Cryptocurrency markets are recovering after a massive selloff that took place throughout Monday and Tuesday. Bitcoin
Bitcoin
While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world. No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology. In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Bitcoin has now a global brand because of how everyone recognizes it even if they don’t really know what it is.Added to that, Bitcoin also has the largest market cap and liquidity pool which is why many find it to be the most attractive coin out there. Bitcoin summed up· Bitcoin is a decentralized digital currency operating with no type of central control nor oversight from banks or governments, relying solely on its cryptography and peer-to-peer software.· A public ledger keeps track of all transactions by recording them. Copies are then held around the world on servers called nodes (which anyone can set up) and consensus is thus achieved on the state of the network.· Every single transaction is broadcasted publicly to the network and then shared between nodes. Miners lump these together into groups called blocks and add them permanently to the blockchain, Bitcoin’s definitive account book.· May 22 is known as the Bitcoin Pizza Day, marking the anniversary of BTC’s first official commercial transaction with a real companyHow Does Bitcoin Work? Bitcoin is a completely neutral and decentralized asset which means no one is controlling it (no bankers or oligarchs pulling strings behind the curtain), and no central entity can issue or back it. Nonetheless, Bitcoin has been recognized as legal tender in El Salvador and as it makes its way into our every day lives, other countries might soon follow suit. Bitcoin uses cryptography to assure its safety and reliability. Bitcoin transactions are verified by a process called mining which basically runs on computing power to solve mathematical puzzles. When trading Bitcoin its name is often abbreviated as BTC. What is a Blockchain Bitcoin’s system can be described as a group of computers (often called miners or nodes) which stores the Bitcoin blockchain and runs the Bitcoin code. The blockchain itself can be visualized as a string of blocks and within every block one can find immutable information, usually a collection of transactions, that are permanently recorded and which everyone can look into. Given that all of the Bitcoin network’s computers are running the exact same list of blocks, participants are assured of the process transparency because the ledger is maintained safely in this decentralized database. This makes it so that no trusted third party is necessary, and no single person is in control, rather all network participants are. As new information comes along, a freshly added block is minted and added to the blockchain while other nodes verify the whole thing. P2P Explained Bitcoin peer-to-peer (P2P) technology is meant to make instant payments easier. Bitcoin was one of the first cryptocurrencies to implement P2P and its system shifts the responsibility of processing the blockchain transactions to Bitcoin miners while giving them rewards for doing so. Bitcoin miners act as a decentralized authority which enforces the Bitcoin network’s credibility by performing these tasks and maintaining the Bitcoin ledger. The best-known case for the success of peer-to-peer BTC transactions probably lies in countries like Venezuela and El Salvador in which the younger generations have made strides in the coin’s mass adoption in their respective countries. How Does Bitcoin Make Money? Many people are still purchasing Bitcoins for the asset’s investment value rather than its capabilities of being used as a medium of exchange. As such, the asset has a speculative side which cannot be ignored due to how it correlates with its price volatility. How To Get Bitcoin? How to get into Bitcoin is a fairly easy process. Aside from the Bitcoin mining process, the asset can be exchanged for standard currencies even though it is not backed by any form of government or central entity like a bank. The Bitcoin exchange rate against the US Dollar keeps attracting investors and traders. Luckily, even the uninitiated won’t be needing a “bitcoin for dummies” guide because the asset is normally bought through a Bitcoin exchange to which you can wire money or simply pay with your credit card. Just remember to look for BTC (BTC meaning is obviously Bitcoin but there are altcoins which might try to pose as the original). Bitcoin Mining: How Are Bitcoins Created? Bitcoins are created through a process which is open for everyone to participate known as Bitcoin mining. Bitcoin mining consists of solving mathematical puzzles by means of one’s computational power, meaning that mining systems will in fact compete with one another for the asset. How Do I Start Mining Bitcoin? Even though the bitcoin digital world welcomes all with open arms, mining new bitcoins isn’t really a Bitcoin for beginners type of thing. If you want to venture into mining Bitcoins, the most obvious entry barriers are the expensive ASIC systems which you will need and the high electrical bills they will run up. ASIC stands for application-specific integrated chip. Bitcoin ASIC systems are custom bitcoin mining machines and are unquestionably one of the largest investments for bitcoin miners given that prices start at 4 figures and miners organize thousands of these into their mining pools (one ASIC system alone will potentially generate less than one single bitcoin). Network infrastructure may also be an issue as miners will need uninterrupted internet access with the least possible latency. The Bitcoin mining process has thus turned into a costly endeavor with no guaranteed results. Bitcoin Security Explained Bitcoin is a decentralized currency which is distributed in a peer-to-peer network, making it very resistant to censorship and confiscation. Bitcoin technology boasts its safety by relying on several factors such as its blockchain, the fact that it is cryptographic, decentralized, and permissionless. Being public and decentralized boosts the asset’s security as nodes verify every transaction and maintain the ledger. As such, theoretically, one would need to control over half of all the nodes to be able to manipulate it, something which albeit not impossible is certainly highly unlikely. How To Use Bitcoin Bitcoin has been growing at a steady pace and some brick-and-mortar merchants have begun to accept it as means of payment for goods and services. Online, the asset has also found its way as an accepted online payment option on pair with credit cards or Paypal. How to Buy Bitcoin Buying Bitcoin is a straightforward process. A buyer will simply need to pick a broker, opt for a paying option (wiring money, credit card, etc.), place an order, and