Bitcoin

Updated: 08/03/2018 by Computer Hope

BitcoinA Bitcoin (BTC) is a digital currency, used on the Internet for various services. This currency utilizes an open-source, peer-to-peer Internet protocol for tracking of transactions involving Bitcoin transfers.

Smartphones, websites, and applications can send and receive Bitcoins through the use of digital wallets, using ECDSA digital signatures to verify the transactions. The Bitcoin is not a standard currency, meaning it has no central bank to manage it like a standard currency does (i.e., the Federal Reserve for U.S. currency). For this reason, the equivalent dollar value can fluctuate greatly, resulting in criticism that it is not suited for use in the worldwide economy.

Bitcoin history

Bitcoin was first introduced by Satoshi Nakamoto on January 3, 2009. However, Nakamoto is not the developer's real name and their real identity is unknown, despite many different investigations. As of August 2018, the equivalent dollar market cap value of the Bitcoin is over $130 billion U.S dollars.

How is Bitcoin created?

Bitcoins are created through Bitcoin mining which is software that runs on a computer that solves complex math problems. If a computer can solve the math problem, it is rewarded a certain number of Bitcoins in exchange for its work. In addition to mining, the computers mining are also approving Bitcoin transactions, and because there are so many computers mining, it helps improve and secure the Bitcoin network.

In the early days of Bitcoin mining, anyone could use a standard computer processor to help solve the Bitcoin math problems. Today, people use video card GPUs, custom-made computers, and ASICs to solve the math problems more efficiently.

With so many advancements and the number of people participating in Bitcoin mining today, it's increasingly difficult for a single person to be rewarded Bitcoins. To help make it more viable for an individual to participate in Bitcoin mining multiple people can work together in pooled mining to mine Bitcoin. If successful, each person in the pool is rewarded with a fraction of the Bitcoin based on how much work he/she contributed.

One example of how you could easily participate in Bitcoin mining is by going to Bitminter.com, create an account, and download and install the Java program on your computer. Once installed and running your computer will be mining Bitcoin. Keep in mind that as your computer is mining Bitcoin, it uses a lot of your computers processing power will be so slow you will not be able to do anything else. However, you can leave the program running while you're away from your computer and when you want to use the computer close the program.

Note: For a standard computer, it's very likely that the electricity cost of running the computer is going to outweigh how much money you're getting from Bitcoin mining and therefore is not a good method of making money. Also, keep in mind that all Bitcoin mining software is very intensive and constant and therefore will cause your computer to generate a lot of heat. If your computer does not have enough cooling, it can cause your computer to overheat.

How do I buy and sell Bitcoin?

To buy and sell Bitcoin or any cryptocurrency you must first have a digital wallet that can store the digital currency, many of these wallets will also allow you to buy and sell cryptos.

Note: There are many stories of people making a lot of real-life money through buying and selling cryptocurrency and although many of these stories are true they are also not typical or guaranteed. As with all investing there are many risks involved, and there are just as many stories of people who lost money or broke even. We recommend you only buy (invest) what you can afford to lose.

Today, one of the most popular and easiest methods for most people buying and selling Bitcoin and other cryptocurrencies like Bitcoin Cash, Ethereum, and Litecoin is to use Coinbase. Coinbase is a digital wallet you can run on your phone and computer to buy, sell, and store cryptocurrency. If you want to buy, sell, or store other cryptocurrencies you need to install a wallet capable of storing that particular cryptocurrency.

Tip: If you're interested in using CoinBase as your digital wallet, use our Coinbase link to signup with Coinbase and you and Computer Hope will get $10 of free Bitcoin when you buy or sell your first $100 of digital currency.

To buy Bitcoin you can use the wallet to transfer real-life money from your bank account, credit card (if supported), wire transfer, or from another cryptocurrency. When buying Bitcoin, you'll likely be purchasing a fraction of a Bitcoin because as of this writing one Bitcoin is worth $7,597.02. So, if you were to spend $100, you'd be buying 0.01265759 BTC.

Selling a Bitcoin is just as easy. If you're buying Bitcoin as an investment, you can wait until the value of your Bitcoin reaches a point you're happy (or not happy) with and sell the Bitcoin. When selling Bitcoin, you are selling it at the current value of Bitcoin. For example, if you bought one Bitcoin on January 1, 2017 (worth $900.86) and sold at its peak on December 10, 2017 (worth $19,065.71) you would have made over $18,000. However, if you bought Bitcoin at its peak, you would have lost a lot of money. Since it's peak Bitcoin has lost more than half of its value and has not returned.

Note: Keep in mind that each time you buy, sell, or make a purchase with Bitcoin that there are transaction fees. Also, realize as you're storing any digital currency that it will fluctuate in value every day and typically fluctuate faster than any other type of investment. So, every hour your wallet value will gain or lose money. There may also be times where your wallet will gain/lose value for weeks or months at a time.

How to buy something using Bitcoin

Once you have a digital wallet with Bitcoin or any other digital currency, you may want to buy something using that money. To purchase a good or service, you need to find someone who is capable of making a Bitcoin transaction. If supported, the store or person displays a Bitcoin logo or mentions they accept Bitcoin as a form of payment, much like a store who accepts credit cards.

Computer Hope Bitcoin wallet QR CodeIf a person or place accepts Bitcoin, they will have a QR code that can be scanned to load their digital wallet code. For example, the picture shown here is the QR code of our digital wallet code (1G8FbYFctKFZ6oAH6tHLsAqxg9jkWPk5TP). Using your phone and wallet, you can scan the code to enter the digital wallet of where you want to send money. Once the wallet code is grabbed, you enter the amount of money you want to send and hit the send button. The transaction will take a little time to be sent and verified.

If you're buying a good or service, once someone verifies the transaction is in their wallet, they will give you the good or service.

Why doesn't everyone accept Bitcoin?

Many businesses don't like how much the value of digital currency, like Bitcoin, can fluctuate. For example, if a good was sold for $10.00 worth of Bitcoin and, when converted back to a real-life currency it was only worth $9.50, the business would have lost .50 on the purchase. Of course, it's also possible to fluctuate up where the business would make additional money on a purchase. However, it's an uncertainty that most businesses cannot deal with or wait to happen.

Also, the time to make a digital currency transaction is longer than a credit card transaction, especially if you're frequently needing to convert the digital currency to a real-life currency.

Finally, the technical hurdle for most businesses owners and their customers is often too difficult for them to participate in Bitcoin and other digital currencies.

Where can I spend Bitcoin?

Bitcoin can be used to purchase Internet services including Reddit, WordPress, and Mega. Web hosting and domain name management can be purchased from some companies using the Bitcoin, as well. More recently, several gambling businesses, like SatoshiDice, have offered services where users can gamble using the Bitcoin. In the past, users could even purchase illegal drugs from a black market website called Silk Road.

Blockchain, Business terms, Currency, Digital Signature, Internet terms, Micropayments, Peer-to-peer, Ukash