of acquiring bitcoins is by way of mining, a long and vigorous process of solving algorithms. A successful mining process is usually rewarded with a block of coins, which are normally 50 bitcoins at any one given time.
Even with the exhaustion and great deal of time spent in this process, there is still a chance that one might not succeed from time to time.
In order to increase your chances of making more money with bitcoin, it is recommended that one joins a pool, which is essentially a group of miners, who pull their resources and abilities to solve the algorithms jointly.
The 50 coins rewarded in each block are then shared among members of the pool, using a predefined criterion. This way, you can be certain that in every attempt, you will generate bitcoins and make more money with bitcoin.
Integrate bitcoins as a payment method
With the widespread publicity about bitcoins, many businesses have co-opted bitcoins as a payment method, whether their trade is online or on a one on one basis.
It really doesn’t matter whether you are dealing in goods or services, or both – all you need to do is to identify with a provider for online bitcoins wallet, and be guided through the integration process, to the point that a logo will display on your page or shop to the effect that bitcoins are accepted.
It would do you a lot of good if you advertised your business as one that accepts bitcoins for payment in various sites and pages.
Simple Interest from Lending or fixed deposits
Making money with bitcoins should not be an uphill task. Simple interest from lending coins to people you know, or from storing them under fixed deposit account with model banks. However, care should be taken in dealing with the latter, since there are no structured insurance plans yet for bitcoins.
Other options of making money with bitcoins would include taking part in trades like gambling (a trade that may not go well with everyone), doing various assignments (like watching movies on websites or data entry for free bitcoins), or taking up regular jobs for regular payments using coins (such organizations may be few at the moment, but the income would be steady), or better still by getting tips from different persons for services offered.
The last six years have witnessed immense growth and tremendous transformation in the world of cryptocurrencies, in light of the number of faucets for bitcoins.
This can only become better in the coming days, as more and more businesses become more open to virtual currencies, and as more countries relax the tough stand they have had over virtual currencies in their rules and regulations.
Look at this Bitcoin faucet list
Various faucets tend to have different provisions.
There are those that would require you to engage in simple activities, and by doing so you would earn yourself some coins.
In some of the sites, you might need to do the many of the simple jobs to get a significant number of coins, since the payouts are usually minimal.
On the other hand, some would be a bit generous, and offer better incentives for say clicking on adverts on the sites, watching videos uploaded on their sites, simple data entry, re-tweeting advertisements, sign up for different accounts, download and install specified applications, or posting simple reviews and comments in various forums.
Here is list of various bitcoin faucet:
Daily Free BTC
Faucet of Galatorg
Free Bitcoin Faucet
MMO Club Faucet
Yet Another BTC Faucet
The Dark Side Faucet
Note: there are certain faucets that prefer to quantify number of hours spent on the site, and so they pay visitors some allowances on an hourly basis.
During a given hour, all you would need to do is to keep clicking the provided links at given intervals.
Essentially, you could be doing something more meaningful every say 4 minutes and check in on the site on the 5th minute to click again and proceed. Alternatively, you could engage in something more passive like watching your favorite movie as you get paid for that!
Opportunities to earn free bitcoins will surely come your way in a big way – do you have your bitcoin address ready?
Arbitrage is the practice of taking advantages of price differences in different places, or in this case bitcoin exchanges, to make a profit.
For example, you might buy from Exchange A at $440/bitcoin, and sell on Exchange B for $480/bitcoin. The number of bitcoin arbitrage opportunities is substantial and growing by the day. Below are a few of the things you’ll need to consider in order to participate successfully in bitcoin-currency arbitrage.
Exchange rate comparisons
First, you’ll need some way of judging which exchanges are offering opportunities for bitcoin arbitrage.
There are a number of bitcoin arbitrage charts available that display all current exchange rates for bitcoin over the various exchanges. Look for two or more exchanges with wide gaps between their prices.
