Bitcoin: what is it and how to get rich? This article is the ultimate guide on all things Bitcoin-related.
Bitcoin: currency of the future, or scam of the century? Discover everything you need to know about the most famous cryptocurrency: history, operation, dangers, advantages, and above all how to invest in BTC and eventually become rich (we wish you)…
Bitcoin is a digital currency created in January 2009. It is a cryptocurrency, also called virtual currency. It is a totally virtual currency.
It could be defined as an “online” version of money. It is possible to use it to buy products and services, and more and more businesses accept it.
This virtual currency was born following the real estate crisis of 2008, in a context of uncertainty and distrust of traditional monetary systems.
The concept and operation of Bitcoin are presented in a white paper written by the mysterious “Satoshi Nakamoto”, considered to be the creator of this technology and whose true identity is unknown.
This cryptocurrency offers the promise of lower transaction fees than other traditional online payment mechanisms. Its real advantage, however, is its decentralization, in contrast to currencies created by governments.
There is no physical bitcoin. This currency is entirely virtual and is based on balances kept up to date on a public register accessible to all. Bitcoin is created, distributed, traded, and stored through this decentralized ledger known as the Blockchain.
Likewise, all bitcoin transactions can be viewed transparently. These transactions are verified by a system that requires immense computing power.
Due to its meteoric popularity, Bitcoin has launched a real trend. Many other cryptocurrencies have since emerged. They are called “altcoins”. However, “BTC” remains the most important cryptocurrency in terms of capitalization.
Table Of Contents
- How does Bitcoin work?
- What are the advantages of Bitcoin?
- History of Bitcoin
- Who invented Bitcoin? Who is Satoshi Nakamoto really?
- How to earn Bitcoins?
- Invest in Bitcoins
- What is Bitcoin worth?
- Bitcoin: what are the security risks?
- When to invest in a cryptocurrency like Bitcoin?
- Companies invest in Bitcoin and push it past $50,000
- Tesla and Bitcoin: Elon Musk's troubled game
- China wants to regulate cryptocurrency, and the price of Bitcoin collapses
- Iran bans Bitcoin mining to avoid power outages in Tehran
- El Salvador, the first country to accept Bitcoin as a global currency
1. How does Bitcoin work?
To understand how Bitcoin works, it is necessary to understand the different elements on which its operation is based. Here are the key things to remember.
What is Blockchain?
Bitcoin is one of the first digital currencies to rely on peer-to-peer technology to facilitate instant payments. This currency is based on a set of computers considered “nodes”.
These computers run Bitcoin's code and store its blockchain. A blockchain can be defined as a collection of blocks. Each block represents a collection of transactions.
All computers running this blockchain have the same list of blocks and transactions and can see new bitcoin transactions populate new blocks. It is therefore impossible to deceive this system.
Transactions can be tracked in real-time by anyone, without even having to own a “node”. Transaction history can be tracked, so no one can spend bitcoins they don't have, make copies or reverse transactions.
What is Bitcoin mining?
Individuals and companies holding some of the computing power that Bitcoin relies on, and participating in this network of nodes, are referred to as 'miners'. They provide the power required to process transactions on the blockchain and are rewarded with new bitcoins and a percentage of bitcoin transaction fees.
Together, the miners form a decentralized authority overseeing the security and legitimacy of the Bitcoin network. New bitcoins are created and released to miners over time so that the total bitcoins reach 21 million. At the end of 2020, around 3 million bitcoins remain to be mined.
Concretely, bitcoin “mining” involves harnessing computing power to discover new blocks that can then be added to the blockchain. This is how new bitcoins are created.
In 2009, the discovery of a new block was rewarded with 50 new bitcoins. However, for every 210,000 blocks, this reward is halved. In 2020, it amounts to 6.25 bitcoins.
Different types of hardware can be used to mine Bitcoin. Some, however, allow you to obtain greater rewards. This is the case with chips of the ASIC type (Application-Specific Integrated Circuits) or GPUs (Graphic Processing Units).
A bitcoin can be divided up to eight decimal places, which is 100 millionths of a bitcoin. The smallest unit is called Satoshi. In the future, if necessary, it might be possible to split bitcoins even further.
What is a Bitcoin wallet?
Bitcoin “token” balances are maintained using public and private keys. These keys look like long series of numbers and letters linked by encryption algorithms used to create them.
A public key is similar to a bank account number and serves as an address to which bitcoins can be sent. The private key is similar to a credit card code and is used to authorize bitcoin transfers.