select a safe storage option for his or her coins. Keep in mind that you should be looking for Bitcoin or BTC and not things like “Bit coin” or “bitcoin cryptocurrency” because there have been known scams and fake coins, so stick with reputable brokers. Where Can I Buy Bitcoin? Buying Bitcoin is mostly done through Bitcoin brokers, many of which will ask you for your KYC data (know your customer data: name, address, and so forth). As such, some concerns were raised over the asset’s security and user anonymity, which is why non-KYC options were also created. However, non-KYC Bitcoin buying might not be entirely legal depending on where the buyer lives. Storing your Bitcoins There are different ways of storing your Bitcoins. Regarded as the safest way of holding Bitcoin, an offline wallet (also known as cold storage or hardware wallet) is usually the go-to option for most people because of how these Bitcoin wallets are not accessible through the Internet and thus keep the asset safe offline. By not being connect to the internet, cold wallets have a much smaller risk of being compromised. However, some will prefer to store the asset in hot wallets which run on internet-connected devices (phones, computers, etc.). Investing in Bitcoin Why Is Bitcoin Valuable? Scarcity is an important element to why Bitcoin has value. Having unlimited supply will obviously not translate to being a good store of value. Bitcoin supply is capped at 21 million. Another factor to consider is that the asset is being considered by many as “freedom money” given that it cannot be inflated away, nor can it be censored or confiscated. This makes it self-evident that Bitcoins are standing above concepts like sovereignty, user’s personal preferences, creeds, and so forth. Moreover, the monetary policy some of the newer crypto projects out there can be altered at a moment’s notice, whereas Bitcoin’s monetary policy was fixed at its inception, meaning that it is a much steadier asset than any of its other digital counterparts. Can Bitcoin be converted to cash? Bitcoin can be converted to cash through third-party broker exchanges. The process requires the seller to deposit his or her Bitcoins into the exchange and, once verification that the asset was received takes place, a withdrawal request for fiat currency can be made. The money will then be wired into the sellers account and usually the broker will require you to use the same account which is connected to it (as to prevent money laundering schemes). Another less used method one can resort to are peer-to-peer selling platforms.There are at least 3 things to consider before cashing out your Bitcoin: taxes, fees, and speed Bitcoin Investing Risks Every investment comes with risk. Bitcoin, albeit being a digital asset, is no different. In fact, there are some risks you should know about when dealing with BTC. Regulatory risk Decentralization comes at a price. As Bitcoin makes great strides into our everyday lives and begins to be recognized as legal tender, it inherently becomes a competitor to fiat, or government currency. Obviously, it can (and many are certain that it already has) become a digital medium for illegal activities such as money laundering, tax evasion, and other underground market payments. This makes it clear that governments will look into either regulate, restrict, or even attempt to ban its use and/or sale. Other efforts might include actively enforcing KYC requirements to brokers or having participants reporting transactions over a certain amount. Regardless, the lack of Bitcoin regulation, especially in a uniformed manner, will certainly make some weary about its longevity and universality. Security risk As the Bitcoin mining process barriers of entry get higher and higher, it comes as no surprise that many Bitcoin holders will have acquired it by resorting to one of the many available online exchanges. As it happens with everything digital, these exchanges are also risk prone either by malware, glitches or even hackers. If a hacker takes over one’s computer and manages to get his or her hands on a private encryption key, they will be easily able to steal Bitcoin (and remember, Bitcoin transactions are permanent and there is no insurance or refunds). The exchanges themselves are honeypots due to how some of their users simply aren’t resorting to holding their Bitcoin in safer places. Insurance risk Bitcoin accounts and exchanges are usually not insured in any way. However, some exchanges have begun to provide Bitcoin insurance to its investors, namely with FDIC insurance for a portion of transactions which involve cash. Fraud risk Bitcoin encryption through private keys allows for ownership verification and transactions to be registered. However, there have been known cases of scammers attempting to sell fake Bitcoin or operating Bitcoin Ponzi schemes. Market risk Bitcoin value fluctuates and cryptocurrency volatility is a quite common occurrence in the digital crypto sphere. As such, Bitcoin price swings are to be expected. As an example of how extreme things can go, Bitcoin fell about 80% in one single day in 2014. People have brought up the subject of the Bitcoin bubble time and time again, but the truth is that the project is holding on despite having plenty of competitors. So, Is Bitcoin a Good Investment? A good investment can be defined in many ways. Bitcoin investments can greatly vary due to how some people interpret it as a speculative short-term play while others see it as a hedge against inflation or aim for long-term adoption and appreciation. It will come down to one’s own perception and assessment of the investment’s risk and reward. What Are the Issues with Bitcoin? Volatility is still and issue with Bitcoin as is the lack of true anonymity. However, the main issue with the digital asset is as its popularity keeps growing, it becomes slower and slower, cumbersome, and, more importantly, expensive to use. Transactions take a long time to be validated and fees have skyrocketed, meaning that Bitcoin is slowly walking a path in which might lead to its unviability as medium of exchange. Electricity consumption has also been a source of concern. The History: Who created Bitcoin? While some people still believe that there is someone who owns Bitcoin, the truth is that Bitcoin has had a somewhat immaculate conception in the world of finance. It is a unique historical “accident” that one might say it would probably be impossible to recreate (as many of the newer digital projects have unfortunately shown us). Anonymous Bitcoin creator Satoshi Nakamoto (who can either be an individual or group of individuals) left the project very early on and as we all know every prominent cryptocurrency creator who sticks around can be turned into a single point of failure of the project, meaning that taking