Why Is Everyone Talking About What Is Bitcoin
If you obtain one bitcoin a year agone you would’ve paid slightly below $1000 for it. However, if you want to sell that same bitcoin today it is worth over $17,000. Which really begs the question?
What exactly is a bitcoin? The idea is that this is a virtual currency that isn’t backed by anything physical, this is advances in technology. It’s important to know that this isn’t a stock. It is a currency. Now mind you, it’s a little bit different than something like a U.S. dollar, or a euro, or the yen, which are all backed by specific countries. But the same idea still applies here. And the maintenance reason why bitcoin is skyrocketing in value is because everyone wants to get their hands on them. So how does this all actually work?
Well, unlike something like cash, which is printed by a government and I can hold it in my hand, bitcoin relies on something called “the blockchain”. A simple way to understand this is to imagine a ledger. Every time anyone buys or sells anything related to bitcoin is recorded in this ledger called “the blockchain” and then it is copied hundreds of thousands of times every single hour across multiple computers to make sure that everyone is on the exact same page.
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What makes this interesting is the idea that because it is copied across all these different computers and because it all is public, before I say, want to go buy a bitcoin from Ken or before he tries to sell me a pizza for a whole bitcoin because he’s greedy and wants to sell me a $17,000 pizza. I can actually see exactly how many bitcoin are in his specific wallet and vice versa.
It is all totally public. So say I wanna buy that incredibly expensive and yet hopefully delicious pizza from Ken for a single bitcoin. Well, it works out from his end because he can look in my wallet and say, “Hey look, I have one bitcoin there.” I transfer it over to him, he receives it into his wallet, it’s all recorded in the blockchain and everything is totally fine. However, what happens when I decide to cheat the system and pretend that I have 50 bitcoin in my wallet when I really don’t have any at all?
Well, the blockchain actually does a really good job of protecting against this. Because that ledger and that list of transactions is copied across so many computers, it’s updated multiple times per hour. The idea that I can just say, hey I have 50 bitcoin and try to tell Ken that, he can check, and unless I can access all of the thousands of computers every few minutes and change those numbers, which is not remotely practical, Ken is still going to be able to know that instead of my 50 bitcoins I have 0.001 bitcoin.
Because that blockchain has to be double and triple and quadruple checked by computers all around the world you can actually set your own computer up to help mine bitcoin. Essentially, every single time that you help process a transaction and make sure that it’s legit you mine what is a very, very tiny amount of bitcoin. If you were lucky enough to mine bitcoin in the early days and held on to what you mined, you’d become a very, very rich person today.
However, if you wanna found out a bitcoin mining system it extremely does not build tons of sense. Bitcoin mining used to work best on PC graphics cards, which were originally meant for gaming, can actually do this kind of stuff fairly well. However, nowadays ASICs have completely destroyed that market. And ASIC is essentially a small computer that its sole purpose in life is to mine bitcoin. And when it does it does it a lot faster than your actual computer which makes it totally obsolete.
If you’re interested, now even though it’s not profitable to mine bitcoin anymore there are other types of crypto currencies that you can actually some money on if you have a pretty decent PC and then trade those into bitcoin. By far, the easiest way of getting your hands on bitcoin is to simply buy them. But this is where I have to be very, very clear, this is not a normal investment. Not only does it just go up and down, but it goes wildly up and wildly down.
So if you do decide to put money into bitcoin, please keep in mind this is a super risky investment. And that, honestly, it could all disappear at any minute. Hopefully it won’t but just be careful. Prices really are wildly variable on bitcoin right now. So last week a single bitcoin was worth about $10,000 but this week it’s worth about 17,000 and next week it could be worth 25,000 or it could be worth $2,000. There’s really know way of knowing. If all that hasn’t scared you off, then it actually isn’t that difficult to get your hands on some bitcoin.
So the first thing you’re going to need is a wallet to actually store them in. There are a lot of different ways of getting yourself a wallet. So on the very secure side you can get a hardware wallet that is going to be fully off line. But for most people the easiest way is to create an account in an exchange such as Coinbase.
The advantage with Coinbase is, is not only do they give you a wallet to store it in but you can also purchase bitcoin from them as well as some other crypto currencies such as Litecoin and Ethereum, which is the other two major ones right now.
Alright, so after this long and arduous journey we finally have our bitcoin. However, what can we actually do with it? So some stores will actually allow you to buy things with bitcoin. However, the vast majority of people are using it as more of an investment. However, it’s not all just digital.
So there are some bitcoin ATMs that you can go to in the real world, put your wallet information in and withdraw or deposit into them. I don’t know if I would really use these myself, but it’s a cool idea. Crypto currencies like bitcoin are a really interesting piece of tech, and the idea that they could be actual currency is super fascinating.
However, how could it all go wrong? The big one is absolutely price. Well yes, bitcoin has skyrocketed in value this year. There is no guarantee that is going to continue in the future. And if you’re not okay with a really, really risky thing like that, then bitcoin is probably not for you.
Even though the blockchain is secure, there’s nothing stopping someone from being able to steal your own personal bitcoin using your wallet. So just like if someone grabs your real world wallet and pulls the cash out of it, if someone has access to your bitcoin wallet they can absolutely pull your bitcoin out of it.
And this actually happened to me a few weeks ago. So I used to use this service called “nicehash” to be able to mine some crypto currencies and then turn those into bitcoin, and as I was in the middle of mining they were hacked and all of the bitcoin were stolen. Mine included. So, like anything, if you have your entire life savings under your bed, probably a bad idea. And if you keep all of your bitcoin in one place, an equally bad idea.
What is Bitcoin Wallet
Let’s talk about Bitcoin wallets. To make it simple we’ll compare it to email. If you want to receive bitcoins you’ll need unique personal address just like an email. Let’s call this address your Bitcoin address and just like your email address anyone can see it and anyone can send bitcoins to it.
Now you decide you want to access your Bitcoin address to see how many bitcoins you won’t. Well, if this were your email you’d first go to your email program like Gmail or outlook the same program exists for Bitcoin and it’s called a Bitcoin client. So you’ve opened up your Bitcoin client and not anything to login for email you’d enter your email address and password when accessing your Bitcoin program you’ll need to enter your Bitcoin address and private key.
It’s crucial that you keep the combination of your Bitcoin address and private keys safe. Exactly, like you’d guard your combination of email address and password. Some people write it down on a piece of paper and hide it away other store an encrypted file in their computer.
There are also dedicated websites that hold your private and public keys for you. Any place that these two pieces information are stored at is called a Bitcoin wallet even if you decide to memorize your Bitcoin address and private key by heart, it will mean that your brain is your Bitcoin wallet.
Today, most programs act as a Bitcoin client and a Bitcoin wallet together. For example blockchain info will store your public information private keys and allow you to send up bitcoins.
That’s it, you now know what a Bitcoin wallet is more information on Bitcoin wallets visit a non-technical blog about Bitcoin and cryptocurrency.