The Crypto-currency trading has not been given much attention until 2008, the time when Satoshi Nakamoto, an alias used by Bitcoin creators, introduced it to the world.
The purpose of Bitcoin trading is to free people from the restrictions set by the government regarding the monetary system. The concept is based on the “crypto-anarchy” ideology promoted by Cypherpunks in the 90’s that strive for a system of commerce free from the state. That plan to decentralize currency came into fruition. Bitcoin trading is now a global financial scheme generating millions of dollars per annum.
When the digital currency recently rose to fame due to its price spike, many asked: “What is a Bitcoin?” In truth, there are tons of things you should learn about it. Here’s all about Bitcoin trading.
What Is a Bitcoin?
To trade using the digital currency, you must know more about it. From its nature itself, Bitcoin is a currency made and kept electronically. This means that its processing is also done virtually.
What is more amazing about it is that no one actually controls it. Bitcoin is very different from euros, dollars and all other paper currencies. Normally, currencies available today are developed and printed by people. Businesses also run them worldwide. There are even systems made to manage monetary connections of various countries. But Bitcoins, run only online.
Characteristics of Bitcoins
- Bitcoin is Decentralized and Uncontrolled by Banks
Because of its convenience, many have tried using Bitcoin to buy things electronically. Although dollars or euros may also be utilized to purchase items online using a bank account or prepaid account online, people are drawn to bitcoin because it’s decentralized.
This is the characteristic that makes Bitcoin distinctive among other currencies around the world. You will not find any organization running a network of Bitcoins. This is also what makes most people feel at ease knowing that even large banks will not be able to control their money.
- No Transaction Charges
Aside from the fact that there are no banks associated with Bitcoin transaction, there are also no transaction charges. More and more merchants are even accepting the digital currency. At present, you can buy pizza and web-hosting services using Bitcoin.
- Making Bitcoins is also Regulated
In terms of limitation, miners are not allowed to create more than 21 million Bitcoins. Nonetheless, you should be reminded that Bitcoins are divided into small parts. Satoshi is the smallest amount of the digital currency, which represents a hundred millionth of a Bitcoin.
- Bitcoins are Created with Mathematics
Like other currencies, there is a basis for the creation of a Bitcoin. Basically, silver or gold has been the foundation of conventional currencies. What makes Bitcoin bizarre is because it is based on mathematics.
Bitcoins are produced by using programs that follow a numerical formula. Anyone can check the mathematical formula. Moreover, the system is also an open source creation, allowing people to verify if it is working properly.
- Setting Up a Bitcoin Address is Easy and Secure
If you are tired of going through stringent procedures simply to open a bank account, it is different with digital currency. In seconds, a Bitcoin address can be developed without charges or questions being asked. There is even no checking of your credit score.
The truth is, as a user, you can keep various Bitcoin addresses. You can be anonymous at the same time. No personal information will be attached to these addresses. However, you must be informed that whatever occurs in the Bitcoin network is being disclosed by the blockchain.
The blockchain is the equivalent of a general ledger. No matter how people can freely check how many Bitcoins are stored in your address, no one will know that it is yours.
As a user, you can make your transactions impenetrable by avoiding transmission of lots of Bitcoins through one address. Also, you can prevent utilizing the same addresses regularly
- You Can Send Real Money with Bitcoin
Do you know that you can also send money using Bitcoin? In just a matter of minutes, digital currencies will arrive regardless of the recipient’s location in the world.
What Is Bitcoin Trading?
Bitcoin trading may sound less risky compared to involving conventional currencies but there is no difference. Do you know that people spend and earn real money by trading Bitcoins? Before you try it, take some advice from Bitcoin professionals.
First, you should know how to begin the process. Despite being a digital currency, exchanging Bitcoins is very similar to trading paper currencies. In other words, you are likely buying another currency using your Bitcoins.
In terms of conventional currencies, people can buy pesos by using dollars. This implies that the economic strength of the countries, which hold the currencies, are taken into consideration. You can consider this concept as a guide.
Instead of economic status, Bitcoin value is based on your computer’s performance. In other words, it can be exchanged as a commodity. For instance, Mt. Gox is an intermediary that allows the trades of Bitcoins to U.S. dollars, and vice-versa.
There are different ways of becoming a Bitcoin market player. Before anything else, you must be reminded that you can lose a tidy sum by moving Bitcoins around the market. At the same time, you may earn a decent amount as well.