credit for the project could in fact hurt it. Moreover, Bitcoins value was near zero for a long time given despite having first mover advantage. That got to fly under the radar of both the public and the regulators unlike the newer projects out there. When Was Bitcoin Created? The Bitcoin white paper was published by Satoshi Nakamoto in 2008 and the original software which runs the asset was released the following year. Bitcoin Forking History Throughout Bitcoin’s history there have been some accounts of disagreement between miners and developers with even factions being created. These led to significant splits in the community which surrounds crypto and the asset, some of which led to the point in which a “fork” had to be performed on the network. Forking happens as developers or miners believe that a significant change must be made in the network’s protocol.In this particular case, the process led to the creation of a new type of Bitcoin with a completely different name. If the new coin is set to share the previous coin’s transaction history up to the split point, the process is considered to be a “hard fork”. Bitcoin Cash (launched in August 2017), Bitcoin Gold (launched in October 2017), and Bitcoin Satoshi’s Vision (launched in November 2018) were all a result of a hard fork in Bitcoin’s network. If the fork, however, allows for the protocol to remain compatible with its previous iteration, that it is known as a “soft fork”. Bitcoin’s functionalities like SegWit are a result of soft forks in the network. What is Bitcoin Concluded While some believe Bitcoin to be the future of currency, others see it as a speculative play. Regardless of how people see Bitcoin, the decentralized aspect of the project completely revolutionized finance and the world itself much akin to how gold overcame seashells many, many centuries ago. With no central control or oversight from governments or banks, Bitcoin is inessence an unbelievably strong social consensus with a monetary policy written in stone and a max supply which can be compared to a religious dogma. FAQ Can Bitcoin be Considered a Real Currency? Bitcoin is referred to by many as a form of digital currency and/or the main alternative to fiat money which is controlled by central entities such as banks. Bitcoin differs due to how no monetary authority can issue it and, as we know, currencies offer value due to their ability to operate as a store of value and, obviously, as a unit of exchange. People who aren’t digitally native or who can’t go beyond the concept of fiat currency may still wonder what do bitcoins look like but there are other countries which have made great strides into adapting themselves to this new currency. Countries like El Salvador, for example, have recognized it as legal tender, which means that if you ask someone over there questions like how to get into bitcoin, what is bitcoin and how does it work, they’ll have the answer on the tip of their tongue even if they don’t know bitcoins definition. The revolution might have just begun, and we might see Bitcoin being used on a daily basis much like credit cards. Why do people want Bitcoins? The reasons why people want Bitcoins can greatly vary. While some believe it will be the currency of the future, assuming that we’re going digital on all fronts, others just use it for speculative plays and quick profits. What makes Bitcoin a new kind of money? Mainly, what makes Bitcoin a new kind of money is its digital, decentralized nature. Many crypto enthusiasts call Bitcoin “freedom money”. Your bank accounts can be frozen, your licenses can even be revoked, the list goes on. If a government has immunity over their actions and is able freeze your assets on just the slight suspicion of wrongdoing (or if they find out you don’t support their “regime”) then it might be the time to do so and start looking at Bitcoin differently because they can try and try again but no one will be able to fully stop peer-to-peer bitcoin or lightning transactions to and from non-custodial wallets, meaning people will still be able to receive and send bitcoins as they please. What is the purpose of Bitcoin? Bitcoin’s original purpose was to provide a way for people to be able to send money over the internet and to provide a digital, decentralized alternative in what concerns payment systems. This is the main reason why some people out there love bitcoin more than cash. How Many Bitcoins Are There? By design, Bitcoins supply is hard capped at 21 million, meaning that its supply is finite.After the asset’s supply reaches 21 million, no additional coins will be generated. Is Bitcoin a Scam? Bitcoin is intangible but its value is certainly real and its presence in the financial world is robust and longstanding. With that being said, there are scammers out there who will try to swindle people with nefarious tactics and scams. Nonetheless, these problems are rooted in human behavior and not in the coin itself. The digital asset’s code is open source, and anyone can download and review it. Can you buy a house with Bitcoin? Buying a house with Bitcoins or another digital crypto asset is certainly a very real possibility. To do so, one should look for a real estate agency which has experience dealing with Bitcoins and crypto transactions. However, keep in mind that a mortgage on the property might not be possible due to how some banks are still hesitant on the asset. Even if the coin is world famous now, there are still many places where you’ll be asked what is btc. However, if the seller will accept Bitcoin, the only thing left is to negotiate the selling price in BTC. Who controls Bitcoin price? Bitcoin is not issued by an entity like a central bank, nor it is backed by a government. Accordingly, monetary policy, and other measurements of economic growth simply do not apply when dealing with Bitcoins. However, its price can still be influenced by a variety of factors like the digital asset’s supply, the market’s demand, the cost of producing it, the miners’ rewards, regulations regarding the asset’s sale and use, news developments, competing crypto, and so forth. How long does it take to mine 1 Bitcoin? The length it takes can vary depending on the block reward’s amount (how much will crypto miners will receive for generating a new block).It is estimated that on average a new block is produced every 10 minutes, meaning that a new Bitcoin gets mined approximately every 1.6 minutes. Is mining Bitcoin illegal? The legality of this process will most likely solely depend on your geographic location. As Bitcoin threatens fiat currencies’ dominance and governmental control, the digital asset has been declared to be completely illegal in some countries. With that being said, ownership and the coin’s mining process are still legal in many more countries than not.
