The Three Point Checklist Before Getting into Bitcoin

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The Three Point Checklist Before Getting into Bitcoin

In the recent weeks, Bitcoin has become a hot commodity. In late 2020, the value of one bitcoin exceeded USD 10 000, two weeks later USD 20 000. If you had bought bitcoin a year ago it would have cost you 21 times less than now.

The enormous growth of this flagship digital currency is due to several factors. The strongest one is the changing perception of bitcoin; A currency considered a few years back a kid’s toy is now a regular investment opportunity. The growing demand drives the price of bitcoin up. People who a year ago didn’t even know that such a currency existed are now keen to get it. Just, for example, in December 2020, about 180 000 Czech citizens searched bitcoin on Google and for this small country, it’s a lot.

Crypto Mining does no longer pay off

To become the owner of bitcoin you can use several ways, to get it described in our previous articles. The main process of creating bitcoins is mining. Today, bitcoin mining is a business for large corporations and organisations with thousands of miners. The mining of blockchains is increasingly demanding for computing capacities requiring hundreds thousand to millions spent on hardware and power. There are some countries in the world where bitcoin mining is a loss-making business even with suitable equipment.

Side by side with powerful players

The question whether investing in bitcoin pays off is being answered by large multinationals through their actions. Tesla, the world’s leading maker of electronic cars, is pumping gallons of dollars in bitcoin. After closing down the Silk Road (a network used for illicit trafficking of drugs and other commodities), FBI has become one of the biggest bitcoin holders with 144 000 bitcoins.

In December 2020, the bitcoin rush escalated after bitcoin’s entering a “real” stock exchange. Despite of some voices warning that this bubble may burst as quickly as it emerged, the vast majority of investors hopes that the boom will continue. So far, there are no indications for bitcoin’s soon collapse.

Main method how to get bitcoin: Buying

Trust, but test: Sale of bitcoins is offered by hundreds of entities, of which only a minority is trustworthy. The huge demand for digital currencies as we can see lures various shady characters and crooks parasiting from the gold rush.

Be cautious when considering your future trading partner. Read the security protocols at the websites and servers as well as reviews written by well-known investors. Conduct a thorough investigation. The validity of “Time is money” applies now more than ever.

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Buying bitcoin, step by step

The first step of the buying process is registration. Simply enter username, password, and email. The next step is usually the verification of your account by clicking on the e-mail link, making the first deposit or having a video chat with an operator making sure that you are a physical person.

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Payment s are usually carried out by bank transfer, but for example, CoinBase offers purchases by payment card.

For example, we will talk about the Czech Republic. Some organizations in a few major cities, such as Prague, Brno, Ostrava and Karlovy Vary operate special bitcoin ATMs, allowing purchases of crypto in cash. If you buy a large amount (typically from USD 1 000 above) the operator will require checking your identity.

Be prepared to pay some fee…

As of 18 December 2020, one bitcoin was traded at around USD 19 000. Early in January 2020, the price fell back to USD 13 200.

Exchanges with renowned brokers are carried out in the same way as with crypto exchanges. The sale/buy rates differ by tens of percent. Given the price of one bitcoin, this represents in absolute figures like dozens of dollars (plus transaction fee). With CoinMate the difference sometimes is merely a few dollars.

…and don’t forget about crypto wallet

Wallets are used for keeping digital currencies in a safe place. The wallet is a piece of software generating addresses – hash keys i.e. unique series of letters and digits used for sending or receiving amounts of money. Each hash key can only work in cooperation with the wallet’s private key. This measure prevents stealing of your money when transferred.

However, there are other risks that may deprive you of your bitcoins. While the transfer technology is nearly perfect one mustn’t forget about the human factor. Countless cases have been reported of a third party stealing bitcoin wallets. The cases demonstrate how dangerous it is to keep wallets in a cloud unencrypted.

Don’t use a password when buying a bitcoin wallet. Most importantly, don’t forget to back your wallet up. A stolen phone or dysfunctional harddisc have been behind numerous huge crypto thefts. Ideally, you should keep a hard copy backup (to access the wallet by downloading a QR code) or in a bitcoin deposit, which we are going to explore next time.

Author

More about the author J. Pro

Unlike Stephen (the other author) I have been thinking mainly about online business lately. I wasn’t very successfull with dropshipping on Amazon and other ways of making money online, and I’d only earn a few hundreds of dollars in years. But then binary options caught my attention with it’s simplicity. Now I’m glad it did because it really is worth it. More posts by this author

Bitcoin Core: Bitcoin protection and mining tool

In 2020 market capitalization of all cryptocurrencies exceeded USD 790 billion. This is more than the annual budget of the world’s second most populated country, India. No wonder that digital currencies attract attention, experts argue about the future development, huge corporations analyze the revenue potential and various sorts of hackers and ordinary thieves make attempts to steal the currencies from their holders.

