Created in the year 2009 the Bitcoin crypto-currency is still related to something mystical, the same as the identity of its developer (so called Satoshi Nakamoto). Nevertheless, this billing system has some benefits compared to other payment processors, which makes it look even more attractive both for an average consumer trying to adjust working processes (purchase/sales or providing services) and for an advanced user aimed at taking advantages from this founder of a peer-to-peer EPS series. Recently the topic of Bitcoin prospects has been actively discussed by Russian and overseas forum users. It makes some sense. This currency is sometimes applied in HYIPs (separate projects add it to the list of accepted currencies), therefore this publication is an adequate reaction to the corresponding trend…
Bitcoin (BTC) is a digital currency first described in a 2008 paper by pseudonymous developer Satoshi Nakamoto, who called it a peer-to-peer, electronic cash system. Bitcoin creation and transfer is based on an open sourcecryptographic protocol and is not managed by any central authority.
The Bitcoin system has made a kind of revolution in the field of virtual payment platforms and fulfilled an old dream of users willing to preserve their anonymous status online. But that is far not all peculiarities of the system under consideration: here is the list of other benefits to be mentioned:
1) a decentralized operational principle: the system is not managed by any central authority or mediators; it works independently by a peer-to-peer principle. Moreover, user’s account cannot be suspended or blocked by some third-party reasons.
2) (casually mentioned) an anonymous status of its users (unlike other EPS, no verification is required here. In order to gain access to the network for information exchange, one has to enter login and password).
3) Bitcoin reliability is ensured by a cryptographic system with an open code. All transaction logs are publicly accessible, by a personal user address (in the form of 24 symbols) that helps saving confidentiality.
4) no binding to other currencies or systems. Unlike other payment systems, Bitcoin is neutral to value of other currencies. Exchange rates are set in accordance with the balance of demand and supply. Supply is created by all participants of a peer network while demand is formed by all customers interested in BTC purchase.
5) currency value and deflation tempo. Some experts equate bitcoins with gold. That is not quite right, but may serve a good analogue in stability and currency value in a long-term aspect. The risks of bitcoin devaluation are really low as currency emission is limited till the end volume of 21 million bitcoins.
6) a Bitcoin experimental status. Despite the fact that bitcoins are gaining popularity among users, the ways of thier use are not outlined wide enough. Nevertheless, it would be incorrect to call it a Ponzi follower. Unlike pyramid in our realization, in a Bitcoin net the developers of the official client do not get interest on referral system and do not earn on hooking new miners (bitcoin creators).
7) no fixed fees in the system. All contributions are voluntary and made for the sake of faster transaction processing.
8) Bitcoin provides a free access to an international market. By exchanging bitcoins with other participants of the network, you do not depend on banks or other factors. You buy/sell/exchange whatever and whenever you want…No control, no obstacles. And your personal data are never shown in these actions.
Regardless of the way of earning bitcoins, the first thing you need is a safe for storing them. Here you have two options: to create a BTC wallet (similar to WM Keeper) or to use an online service for storing currency. Of course, it is better to keep your money in a personal web wallet. You may download the program for wallet installation from the official BitCoin website.
Now let’s get back to the main issue of this block: how do I get bitcoins? There are several options for getting this immaterial currency:
* get bitcoins in return for rendered services/ sold goods (there is a number of sites that host this type of EPS as a means of payment. Details can be found here)
* exchange your money for bitcoins on the relevant exchanges (btc-e. com, mtgox. com, etc.) or in exchange services (metabank. ru, xmlgold. eu, etc.)
* buy currency from a trusted seller
* generate bitcoins yourself (with the help of mining).
I think it is worth developing only the last point, which is the key to the whole system of Bitcoin digital money.
The process of bitcoins mining is very simple and it requires virtually no efforts. In fact, you provide your computing power in the network, for which he/she receives reward in the form of bitcoins. In order to get connected to the system and start earning, you must have proper hardware and a high-speed Internet connection:
1) a powerful video adapter (Radeon HD video adapters of 5xxx version or newer ones are of the most practical use), one computer can afford up to 8 video adapters
2) an uninterrupted Internet connection supply (at 1,000 Mhash/s performance speed about 300 MB of traffic are consumed per month if mining is carried out in a 24/7 mode)
3) a constant powering (bitcoin mining consumes much electricity. According to the calculations of foreign experts, in April 2013 the energy spent every day to generate bitcoins is enough to power about 31,000 American homes).
We will not delve deeply into all technical subtleties of mining (you can find this information on BTC official website) and will describe a general mechanism of bitcoin mining. If you have all tools and necessary conditions, the next stage assumes download of a free miner application. Coin generation requires from PC to execute some set of actions with a dedicated block of coins. I am afraid to disappoint those users, who think about getting a lot of coins at once: the volume of bitcoin mining is regulated by the network in such a way that the amount of created money resources does not exceed the end limits. This amount decreases with time in a geometrical progression. BTC mining may be carried out by a separate user (solo mode) or in a pool (together with other users of the same block).
Amount of earning on mining depends on hardware speed (you can evaluate it here) and is counted according to special income calculator similar to HYIPs. Follow this link, enter your speed and press ‘Calculate’.
Alternatives and derivatives
Surely, the outset of a new and promising currency could not help triggering the broadening of p2p currencies range. Some of widely used ones are given below:
– Litecoin (LTC) is a Bitcoin derivative, its main distinctions are use of a different algorithm called ‘scrypt’, the period of transaction confirmation is 4 times shorter, the volume of emission is 4 times larger and constitutes 84 million.
– Namecoin (NMC) is mined together with Bitcoin and used for alternative domain names.
– PPcoin (PPC) uses proof-of-stake/ proof-of-work hybrid systems, the limit of emitted coins should not exceed 2 billion.
– Freicoin (FFC) is generated by video adapters like it is in Bitcoin system and works with block chains confirmations.
Incidents of BTC theft
Though the reliability of this billing system is unquestionable, hackers have managed to find the loophole in it. Starting from 2011 several major cases of mass currency theft on exchanges and exchange offices have been recorded. There are such companies among the victims as Mt. Gox, Bitomat, MyBitcoin and new casualty – Instawallet.
Prospect and outlook
Present attitude of people to Bitcoin allows making optimistic predictions, but let’s remember that it is also a tool, which may be used for various purposes. Anonymity kindly provided by this system may become a blazed trail to underground business development or vice versa a help for Bitcoin in attaining the currency of the future status. In a word, the future of this billing network depends on culture and orientation of its users.
In conclusion I would like to wish good luck and patience to everyone joining Bitcoin or studying the way it works. In the process of a more detailed acquaintance it is advisable to visit such useful resources:
- Bitcoin official website EPS clients Bitcoin official forum Currency rates on exchanges