While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world. No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology. In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Bitcoin has now a global brand because of how everyone recognizes it even if they don’t really know what it is.Added to that, Bitcoin also has the largest market cap and liquidity pool which is why many find it to be the most attractive coin out there. Bitcoin summed up· Bitcoin is a decentralized digital currency operating with no type of central control nor oversight from banks or governments, relying solely on its cryptography and peer-to-peer software.· A public ledger keeps track of all transactions by recording them. Copies are then held around the world on servers called nodes (which anyone can set up) and consensus is thus achieved on the state of the network.· Every single transaction is broadcasted publicly to the network and then shared between nodes. Miners lump these together into groups called blocks and add them permanently to the blockchain, Bitcoin’s definitive account book.· May 22 is known as the Bitcoin Pizza Day, marking the anniversary of BTC’s first official commercial transaction with a real companyHow Does Bitcoin Work? Bitcoin is a completely neutral and decentralized asset which means no one is controlling it (no bankers or oligarchs pulling strings behind the curtain), and no central entity can issue or back it. Nonetheless, Bitcoin has been recognized as legal tender in El Salvador and as it makes its way into our every day lives, other countries might soon follow suit. Bitcoin uses cryptography to assure its safety and reliability. Bitcoin transactions are verified by a process called mining which basically runs on computing power to solve mathematical puzzles. When trading Bitcoin its name is often abbreviated as BTC. What is a Blockchain Bitcoin’s system can be described as a group of computers (often called miners or nodes) which stores the Bitcoin blockchain and runs the Bitcoin code. The blockchain itself can be visualized as a string of blocks and within every block one can find immutable information, usually a collection of transactions, that are permanently recorded and which everyone can look into. Given that all of the Bitcoin network’s computers are running the exact same list of blocks, participants are assured of the process transparency because the ledger is maintained safely in this decentralized database. This makes it so that no trusted third party is necessary, and no single person is in control, rather all network participants are. As new information comes along, a freshly added block is minted and added to the blockchain while other nodes verify the whole thing. P2P Explained Bitcoin peer-to-peer (P2P) technology is meant to make instant payments easier. Bitcoin was one of the first cryptocurrencies to implement P2P and its system shifts the responsibility of processing the blockchain transactions to Bitcoin miners while giving them rewards for doing so. Bitcoin miners act as a decentralized authority which enforces the Bitcoin network’s credibility by performing these tasks and maintaining the Bitcoin ledger. The best-known case for the success of peer-to-peer BTC transactions probably lies in countries like Venezuela and El Salvador in which the younger generations have made strides in the coin’s mass adoption in their respective countries. How Does Bitcoin Make Money? Many people are still purchasing Bitcoins for the asset’s investment value rather than its capabilities of being used as a medium of exchange. As such, the asset has a speculative side which cannot be ignored due to how it correlates with its price volatility. How To Get Bitcoin? How to get into Bitcoin is a fairly easy process. Aside from the Bitcoin mining process, the asset can be exchanged for standard currencies even though it is not backed by any form of government or central entity like a bank. The Bitcoin exchange rate against the US Dollar keeps attracting investors and traders. Luckily, even the uninitiated won’t be needing a “bitcoin for dummies” guide because the asset is normally bought through a Bitcoin exchange to which you can wire money or simply pay with your credit card. Just remember to look for BTC (BTC meaning is obviously Bitcoin but there are altcoins which might try to pose as the original). Bitcoin Mining: How Are Bitcoins Created? Bitcoins are created through a process which is open for everyone to participate known as Bitcoin mining. Bitcoin mining consists of solving mathematical puzzles by means of one’s computational power, meaning that mining systems will in fact compete with one another for the asset. How Do I Start Mining Bitcoin? Even though the bitcoin digital world welcomes all with open arms, mining new bitcoins isn’t really a Bitcoin for beginners type of thing. If you want to venture into mining Bitcoins, the most obvious entry barriers are the expensive ASIC systems which you will need and the high electrical bills they will run up. ASIC stands for application-specific integrated chip. Bitcoin ASIC systems are custom bitcoin mining machines and are unquestionably one of the largest investments for bitcoin miners given that prices start at 4 figures and miners organize thousands of these into their mining pools (one ASIC system alone will potentially generate less than one single bitcoin). Network infrastructure may also be an issue as miners will need uninterrupted internet access with the least possible latency. The Bitcoin mining process has thus turned into a costly endeavor with no guaranteed results. Bitcoin Security Explained Bitcoin is a decentralized currency which is distributed in a peer-to-peer network, making it very resistant to censorship and confiscation. Bitcoin technology boasts its safety by relying on several factors such as its blockchain, the fact that it is cryptographic, decentralized, and permissionless. Being public and decentralized boosts the asset’s security as nodes verify every transaction and maintain the ledger. As such, theoretically, one would need to control over half of all the nodes to be able to manipulate it, something which albeit not impossible is certainly highly unlikely. How To Use Bitcoin Bitcoin has been growing at a steady pace and some brick-and-mortar merchants have begun to accept it as means of payment for goods and services. Online, the asset has also found its way as an accepted online payment option on pair with credit cards or Paypal. How to Buy Bitcoin Buying Bitcoin is a straightforward process. A buyer will simply need to pick a broker, opt for a paying option (wiring money, credit card, etc.), place an order, and select a safe storage option for his or her coins. Keep in mind that you should be