There are different ways to enter Bitcoin Trading for anyone who wants to be a part of the digital currency market. Here are some ways:
Mining. This is the answer to the questions “Where does Bitcoin come from?” and “How does it circulate in the market?” The process is also responsible for releasing new Bitcoins and adding transactions to the blockchain.
As a miner, you must solve a difficult puzzle that involves mathematical formulas and computations. Compilation of recent transactions is also involved in the procedure. If you are the first one to solve the problem, you will be able to place the next block in the digital ledger.
This gives you a reward, which is inclusive of the newly released Bitcoin and transaction fees. You should remember that Bitcoin mining is also decentralized, which is why many users are interested in using it.
If you have the appropriate hardware and internet connection to use, you can participate in the activity.
Trading. You can consider this as the riskiest step you will take. However, it is also the quickest option you have. Mt. Gox is obviously the largest and pioneering Bitcoin exchange site you can find today. They require everyone to sign up first before entering the trading site. You do not have to worry about most of the information required as anonymity is ensured. Afterwards, you must deposit funds into your account. Similar to stock exchange markets, you will wait for chances to make money. For every transaction, you will be charged.
Be aware that if it is your first-time trading, anticipate that you may lose a lot of money. If you do not have a lot of money, it is best to settle to mining first.
It is advised that you simply invest an amount of money you can afford to lose. This is due to the fact you need to buy Bitcoins. Afterwards, you will sell these at a higher value. This results in your profit. Nonetheless, when the price goes down, it will be difficult for you to sell these again.
If you sell the Bitcoins, you may have losses. However, keeping the digital currencies for long may put you at more risks of losses.
How to Get Bitcoins Other Than Mining?
There is a library of places where you can obtain Bitcoins. You simply have to know where they are. However, beware since not all sources are trustworthy. Moreover, you will not become wealthy if you will not invest or work for the digital currency.
You must remember that that earning lots of Bitcoins is not limited to clicking around a few websites. Be reminded that the options to be given are dedicated to help you have money in a way. Getting rich is a different story, which even trading may not ensure all the time.
To start your Bitcoin earning as a beginner, try the following:
- Accept Bitcoins as Payment Means. Instead of solving difficult puzzles or trading currencies in exchange of Bitcoins, you can accept Bitcoins as means of payment. This is greatly applicable if you have a small business. If you sell either services or products, Bitcoins can serve as payments accordingly.
However, you must set up a wallet first. From the name itself, it is where you will keep the digital currencies. No wallet is safe, which is why you should also learn how to secure it. This will be discussed in the latter part of this article.
Afterwards, you must display the QR-code with your Bitcoin address on your cash register. Your customer simply has to use a Bitcoin app in order to put the amount of money they will transmit as payment. The app will convert it to Bitcoins.
Alternatively, you can request for payment. You should enter the amount in Bitcoins. This will be followed by the generation of corresponding QR code.
- Use Smartphone Applications. You can use several smartphone applications to have fun while earning Bitcoins. Blockchain Game is one of the best examples of these applications. You simply need to sign up by completing two steps, requiring your e-mail address and Bitcoin address.
The payout for the game is done once every seven days. Take note that there are various advertisements popping while using the application. You simply have to understand that these are used by the application to pay for users.
You will find the game to be quite addictive, challenging, and fun all at the same time. The first level may be easy but as you pass through another level, the game will be much faster. Every ten levels will help you cash out.
- Complete Tasks on Websites. If you have a lot of time to kill, then you should try completing tasks on websites to earn Bitcoins for free. There are various websites that give you such opportunity. One good example is BitVisitor.
You will earn digital currencies by watching videos or websites via the platform. For five minutes, every page will be shown. You will consider this website since it provides payment in just approximately 60 minutes. Besides, there is no user account necessary.
All you must do is enter your Bitcoin address. Simply be reminded that the amount you can earn is limited. For every five minutes, you will get BTC 0.00001. Although it is not big, this is a good start.
What Are the Ways to Protect Your Bitcoin Wallet?
Protecting your Bitcoin wallet is synonymous of securing your digital currencies. Over the years, even data security is hard to achieve nowadays. That’s why commercial transactions are often doubted by consumers worldwide unless an impenetrable system is introduced as an assurance.