Accounts with the relevant exchanges
You may need to jump through a number of hoops to get an account with some of the bitcoin exchanges, so it’s worth starting the process a couple of weeks before you want to start trading.
Some will only require identity verification if you plan to trade more than a certain amount per day. Others require identity verification for all accounts.
Funding your accounts
Most bitcoin exchanges offer a number of ways to fund your account, from walking into a store and paying cash to wire transfer and third-party accounts like EgoPay. Some of these funding options won’t be immediate.
Keep in mind, too, that successful arbitrage will involve withdrawing money from the exchange with whom you made a sale, back to your bank or third-party account, and then depositing it to the exchange where you want to buy funds. This process could take you up to two weeks.
The most common way to ameliorate the effects of this two-week delay is to use smaller amounts more often and stagger deposits, buys, sales and withdrawals. That way, you’re more likely to have the funds available to take advantage of a good opportunity when you see it.
You need to know that your trading profits won’t be obliterated by the fees charged by bitcoin exchanges and any payment middle-men (eg. EgoPay). Trading fees must be calculated for every trade beforehand, to ensure that it’s worth your while. Consider using a bitcoin arbitrage calculator, as doing these calculations manually can be a pain.
Some of the fees you should check are:
Trading fees: Most, if not all, exchanges charge a percentage per transaction, usually around 0.5%.
Deposit fees: Some exchanges will charge you a fee to fund your trading account.
Withdrawal fees: Most exchanges will charge you a fee to withdraw money.
Currency conversion: If you’ve decided to trade in a currency other than your originating currency (for example you live in Singapore but trade in USD) you’ll probably be hit with currency conversion fees somewhere along the way.
These may be overt, or a less-beneficial conversion rate than is currently offered on the forex market.
Most exchanges offer free bitcoin ‘transfer’ from one place to another. This is a bit of a misnomer, really, since the bitcoins don’t actually move; the exchange is simply accessing the bitcoins on your behalf.
The idea behind the introduction of a virtual currency was never, and has never been, to burden people with heavy costs of transaction.
The brains behind the introduction of virtual currencies, bitcoins being in the forefront, intended that this new dimension of trading be not only fast and convenient, but also cost effective by all means.
At the very least, bitcoin minimum transaction fee should be very negligible, and where possible be scrapped off the system completely.
Where do bitcoin transaction fees go?
The answer to this question should be understood in two dimensions. First and foremost, the bitcoin network has computers within the network that receives your coins, each time you set out to carry out a transaction. Whenever you choose to send bitcoins, that computer receives a small amount of the coins, usually 0.0001BTC for every 1000bytes.
This should remind you of every time you go to a post office to send a mail – for every mail you send there is always a postage stamp. Should you decide to send one file in several smaller documents separately, then you will end up paying more postage fees. Similarly, any effort to make small transactions may result in spending more transaction fees.
This is mostly because smaller transactions would end up occupying more space in the block. To regulate such factors, always visit the ‘transactions’ icon, and you will be able to view the size of each of the transaction. It would therefore translate to mean, that for reduced bitcoin transaction fees, endeavor to minimize minute transactions with very little bitcoins.
On the other hand, bitcoin mining attracts transaction fees, which usually find its way to the miners. It is important to note, that for each transaction that is carried out, these coins belong to a given block, and each block is associated with a given miner.
As a result of this relationship, all the fees related to a given transaction and a given block goes to the miner in charge. In light of this, miners strive to ensure they handle clients whose transactions would somehow attract some fees.
Whenever some coins remain in a transaction, usually they are sent back to the sender as new coins (now received), and can obviously be used again.
Note: as small as the bitcoin transaction fees may be, they are still believed to be high because the value of the currency has been on the upper side. With time, it is hoped that the fees will reduce significantly, as the value of bitcoins stabilizes.
Bitcoin usage has received a lot of attention since the currency came about in 2009.