looking for Bitcoin or BTC and not things like “Bit coin” or “bitcoin cryptocurrency” because there have been known scams and fake coins, so stick with reputable brokers. Where Can I Buy Bitcoin? Buying Bitcoin is mostly done through Bitcoin brokers, many of which will ask you for your KYC data (know your customer data: name, address, and so forth). As such, some concerns were raised over the asset’s security and user anonymity, which is why non-KYC options were also created. However, non-KYC Bitcoin buying might not be entirely legal depending on where the buyer lives. Storing your Bitcoins There are different ways of storing your Bitcoins. Regarded as the safest way of holding Bitcoin, an offline wallet (also known as cold storage or hardware wallet) is usually the go-to option for most people because of how these Bitcoin wallets are not accessible through the Internet and thus keep the asset safe offline. By not being connect to the internet, cold wallets have a much smaller risk of being compromised. However, some will prefer to store the asset in hot wallets which run on internet-connected devices (phones, computers, etc.). Investing in Bitcoin Why Is Bitcoin Valuable? Scarcity is an important element to why Bitcoin has value. Having unlimited supply will obviously not translate to being a good store of value. Bitcoin supply is capped at 21 million. Another factor to consider is that the asset is being considered by many as “freedom money” given that it cannot be inflated away, nor can it be censored or confiscated. This makes it self-evident that Bitcoins are standing above concepts like sovereignty, user’s personal preferences, creeds, and so forth. Moreover, the monetary policy some of the newer crypto projects out there can be altered at a moment’s notice, whereas Bitcoin’s monetary policy was fixed at its inception, meaning that it is a much steadier asset than any of its other digital counterparts. Can Bitcoin be converted to cash? Bitcoin can be converted to cash through third-party broker exchanges. The process requires the seller to deposit his or her Bitcoins into the exchange and, once verification that the asset was received takes place, a withdrawal request for fiat currency can be made. The money will then be wired into the sellers account and usually the broker will require you to use the same account which is connected to it (as to prevent money laundering schemes). Another less used method one can resort to are peer-to-peer selling platforms.There are at least 3 things to consider before cashing out your Bitcoin: taxes, fees, and speed Bitcoin Investing Risks Every investment comes with risk. Bitcoin, albeit being a digital asset, is no different. In fact, there are some risks you should know about when dealing with BTC. Regulatory risk Decentralization comes at a price. As Bitcoin makes great strides into our everyday lives and begins to be recognized as legal tender, it inherently becomes a competitor to fiat, or government currency. Obviously, it can (and many are certain that it already has) become a digital medium for illegal activities such as money laundering, tax evasion, and other underground market payments. This makes it clear that governments will look into either regulate, restrict, or even attempt to ban its use and/or sale. Other efforts might include actively enforcing KYC requirements to brokers or having participants reporting transactions over a certain amount. Regardless, the lack of Bitcoin regulation, especially in a uniformed manner, will certainly make some weary about its longevity and universality. Security risk As the Bitcoin mining process barriers of entry get higher and higher, it comes as no surprise that many Bitcoin holders will have acquired it by resorting to one of the many available online exchanges. As it happens with everything digital, these exchanges are also risk prone either by malware, glitches or even hackers. If a hacker takes over one’s computer and manages to get his or her hands on a private encryption key, they will be easily able to steal Bitcoin (and remember, Bitcoin transactions are permanent and there is no insurance or refunds). The exchanges themselves are honeypots due to how some of their users simply aren’t resorting to holding their Bitcoin in safer places. Insurance risk Bitcoin accounts and exchanges are usually not insured in any way. However, some exchanges have begun to provide Bitcoin insurance to its investors, namely with FDIC insurance for a portion of transactions which involve cash. Fraud risk Bitcoin encryption through private keys allows for ownership verification and transactions to be registered. However, there have been known cases of scammers attempting to sell fake Bitcoin or operating Bitcoin Ponzi schemes. Market risk Bitcoin value fluctuates and cryptocurrency volatility is a quite common occurrence in the digital crypto sphere. As such, Bitcoin price swings are to be expected. As an example of how extreme things can go, Bitcoin fell about 80% in one single day in 2014. People have brought up the subject of the Bitcoin bubble time and time again, but the truth is that the project is holding on despite having plenty of competitors. So, Is Bitcoin a Good Investment? A good investment can be defined in many ways. Bitcoin investments can greatly vary due to how some people interpret it as a speculative short-term play while others see it as a hedge against inflation or aim for long-term adoption and appreciation. It will come down to one’s own perception and assessment of the investment’s risk and reward. What Are the Issues with Bitcoin? Volatility is still and issue with Bitcoin as is the lack of true anonymity. However, the main issue with the digital asset is as its popularity keeps growing, it becomes slower and slower, cumbersome, and, more importantly, expensive to use. Transactions take a long time to be validated and fees have skyrocketed, meaning that Bitcoin is slowly walking a path in which might lead to its unviability as medium of exchange. Electricity consumption has also been a source of concern. The History: Who created Bitcoin? While some people still believe that there is someone who owns Bitcoin, the truth is that Bitcoin has had a somewhat immaculate conception in the world of finance. It is a unique historical “accident” that one might say it would probably be impossible to recreate (as many of the newer digital projects have unfortunately shown us). Anonymous Bitcoin creator Satoshi Nakamoto (who can either be an individual or group of individuals) left the project very early on and as we all know every prominent cryptocurrency creator who sticks around can be turned into a single point of failure of the project, meaning that taking credit for the project could in fact hurt