Owners of Bitcoin can store this cryptocurrency in virtual wallets. These devices facilitate trading and allow users to keep track of their assets.
It is very easy to send bitcoins to a wallet. Simply choose the amount, and enter the address of the wallet in question. Similarly, you can provide your wallet address to someone to send you bitcoins.
How Cryptocurrency ACTUALLY works.
2. What are the advantages of Bitcoin?
Bitcoin has several advantages. First of all, it allows confidential and secure transactions, with relatively low fees. Transactions contain no personal information, eliminating the risk of data leakage or identity theft.
The other strong point of Bitcoin is its immense growth potential. Many investors hold on to their bitcoins betting that their value will skyrocket when cryptocurrency is truly democratized.
This virtual and decentralized currency also makes it possible to avoid traditional intermediaries such as banks and governments. A significant advantage, in a context of economic crisis and recession...
3. History of Bitcoin
Introduced in 2008, the inventor of bitcoin remains a bit of a mystery. A document titled Bitcoin: A Peer-to-Peer Electronic Cash System was published on October 31, 2008, on a crypto mailing list, with Satoshi Nakamoto as the author. However, the latter never revealed any personal information about himself, and his identity was never confirmed. This led many netizens to believe it was a pseudonym for one or more creators.
The first use of bitcoin was in 2009 when Nakamoto minted the first blockchain block. Laszlo Hanyecz, a programmer, made the first business transaction using cryptocurrency when he bought two Papa John's pizzas for 10,000 bitcoins.
Since then, bitcoin has been traded hundreds of millions of times. However, the first major transactions took place on the black market. As a result, regulations have emerged in several countries. In China, the People's Bank initiated the most significant regulation by taking three distinct steps:
In December 2013, it banned financial institutions from using bitcoin.
It then issued a complete ban on the use of bitcoin in September 2017.
From June 2021, it applied a crackdown on major cryptocurrency miners.
After each of these measures, the price of bitcoin was halved. But despite these regulations, the price of bitcoin is on an upward curve thanks to institutions that authorize the use of cryptocurrencies.
4. Who invented Bitcoin? Who is Satoshi Nakamoto really?
No one really knows who invented Bitcoin. The name Satoshi Nakamoto is only a pseudonym, and could just as easily designate an individual as a large group at the origin of this cryptocurrency...
Many individuals have claimed to be the creators of Bitcoin and claimed to be the real Satoshi Nakamoto. However, to date, there is no concrete evidence…
Several reasons may explain Satoshi Nakamoto's desire to preserve his anonymity. The most obvious seems to be to protect your privacy. Bitcoin has become a truly global phenomenon, and its inventor would no doubt be harassed by the media and the public if he exposed himself in broad daylight.
In addition, Bitcoin poses a threat to current banking and monetary systems. If this cryptocurrency manages to outperform national currencies, governments would risk taking legal action against its creator.
Moreover, by now, this person has probably become extremely rich thanks to Bitcoin. In 2009, 32,489 blocks were mined with a reward rate of 50 BTC per block for a total of 1,624,500 BTC. At the end of 2020, this sum is equivalent to more than 30 billion dollars.
Logically, Satoshi was one of the first bitcoin miners and probably owns most of the bitcoins in circulation. By revealing his identity, he would therefore risk being targeted by criminals around the world.
Before Nakamoto, Hashcash was invented in 1997 by Adam Back. Among the precursors of BTC, we can also mention Wei Dai's b-money, Nick Szabo's bit gold, and Hal Finney's Reusable Proof of Work. The original Bitcoin white paper also cites Hashcash and b-money among other research works from various disciplines…
5. How to earn Bitcoins?
Let's get to the heart of the matter, and what is perhaps the main reason for your presence on this page: how to earn bitcoins. There are several methods.
Become a Bitcoin miner
As stated earlier, the main technique for earning bitcoins is mining. To become a miner, you have to invest in powerful computers to create a “rig”.
By using the power of these machines to discover and add new blocks to the Bitcoin blockchain, it is possible to receive a percentage of the new bitcoins generated over time. However, it is becoming increasingly difficult to get rich from bitcoin mining.
It now takes several years to hope to earn a bitcoin through mining. In addition, it can cost more in electricity than it brings in…
Receive Bitcoins as payment
Bitcoins can now be accepted as payment for many products and services. Thus, the owner of a shop or a store can offer his customers to pay in bitcoins.
All you need to do is invest in a terminal, or simply display a QR code linked to the wallet address. Likewise, online businesses can add this option in addition to traditional payment methods such as credit cards or PayPal.