Known for its explosive nature almost to the same degree as its anonymous usage, bitcoins continue to draw sharp criticism but equally too, a lot of approval from quite unsuspected quarters. Bitcoin mining, in and of itself, began as a very quiet move, with little known even about its founders and early promoters.
Nonetheless, today it has become a household name, with leading media houses across the globe featuring news and developments on this currency.
That notwithstanding, Parliaments around the world have risen to discuss various aspects of bitcoin uses, including most recently the house of congress in the United States of America. Today, the issue most traders are battling with is how to invest in bitcoins, and if indeed they should invest in bitcoins.
The “if” and “how” to invest in bitcoin
To begin with, it is important to point out that in the early stages of bitcoins development, and over the last five years, this currency has witnessed tremendous rise and fall.
There have been instances when the bitcoins exchange rate against the American dollar has been as low as 1BTC against $5, while in the recent weeks (2014), 1BTC has been seen to rise as high as $800! Sometimes, these fluctuations are witnessed within a single day, in the mornings quite low, and quite high in the afternoons! Of course, this is the very unpredictable part of speculation in trading.
To the high spirited, this has always been a serious moment of turning around their financial and social standing. As such, they keep monitoring the leading bitcoins exchanges and sites like Bitstamp, BTCChina, BitcoinCentral, Mt.Gox, Localbitcoins, and many others.
As a rule of the thumb, it is always advisable that in speculative kind of investments, you only put in money that you are ready to lose, just in case things do not go your way, like they surely do sometimes.
It would go without saying, that every other currency is invested in many other ways, besides exchange bureaus and the stock market, and so is bitcoins. quite a number of retailers, non-governmental organizations, friends and families have accommodated transactions involving bitcoins, and this would be a sure to trade and invest your coins.
What must remain clear to all bitcoins investors, is that the future is full of great promises, and bitcoins are here to stay. The returns for those who invest now, in small or large scale, will surely be worth the struggle.
Many people who have keep hearing about bitcoins have kept on asking, is bitcoin legal?
This is a very pertinent question for those who want to engage in buying and selling using this currency, and for those who wish to involve themselves in major investments using bitcoins.
For this and many more reasons, you definitely would not want to pull your resources in a venture whose legality is not well defined, at least within the borders of your country.
It would suffice to say, for now, that over the last half a decade since inception of virtual currencies, this sudden change of direction in money matters has been received and denied almost in equal measure, from one country to another.
To those open minded, they seem to appreciate the simple fact that technology has done us more good than harm, and that it is time we spared our pockets the trouble of carrying notes and coins in whichever form.
Supporters of cryptocurrencies seem to enjoy anonymity, and do not see why people should bother with what you do with your money, when, with whom, and where, and perhaps rightly so.
On the other hand, this aspect of anonymity in using cryptocurrencies has been met with claims of illegal trading, financing of criminal activities, gambling, and various forms of corruption. This thinking may however not hold a lot of water, given the simple fact that this apparent evil continues to eat the society, with or without virtual currencies.
From the days of barter trading to the arrival of money and finally plastic money, these challenges have continued to befall humanity, and cannot sufficiently be blamed on bitcoins.
And whereas the activities are more of a personal choice by individuals of sound mind than influence or by law, the driving force for fear by governments emanates from this chief characteristic of bitcoins: anonymity.
How would they monitor its circulation? How would they reach people for proper taxation? How would they plan on financial expenditure as a nation? Who would cushion people against possible losses?
The legality of bitcoins by country
Countries that have little or no restrictions on use of bitcoins have been on the increase in the recent months. The fear that bitcoins cannot be regulated by governments, revenue authorities and other financial organs has been dispelled in most countries, and not so in a few others.
In 2014, countries that allow trade using bitcoins include:
In 2014, countries that restrict use of bitcoins include:
Important note: whereas some countries may have imposed bans or restrictions on the use of bitcoins, it is important that you take time to ascertain what the extent of the imposition is: is it on businesses, institutions, individuals, or foreign relations? This way, you would make an informed decision on which way to take your transactions and investments.