it. Moreover, Bitcoins value was near zero for a long time given despite having first mover advantage. That got to fly under the radar of both the public and the regulators unlike the newer projects out there. When Was Bitcoin Created? The Bitcoin white paper was published by Satoshi Nakamoto in 2008 and the original software which runs the asset was released the following year. Bitcoin Forking History Throughout Bitcoin’s history there have been some accounts of disagreement between miners and developers with even factions being created. These led to significant splits in the community which surrounds crypto and the asset, some of which led to the point in which a “fork” had to be performed on the network. Forking happens as developers or miners believe that a significant change must be made in the network’s protocol.In this particular case, the process led to the creation of a new type of Bitcoin with a completely different name. If the new coin is set to share the previous coin’s transaction history up to the split point, the process is considered to be a “hard fork”. Bitcoin Cash (launched in August 2017), Bitcoin Gold (launched in October 2017), and Bitcoin Satoshi’s Vision (launched in November 2018) were all a result of a hard fork in Bitcoin’s network. If the fork, however, allows for the protocol to remain compatible with its previous iteration, that it is known as a “soft fork”. Bitcoin’s functionalities like SegWit are a result of soft forks in the network. What is Bitcoin Concluded While some believe Bitcoin to be the future of currency, others see it as a speculative play. Regardless of how people see Bitcoin, the decentralized aspect of the project completely revolutionized finance and the world itself much akin to how gold overcame seashells many, many centuries ago. With no central control or oversight from governments or banks, Bitcoin is inessence an unbelievably strong social consensus with a monetary policy written in stone and a max supply which can be compared to a religious dogma. FAQ Can Bitcoin be Considered a Real Currency? Bitcoin is referred to by many as a form of digital currency and/or the main alternative to fiat money which is controlled by central entities such as banks. Bitcoin differs due to how no monetary authority can issue it and, as we know, currencies offer value due to their ability to operate as a store of value and, obviously, as a unit of exchange. People who aren’t digitally native or who can’t go beyond the concept of fiat currency may still wonder what do bitcoins look like but there are other countries which have made great strides into adapting themselves to this new currency. Countries like El Salvador, for example, have recognized it as legal tender, which means that if you ask someone over there questions like how to get into bitcoin, what is bitcoin and how does it work, they’ll have the answer on the tip of their tongue even if they don’t know bitcoins definition. The revolution might have just begun, and we might see Bitcoin being used on a daily basis much like credit cards. Why do people want Bitcoins? The reasons why people want Bitcoins can greatly vary. While some believe it will be the currency of the future, assuming that we’re going digital on all fronts, others just use it for speculative plays and quick profits. What makes Bitcoin a new kind of money? Mainly, what makes Bitcoin a new kind of money is its digital, decentralized nature. Many crypto enthusiasts call Bitcoin “freedom money”. Your bank accounts can be frozen, your licenses can even be revoked, the list goes on. If a government has immunity over their actions and is able freeze your assets on just the slight suspicion of wrongdoing (or if they find out you don’t support their “regime”) then it might be the time to do so and start looking at Bitcoin differently because they can try and try again but no one will be able to fully stop peer-to-peer bitcoin or lightning transactions to and from non-custodial wallets, meaning people will still be able to receive and send bitcoins as they please. What is the purpose of Bitcoin? Bitcoin’s original purpose was to provide a way for people to be able to send money over the internet and to provide a digital, decentralized alternative in what concerns payment systems. This is the main reason why some people out there love bitcoin more than cash. How Many Bitcoins Are There? By design, Bitcoins supply is hard capped at 21 million, meaning that its supply is finite.After the asset’s supply reaches 21 million, no additional coins will be generated. Is Bitcoin a Scam? Bitcoin is intangible but its value is certainly real and its presence in the financial world is robust and longstanding. With that being said, there are scammers out there who will try to swindle people with nefarious tactics and scams. Nonetheless, these problems are rooted in human behavior and not in the coin itself. The digital asset’s code is open source, and anyone can download and review it. Can you buy a house with Bitcoin? Buying a house with Bitcoins or another digital crypto asset is certainly a very real possibility. To do so, one should look for a real estate agency which has experience dealing with Bitcoins and crypto transactions. However, keep in mind that a mortgage on the property might not be possible due to how some banks are still hesitant on the asset. Even if the coin is world famous now, there are still many places where you’ll be asked what is btc. However, if the seller will accept Bitcoin, the only thing left is to negotiate the selling price in BTC. Who controls Bitcoin price? Bitcoin is not issued by an entity like a central bank, nor it is backed by a government. Accordingly, monetary policy, and other measurements of economic growth simply do not apply when dealing with Bitcoins. However, its price can still be influenced by a variety of factors like the digital asset’s supply, the market’s demand, the cost of producing it, the miners’ rewards, regulations regarding the asset’s sale and use, news developments, competing crypto, and so forth. How long does it take to mine 1 Bitcoin? The length it takes can vary depending on the block reward’s amount (how much will crypto miners will receive for generating a new block).It is estimated that on average a new block is produced every 10 minutes, meaning that a new Bitcoin gets mined approximately every 1.6 minutes. Is mining Bitcoin illegal? The legality of this process will most likely solely depend on your geographic location. As Bitcoin threatens fiat currencies’ dominance and governmental control, the digital asset has been declared to be completely illegal in some countries. With that being said, ownership and the coin’s mining process are still legal in many more countries than not.