The world’s leading cryptocurrency and the first one under the spotlight, bitcoin reached its high in December 2020 when it was traded at the largest exchange for USD 20 000. Today it’s still a valuable investment commodity with the safety issue not yet resolved.

According to experts, the value of a blockchain will surely grow. Resource: bitcoin.com

Growing demand for encrypted wallets

To keep bitcoin safe from the hands of all thieves is a job for bitcoin wallets, encrypted applications generating pairs of cryptographic keys. One of the keys is a public address used for transactions. This is an address you tell people wishing to send you some bitcoins. The second key is a password which allows you accessing, converting or selling the stored bitcoins.

The main disadvantage of most of the wallets is their dependence on operators, typically crypto exchanges and traders. The credibility of these third parties has been undermined by several scandals in which up to hundreds of thousand bitcoins were stolen.

Bitcoin Core, the official bitcoin wallet developed in 2009, the same year in which bitcoin was born, provides efficient protection against theft. Bitcoin Core in its current shape is a result of a collective effort of hundreds of developers.

BC as a theft-proof box

Bitcoin Core secures your coins at multiple levels. First, each transaction is tested at several levels, secondly, BC is protected against external attacks, thirdly BC helps as a protection against tempering by software programmers.

One of the weapons is a limited number of transactions per second. Cryptographic tasks in which miners are using powerful hardware cost a lot. Thanks to the enormous growth of transactions in the recent year a transfer transaction taking 30 minutes and costing a few dollars is no exception. The more users, the higher the costs. By the way, Litecoin is addressing this issue and, in our opinion, its growth potential is huge.

A typical simple bitcoin core wallet.

Why to use Bitcoin Core

BC controls and manages the blockchain, a core structure used for executing transactions and keeping bitcoins. In parallel, Bitcoin Core verifies the validity of individual transfers through a series of complex tasks. Each confirmation requires great computing power. People doing this work (called “mining”) on their computers are rewarded in the form of new bitcoins.

Bitcoin Core is nearly a perfect protection. To have your own Bitcoin Core wallet is an important thing. It can protect you in the case of fork (i.e. split of the original currency into two). When stored in a third party application it may happen that the third party denies you access to the blockchain and you will lose all your coins. Some people may argue that this is not happening. Don’t get confused; the opposite is true. The year 2020 was rich in such events.

Not all that shines is gold

Nothing is absolutely perfect and Bitcoin Core is no exception. One of the biggest flaws is that Bitcoin Core doesn’t allow trading. Simply because it has no safe protection for this.

The power consumed by mining represents even a bigger problem. During the verification process, the software is checking each transaction down to the origination of the crypto. The number of bitcoins i.e. the number of data that must be downloaded continuously increases. In March 2020 it was 6GB, whereas in early 2020 nearly 150 GB. To download bitcoin takes several hours, sometimes even a few days. Close to perfect protection is compromised by huge computing consumption, which is an issue some other wallets try to tackle (we will soon publish an article about them).

Places to buy bitcoin

If you had purchased one bitcoin on 18 July 2020 you would have paid for it USD 50 000. If you had sold the same bitcoin one month later, you would have received USD 95 000, almost a double. However, if you had decided to sell it after 14 December 2020, you would have gained USD 350 000! One way how to make money on bitcoin is to buy and wait until the price grows and then sell.

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Places to trade Bitcoin

Some Forex brokers such as Bitcoin Plus500 or IQ Option allow trading bitcoin. This type of trading gives you an advantage in using the leverage. Maximum leverage currently possible is 1:30. What does it mean?

Using a leverage means to buy multiples i.e. buy more than what you can afford. Does the money in your pocket allow you to buy 0.1 (10%) BTC but you want more? Use leverage and buy the whole bitcoin. The whole bitcoin will cost you one-tenth of its price. If the price grows your profit will be the same as if you had invested the whole bitcoin!

Example: One bitcoin costs USD 100 000 and your leverage is set at 1:10. You have USD 10 000 on your account. What you can do is open a long position (speculating for growth) with the value of one bitcoin. If the price reaches USD 120 000 your trading balance will amount to USD 10 000 plus USD 20 000. The total profit will be USD 30 000.

The dark side of using a leverage is that if the price goes down your loss will be much bigger than without the leverage. A ten percent price decline would eventually deplete your account.

More details about Bitcoin

Author

More about the author J. Pro

Unlike Stephen (the other author) I have been thinking mainly about online business lately. I wasn’t very successfull with dropshipping on Amazon and other ways of making money online, and I’d only earn a few hundreds of dollars in years. But then binary options caught my attention with it’s simplicity. Now I’m glad it did because it really is worth it. More posts by this author

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    2nd place! Good choice!

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