You cannot clearly say that Bitcoin is an entirely safe option. Although it has advantages in security, there are instances that prove that digital currencies can still be stolen. One proof is when 19,000 BTC were stolen, particularly handled by Bitcoin exchange’s virtual wallets.
When converted to traditional currencies, the loss is worth $5 million. One possible loophole that allows this kind of theft happens is due to the irreversible nature of Bitcoins. Higher risks are met when the people involved in a transaction are not aware of one another’s identity.
So, how can you protect your digital currencies? There are various measures that will help you understand how it is done, which include the following:
- Try Having Web-Based Wallet. If you are doubtful of your own measures in keeping your digital currencies, you should then try letting others do the work for you. This means you will let someone take control of your Bitcoins. A web-based wallet is a good choice since an organization running it uses a private key. Furthermore, the wallet is accessible regardless of your location anytime. Among commonly known online wallet sites are Strongcoin, Coinbase, and Blockchain. The first site allows private keys’ encryption prior to transmission of the digital currencies. This gives the perk of extra protection.
- Utilize a Flexible Bitcoin Client. A Bitcoin client is the best option if you want to keep your personal information private. Furthermore, this helps hide your Bitcoin address. With every transaction, the client also gives you the freedom to alter your address. Aside from that, you may use your different wallets to separate your transactions depending on their significance. According to experts, you should have a wallet with small Bitcoin amounts for daily transactions to be filled only when necessary.
- Do Not Trust All Vendors. Before you even trust a vendor, you should check if it is registered. There must be a clear picture of how they process the digital currencies. This is important for your Bitcoins will come from them.
- Encrypt Your Bitcoin Wallet. Obviously, this is one of the most reliable ways to protect your Bitcoin wallet. This does not mean you have to be an expert in programming. Instead, you have to set a very strong key of at least 16 letters. It is preferable for you to combine numbers, capital letters, and punctuation marks for your password. However, a very strong key does not guarantee utmost protection from hackers since they can use a program to log your keystrokes. Furthermore, you must remember your password for you will not have access to your coins if you forget the key.
- Use Your Computer for Transactions. There is no urgency when trading and earning Bitcoins. Therefore, you should never use another computer to make transactions. You are only making your digital currencies vulnerable. Paired with your computer is an updated online wallet software. At least, if there are problems with your software, you will be able to adapt to these immediately.
- Back Up Your Wallet. Like data, you must have a backup for your Bitcoins. In such way, you will be able to restore your coins when worst happens. Be reminded that having a backup of your addresses is not enough. The same with your existing wallets, the backups must also be encrypted with a strong password. Besides USB, you may also consider hard drives or CDs. Ensure that your backups are also updated always.
Is Bitcoin a Good Choice?
There are several reasons why you can consider digital currency or Bitcoin a good choice. Apparently, these are also the justifications why most people are trading using the new currency instead of conventional dollars.
Until now, Bitcoin is rich with characteristics, making it dissimilar to any currency. But still, there are flaws found in its creation. Prior to that, you should have insights on the overall perks of using the digital currency.
The following are among the grounds why you would also participate in the Bitcoin market in the near future:
- Fast and Low-Cost Transactions. It is undeniable that most of the transactions nowadays, though virtually processed, are associated with fees and long process. Compared to conventional methods of transmitting money, low fees are associated with transferring Bitcoins. For every transfer, the fee is less than a 25-satang coin. If you will choose the wire transmission, you can anticipate compensating for up to 1300THB at the maximum per transaction. Credit cards may cost you three to five percent of the transfer amount, which makes it costlier than Bitcoin process. Furthermore, you can expect Bitcoin transactions to be confirmed in around 60 minutes. In contrast, conventional currencies are transferred for over seven days at the maximum.
- Quick Account Setup. If you want to set up a Bitcoin account, everything will be hassle-free. Simply imagine that you do not need a proof of address, ID card, or even a passport to begin earning or trading the digital currency. At present, you can begin by simply downloading a wallet program. Afterwards, you need to generate an address. If you prefer, you can make as many as thousands of Bitcoin addresses. There is no limit on the quantity of addresses you can render.
- Payment Freedom. With the rise of Bitcoins, you can send and receive Bitcoins anywhere you are at any given time. Instead of worrying about bank holidays or crossing borders, Bitcoins give you a different level of payment freedom. Transferring money does not even need further authorizations or complicated approvals. Since the digital currency is not guided by a certain organization, you will be in full control of your Bitcoins.