Read this Term has rebounded past the $50,000 mark, and the tokens that belong to two competing chains, Ethereum and Binance Smart Chain (BSC), have also improved their price performances.
At press time, data from Messari showed that Ether (ETH) was up by nearly 17 percent over the past 24 hours, with a price of ~$1,690. Binance Coin (BNB), which is associated with the BSC, was up by nearly 30 percent, bringing the price to ~$265. Over the past 30 days, BNB was up by more than 530 percent; ETH was up by 27 percent.
While the price drops that started off the week may have shifted the discussion away from the roles that these two chains play in the cryptocurrency ecosystem, the market rebound has allowed some of the spotlight to shine back onto these two blockchains. The big question is this: which one of them has more long-term viability as the 'backbone' of the DeFi ecosystem?
BSC vs. Ethereum: A History in Brief The BSC initially appeared on the scene in September. A blog post detailing the launch of the chain said at the time that the “Binance Chain will enable the creation of smart contracts and the staking mechanism for BNB.” The post also mentioned that: “Any interested individuals and/or organizations can gather BNB stakes to become a validator of this new Blockchain
Blockchain
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Read this Term .”
The blog post specifically said that the BSC was launched just “in time DeFi (decentralized finance) revolution, as the public shows increased interest in alternative financial solutions powered by blockchain.”
And indeed, the public was showing massive interest in the 'DeFi revolution'. The upward price movements of a number of DeFi-associated tokens were so powerful throughout June, July and August that the warmer months of the year came to be known as the 'DeFi summer'.
Throughout this 'DeFi summer', a great deal of the projects that were performing so well price-wise were struggling in another way. As DeFi was growing, the Ethereum network, the network that many of these projects were built on, was beginning to strain under the weight of their success.
At the time, Finance Magnates reported that the Ethereum network was raking in record-high transaction fees as increased network congestion stepped up transaction times and continued to slow down.
“The reason that the network fees went up was because of Ethereum’s popularity: the more users and protocols that the network attracts, the more transactions that are sent through the network,” Finance Magnates reported at the time. “The more traffic there is on the network, the more congested it becomes; as it becomes more congested, fees go up, and transaction times slow down.”
Was “the Demise of the Narrative That ETH 2.0 Is a Viable Future Platform” the “Biggest 2020 Development in DeFi”?
As such, the conversation around the Ethereum network began to shift. The viability of the network, which is known as the original smart contract-enabled blockchain network, became uncertain. A growing number of reports emerged claiming that DeFi developers were looking beyond Ethereum for blockchains that could support higher numbers of transactions without skyrocketing fees or vastly slowed transaction times.
At the time, Stuart Popejoy, Co-founder and President of blockchain infrastructure firm, Kadena told Finance Magnates that: “the demise of the narrative that ETH 2.0 is a viable future platform” was the “biggest 2020 development in DeFi.”
Stuart Popejoy, Co-founder and President of blockchain infrastructure firm, Kadena.
Indeed, while Ethereum’s software upgrade to Eth2.0 is already underway, some members of the community believe that the update will take too long, and that another smart contract-enabled blockchain could become dominant in the meantime.
Competitors to the Ethereum network were already on the market when Ethereum began to struggle under the weight of the DeFi ecosystem: Polkadot, Cardano, Quantum (QTUM) and NEO, to name a few.
However, none of these competing chains seemed to have managed to pick up traction that could make them truly viable competition to good old Ethereum.
BSC Was Originally Billed as a “Support Network” for Ethereum Enter the Binance Smart Chain.
Right away, Binance Chief Executive, Changpeng Zhao (CZ) began to encourage DeFi projects to leave Ethereum in favor of the BSC. However, CZ has maintained that BSC is a 'support network' for the Ethereum ecosystem and is not intended to threaten the Ethereum network.
In a tweet that appears to have been deleted, CZ allegedly wrote in mid-September that: "BSC never aimed to replace ETH, BSC is just ETH-compatible. Smart projects are giving their users more options. Option for cheaper fees." At the time, CZ allegedly wrote that Binance Smart Chain transaction volume recently reached 10% of Ethereum's network a few days ago.
Then, in late October, he wrote that: “#BSC is not a #ETH replacement or killer. I believe ETH 2.0 will be awesome, when it comes out... Until then,#BSC is more like a #ETH 1.8. 100% backward compatible, faster and lower fees (97% lower).”
#BSC is not a #ETH replacement or killer. I believe ETH 2.0 will be awesome, when it comes out... Until then,#BSC is more like a #ETH 1.8. 100% backward compatible, faster and lower fees (97% lower).
— CZ 🔶 Binance (@cz_binance) October 29, 2020 “#BNB Started as a Token on #ETH, but Maybe #ETH Will End up as a Token on #BSC.” Since then, CZ has stated that BSC and Ethereum can continue to coexist with one another. “For those holding ETH, no need to attack #BSC. We together make the industry bigger. ETH price did not drop. It increases together with #BNB. Have an infinite mindset,” he wrote on Twitter on February 20th.