Receive your salary in Bitcoins
For their part, freelancers and freelancers can be paid in bitcoins for their work. For example, if they offer an online service, all they need to do is add their bitcoin wallet address as a payment method on their website.
In addition, there are several platforms that specialize in bitcoin-paying jobs. These include Cryptogrind, Coinality, Jobs4Bitcoins, and BitGigs. Similarly, Bitwage offers to convert a percentage of salary into bitcoins.
Buy Bitcoins with real money
It is now very easy to buy bitcoins for real money. All you have to do is create an account on an exchange platform like Coinbase, and deposit money in euros or any other currency into your wallet.
You can then exchange this money for Bitcoin or another cryptocurrency offered on the platform. It is then possible to send these bitcoins to the recipient of your choice or resell them for real money. In some countries, there are also Bitcoin "dispensers", compatible with bank cards.
6. Invest in Bitcoins
Bitcoin can be used as a means of payment for many products and services. However, to get rich, it is also possible to invest in this cryptocurrency, the value of which changes over time.
Many people are convinced that this digital currency represents the future of the financial system. It makes it easier, faster, and cheaper to pay and therefore has many advantages over traditional currencies.
The exchange rates are also often attractive. Many choose to trade their savings in euros or dollars, or even commodities like gold, for bitcoins.
Unfortunately, the capital gains realized thanks to Bitcoin are now taxed by the tax authorities, as in many countries. Despite this, investing in BTC can still bring in a lot of money.
As with any asset, the principle of investing is to buy bitcoins when the price is low and sell them when the price is high. The most common way to buy bitcoins is through an “exchange” type platform. Coinbase, Kraken, and eToro are some examples of popular exchange platforms.
However, keep in mind that Bitcoin is a high-risk investment. Many people have gone broke thinking of making a fortune because the price of BTC can rise dramatically and collapse overnight…
There is also a risk that governments will seek to regulate or even ban the use and purchase of bitcoins. This is already the case in some countries. For good reason, this cryptocurrency is commonly used for money laundering, tax evasion, or illegal transactions, particularly via the Dark Web.
7. What is Bitcoin worth?
The value of Bitcoin follows the law of supply and demand. Some people covet this currency because it allows you to make purchases anonymously. Others see it as a way of emancipating themselves from the banks.
Either way, for many it is a resource to invest in to get rich. This is the reason why the price of this cryptocurrency is extremely volatile.
While its price had reached almost €17,000 in December 2017, it fell back to less than €3,000 in 2018. Nevertheless, in December 2020, Bitcoin reached an all-time high of over €18,000.
8. Bitcoin: what are the security risks?
To hijack the blockchain system, a cybercriminal would need to manage 51% of the computing power that Bitcoin relies on alone. However, in 2020, Bitcoin is made up of more than 50,000 nodes. It is therefore very unlikely that a cyberattack on this blockchain will ever bear fruit.
The real “risk” with bitcoin is losing your wallet or inadvertently deleting it. You will then lose all your fortune irretrievably...
Also, some websites offering to store bitcoins have defrauded their users and stolen their assets. It is therefore important to only use trusted platforms.
Exchanges can also be targeted by hackers. In 2014, the Japanese exchange Mt. Gox was hacked, and the equivalent of millions of dollars in bitcoins was stolen.
9. When to invest in a cryptocurrency like Bitcoin?
Investing in a cryptocurrency like Bitcoin is different from any other type of investment. It is a more complex universe, which requires caution and a taste for risk. However, there is no perfect time to start trading. All you need is the right tools and basic skills.
With which crypto to invest?
Bitcoin is the pioneer of virtual currencies. It thus remains the most popular and most beginners consider it the best crypto so far. Which explains why newcomers to trading choose it to start with. Apart from Bitcoin, you can also choose other cryptocurrencies like Ethereum and Dogecoin.
You can consult the comparison of cryptocurrencies before being sure of your choice. In addition to the comparison, do not hesitate to consult the opinions of other traders. Indeed, these currencies of the future are very volatile. It is then difficult to predict their trend, even in a very short period of time.
And for the bank?
The choice of bank is also crucial. You must buy cryptocurrency before investing. However, offering a fast service is not one of the strengths of traditional banks. This is why it is necessary to resort to a neobank or an online bank.
Although the two are not quite similar, their services can be accessed without traveling. If the neobank is accessible from your smartphone, online banking requires a computer to manage your transactions.