- Irreversible Transactions. If you are selling products online, you have likely come across buyers who have reversed their payments after they received the items. It is a totally painful experience but it happens to almost every seller. Bitcoin will not allow you to be cheated on this way anymore. You will not be charged back by using the digital currency as a payment means. Moreover, it is 100 percent irreversible. However, this characteristic of Bitcoin gives you the requirement to send your digital money to a trusted vendor.
- High Security. As mentioned earlier, you can be in control of your transactions. Even merchants have no power to charge you with other fees without them being monitored in doing so. Before any additional payment is required, the consumer must be informed. Personal information is also optional when processing Bitcoin payments. Since your identity is secure when trading the digital currency, data theft is also prevented. To ascertain that your Bitcoins are protected, these can be encrypted and backed up.
- Transparency Is Practiced. Everyone can see transactions made across the Bitcoin network. You do not have to worry since your personal information is private even though your public address is visible. If you want to verify transactions, you simply have to check the Bitcoin blockchain.
- Merchants’ Protection. Merchants will also benefit from the fact that fraud in using Bitcoins is low since a public ledger is accessible by its users. Doing business while cheating will be quite difficult to carry out.
Are There Disadvantages in Bitcoin Trading?
If there are advantages associated with Bitcoins, for certain, there are also disadvantages. You must weigh the pros and cons of the digital currency prior to joining its exchange. Remember, you are still dealing with currency in Bitcoin trading even if you are talking about digitized money.
It is true that the perks of using Bitcoins can be very overwhelming. Nonetheless, its weak points outweigh its advantages in a way.
To start your evaluation, given below are its disadvantages that may ask you to think twice before mining or exchanging Bitcoins:
- Low Acceptance. Although Bitcoin industry is slowly growing, it is still necessary to find shops that accept it as payment means. Normally, these places are based online. The truth is, there is a very small number of Bitcoin-friendly stores today. From the given fact, you can conclude that it cannot be relied on as a general currency yet. There is even a possibility that the government will encourage shops not to accept it as digital currency for transactions. Apparently, it is a loss for them if they have no power over the currency network. Actuality, it is the purpose of Bitcoin to eliminate the federal government from meddling with its transactions, fees, and regulations.
- Fluctuating Values. You must remember that like currencies, Bitcoin’s value also changes over time. If you will compare conventional and digital currencies, you will notice that the latter have a more unstable fluctuation. Whenever users put less trust on it, you can anticipate its value to deflate largely. The same occurrence takes place when the system suffers from an error or glitch. However, stability is met whenever people use the currency. At present, the trend of utilizing the digital currency is still slow. This is a big disadvantage in terms of product refunds.
- Vulnerability Is Still Present. No matter how Bitcoin supporters claim that the digital currency is safe against fraud, it is vulnerable in one way. Primarily, the use of digital QR codes makes it less resistant to theft. By simply scanning the digital code, you can steal Bitcoins. This is also a flaw in terms of keeping the holders of Bitcoins unknown. Additionally, Bitcoin wallets can be lost, particularly when data corruption or hard drive failure occurs. If you are a wealthy Bitcoin investor that does not practice care, you will have large losses in just seconds without a recovery.
- No Guarantee of Valuation. Until now, users are not provided an assurance of Bitcoin valuation. This is due to the lack of central authority for the network. In case the merchants supporting it decided to leave the use of the digital currency, Bitcoin valuation will drop tremendously. This shows that decentralization can either be an advantage or disadvantage for the users.
- Unidentified Technical Loopholes. Since it is a new system, its loopholes are yet to be revealed. There is a chance that these flaws will be discovered when more people use it. Nonetheless, this could result in great wealth for the exploiter and eventually, end up with the network’s destruction.
From the facts provided above, you can conclude that mining or trading Bitcoins is like currency market gambling. There are advantages and pitfalls at the same time. It is all about your decision to take a risk to earn more.
The given Bitcoin information also shows that no currency is perfect. Since Bitcoin is new and young, it is understandable that it is undergoing development. In order for you to succeed with it, you must understand more of it.
Simply weigh the pros and cons prior to making a decision. The above-mentioned insights will relatively serve as your guide if you are thinking of venturing into Bitcoin Trading.