Choose the right brokers
The number of online brokers or brokers continues to increase. Some are in order, others are not. Before starting trading, it is necessary to be certain that the brokers are in a legal situation. You should also compare the different fees (brokerage fees, withdrawal fees, etc.) and the payment system.
Also, make sure that your broker has good technical support, and that he can give you training in this area in order to offer the maximum security for your assets. Various sites offer broker comparisons.
Mistakes to avoid
In addition, certain errors are to be avoided. So, you have to adopt the right strategy. In order not to get lost, you have to see the different indicators such as the RSI or Relative Strength Index and the MACD (Moving Average Convergence Divergence).
In addition, losses must be limited, by adopting stop-loss and take-profit, in order to guarantee maximum security. Finally, it is advisable to take advantage of the demo account. This is a test account where you will use fake money to trade. Such a simulation is more than useful before attacking the real world, it allows you to become familiar with the tools and the different techniques.
10. Companies invest in Bitcoin and push it past $50,000.
On February 16, 2021, Bitcoin surpassed $50,000 in value for the first time in its history. This record is particularly linked to the investment of several large companies that have decided to convert their cash into cryptocurrency.
Thus, the previous week, Tesla announced that it had purchased the equivalent of $1.5 billion in Bitcoin. Going forward, the automaker also plans to accept BTC as payment for its vehicles. What strongly increases the interest in this cryptocurrency.
At the same time, Mastercard has also decided to open its network to several cryptocurrencies, including Bitcoin. Other companies like PayPal and BNY Mellon have also shown their support for this new kind of currency.
Now, speculators are wondering about the possibility of other companies backing Bitcoin. This simple assumption is enough to blow up the theoretical value of BTC.
However, some firms are more reluctant. For example, Uber admitted he was hesitant to accept Bitcoin as payment for his rides before giving up.
Either way, Bitcoin's new boom looks quite different from 2017's. At the time, the price rise was driven by speculation in the retail sector. From now on, it is linked to demand from institutional investors.
According to Michael Saylor, CEO of software provider MicroStrategy, “ Bitcoin is much more stable than it was three years ago .” Moreover, MicroStrategy and Square caused a lot of ink to flow in 2020 by transforming part of their cash into Bitcoin. This new trend should continue in 2021.
11. Tesla and Bitcoin: Elon Musk's troubled game.
In February 2021, Tesla created a surprise by announcing an investment in Bitcoin to the tune of $1.5 billion. Subsequently, in March 2021, the electric vehicle manufacturer also decided to accept payments in BTC for its cars.
Several companies had already invested in Bitcoin in the past, such as Square Inc or MicroStrategy. However, Tesla is the first S&P 500 company to bet on the cryptocurrency.
This was a priori a positive signal, and the price of Bitcoin reached a new high following Tesla's announcement. The digital currency reached an unprecedented unit value of 44,000 dollars, or more than 13.40% compared to the previous day. This investment directly contributed to the company's quarterly profits, thanks to the rise of Bitcoin over the following months.
Unfortunately, shortly after, Elon Musk suddenly turned his jacket around. On May 12, 2021, barely two months after starting to accept payments in BTC, the CEO of Tesla decided to backtrack on the pretext of the harmful impact of cryptocurrency mining on the environment.
Remember that the creation of new Bitcoins involves the use of computers to solve complex mathematical problems. This process consumes a lot of electricity, and the consumption increases rapidly as the number of Bitcoins increases. Bitcoin transactions, too, consume fossil fuels like coal.
This unexpected setback caused a sharp drop in the value of Bitcoin. Within minutes, the price of the cryptocurrency dropped by several thousand dollars. The next day, its value had decreased by 12%.
In parallel, Elon Musk assured us that Tesla had not sold Bitcoin. Yet journalist Liam Denning expressed his doubts in this regard.
According to him, it is very likely that the entrepreneur did not resist the temptation to sell some of the Bitcoin purchased by Tesla to deliver encouraging results to shareholders.
At the same time, the firm has had to deal with declines in its vehicle sales in China. A decline linked to rumors, since denied, of brake failure in Tesla cars. We can think that Elon Musk wanted to compensate for this loss by selling BTC.
According to the BBC, the American company would have already sold 10% of its Bitcoins in April 2021 to improve its first-quarter income to the tune of $101 million. In the eyes of experts, it is possible that Tesla has sold even more BTC over the past few weeks…
If Elon Musk's decisions may seem risky, some simply suspect him of manipulating the market in his favor. On June 5, 2021, Anonymous posted a three-minute video addressed to the CEO.
According to the notorious hacker group, Elon Musk's " game " with cryptocurrency markets has " destroyed lives ". In their eyes, the entrepreneur's tweets show " a clear contempt for the middle-class worker ". Faced with these accusations and promises of revenge, Elon Musk simply replied " don't kill what you hate, save what you love "...
On Sunday, June 13, 2021, Elon Musk changed his tune again. While Sygnia CEO Madga Wierzycka accused him of using his influence to manipulate the market, the entrepreneur defended himself on Twitter.
According to him, Tesla will accept Bitcoin payments again “ when it is confirmed that at least 50% clean energy is used by miners with a positive future trend ”. Immediately, the price of Bitcoin rose again by 10%, proving once again the impact of Elon Musk and Tesla on the price of BTC…
12. China wants to regulate cryptocurrency, the price of Bitcoin collapses.
At the end of May 2021, Chinese Vice Premier Liu He and the State Council announced that stricter regulation of cryptocurrencies was necessary to protect the financial system.
According to the official statement, it is essential to “tighten the screws” around Bitcoin drilling and trading, and firmly prevent the transmission of individual risks to the social field.
Following this announcement, the price of Bitcoin fell by 8.5%. The move only added to a long slide in BTC that has plagued several months, with more than 40% in value lost from its peak.
Other cryptocurrencies have also been impacted by the Chinese resolution. Ethereum and Dogecoin lost 11% in value.
The day before, the United States had also announced its intention to be stricter against people using Bitcoin for “illegal activities including tax evasion”. The transfer of cryptocurrency over $10,000 will need to be reported to the Treasury Department, just like cash.
However, the Chinese reluctance towards cryptos is related to other factors. China is the country with the most Bitcoin farms, and mining operations use a lot of energy.
As in all countries, authorities also fear that Bitcoin and other crypto are being used illicitly. According to the statement, " it is necessary to tighten the screws on illegal financial activities and to punish them severely to maintain the smooth functioning of the stock market, debt, and international exchanges ".
In order to avoid the drifts of cryptocurrencies, the Chinese central bank was one of the first in the world to develop its own cryptocurrency based on the yuan.
13. Iran bans Bitcoin mining to avoid power outages in Tehran.
Bitcoin mining can make a lot of money, but it also consumes a lot of energy. A lot of energy, to the point of plunging entire cities into darkness. This is exactly what happened in Iran, where the capital Tehran and other major cities have faced daily power outages over the past few months. Some hospitals have even been unable to keep their Covid-19 vaccines cool.
While authorities initially blamed natural gas shortages and drought, cryptocurrency drilling is now being singled out. According to the government, the energy spent on BTC is mainly consumed by illegal or unlicensed miners. These would account for 85% of the drilling done in Iran, hosting only 50 officially recognized farms using a total of 209 megawatts.
At the end of May 2021, Iranian President Hassan Rouhani, therefore, banned the mining of Bitcoin and other cryptos, at least until September 22, 2021. Arrests have taken place, and even legal Bitcoin farms have suffered temporary power cuts.
Iran is one of the top countries for Bitcoin drilling, and alone accounts for 4.5% of the mining carried out in the world between January and April 2021. In comparison, China accounts for 70% of the drilling.
The success of BTC in Iran is linked to the fact that the country allows its users to pay for imports of goods. A solution to circumvent the American sanctions imposed by the Trump administration ...
14. El Salvador, the first country to accept Bitcoin as a global currency.
While Bitcoin is strongly criticized by several countries including China, others support them. El Salvador wants to make this cryptocurrency a legal means of payment, just like the US dollar. A world first.
President Nayib Bukele sent his bill to Congress on Wednesday, June 9, 2021. Congress then voted in favor of the bill with an overwhelming majority at 62 out of 84 votes.
According to the official text, “ the objective of this law is to regulate Bitcoin as a legal currency of exchange ”. The Central American country wants to remove the limits that are holding BTC back.
From now on, prices in stores can be displayed in Bitcoin. Taxes can be paid with this cryptocurrency. Trading in Bitcoin will not be subject to profit taxes.
One of the main criticisms of Bitcoin is its high volatility in value, capable of reaching highs before crashing lower than earth. For many experts, this is what prevents it from being a reliable currency. It is not yet known how El Salvador intends to remedy this problem.
The exchange rate with the US dollar will be "determined freely by the market", according to the proposed law. In addition, the text plans to train the population and put in place mechanisms so that they can access Bitcoin transactions.
Unlike the recent Elon Musk escapades or Chinese decisions, this announcement had a positive impact on the price of Bitcoin. This increased by 5% shortly after the vote.
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