For those holding ETH, no need to attack #BSC . We together make the industry bigger. ETH price did not drop. It increases together with #BNB . Have an infinite mindset. Read: Infinite Game by Simon Sinek Innovation Stack by Jim McKelvey https://t.co/kRvNlh83GP
— CZ 🔶 Binance (@cz_binance) February 20, 2021 On February 23rd, CZ wrote that: “to think a new coin takes value away from existing ones shows a finite mindset. It's like saying whenever a new company is formed, Telsa or Google or Bridgewater loses value. That's not the case. The world is not finite. Value is can be created by more/new use cases.”
To think a new coin takes value away from existing ones shows a finite mindset. It's like saying whenever a new company is formed, Telsa or Google or Bridgewater loses value. That's not the case. The world is not finite. Value is can be created by more/new use cases.
— CZ 🔶 Binance (@cz_binance) February 23, 2021 However, CZ’s rhetoric seemed to take a more competitive turn against Ethereum when it was revealed earlier this month that the transaction volume on the BSC surpassed that of the Ethereum network. Indeed, on Wednesday, February 10th, reports emerged that the Binance Smart Chain (BSC) had surpassed the daily transaction volume of Ethereum by 30%. Then, on Thursday, February 18th, further reports emerged that BSC was processing 70 percent more transactions than the Ethereum network. On that day, BSC recorded 2.5 million transactions on its network; Ethereum processed 1.3 million transactions.
“As expected, I get a bit of ‘heat’ from #ETH lovers given the increased adoption of #BSC. I have no issues with ETH. We support it. We trade it. We futures it. We mine it. As a #BNB holder, I will of course continue to relentlessly shill #BSC and #BNB,” he wrote.
As expected, I get a bit of "heat" from #ETH lovers given the increased adoption of #BSC . I have no issues with ETH. We support it. We trade it. We futures it. We mine it. As a #BNB holder, I will of course continue to relentlessly shill #BSC and #BNB .
— CZ 🔶 Binance (@cz_binance) February 20, 2021 Later, he joked that that “#BNB started as a token on #ETH, but maybe #ETH will end up as a token on #BSC.”
Will Low Fees Be Enough to Carry BSC into the Future? And, indeed, while the two networks are coexisting for now, Binance seems to be betting on BSC’s low fees for future growth of the network.
On February 20th, a Binance spokesperson explained to Cointelegraph that the higher number of transactions may be due to lower fees on the BSC.
“BSC daily transaction volume is up by 300% from YTD and bolsters an ecosystem of 100+ DeFi projects,” the spokesperson said. “Furthermore, the platform has succeeded in maintaining GAS costs as low as $0.04. Compared to Ethereum’s $5.53, BSC is 135 times less expensive.”
Additionally, CZ retweeted a meme of a person holding an empty wallet next to the Ethereum logo captioned with: “After paying all these gas fees, #Ethereum logo makes sense to me.”
After paying all these gas fees, #Ethereum logo makes sense to me pic.twitter.com/ElzBMRKtAC
— Milana Valmont (@milanavalmont) February 21, 2021 ”Real Builders Make the Customers King and Their Needs #1 Welcome to Reality.” Whether or not CZ was fostering the “BNB vs. ETH” narrative, much of the crypto community seems to have been picking the narrative up on its own. Much debate has ensued over whether BSC or Ethereum will ultimately hold the crown as the premier chain of the DeFi ecosystem.
Ajit Tripathi, Head of Institutional Business at DeFi lending protocol, Aave, wrote on Twitter that: “my final take on #BSC is that consumers get to choose whether they want high throughput and low transaction costs, or security and autonomy. Fellow #Ethereum believers can either build and promote the tech consumers deserve or continue to do what Netscape did (ie assume victory).”
Ray Youssef, Chief Executive of crypto exchange, Paxul, also described the apparent surge of activity on BSC as par for the course: “The Eth bros are now seeing the cost of ignoring the customer,” he said.
The Eth bros are now seeing the cost of ignoring the customer. Cryptocrats are kings only in their own minds. Real builders make the customers king and their needs #1 Welcome to reality. https://t.co/PVTRNFH2pW
— Ray “Adewale⚡️Uwaifo” Youssef (@raypaxful) February 20, 2021 “Cryptocrats are kings only in their own minds. Real builders make the customers king and their needs #1 Welcome to reality.”
“We All Know BSC Is Not Going to Threaten Ethereum Long Term.” However, other members of the crypto community have questioned whether the surge in BSC trading activity is the start of a long-term trend or merely a short-term phenomenon.
“...Tbh, it is still far too early to say #BSC will replace $ETH,” wrote Andy Cheung, Founder & Executive Chairman of ACDX.io. on Twittter on February 19th. “Just a few years ago, a similar discussion was on $BCH & $BTC.”
Now all eyes are on #BSC . I do appreciate what @cz_binance has done. But tbh, it is still far too early to say #BSC will replace $ETH . Just a few years ago, a similar discussion was on $BCH & $BTC .
— Andy Cheung (@AndyC0125) February 19, 2021 Larry Cermak, Director of Research at The Block, also tweeted on the 19th that: “we all know BSC is not going to threaten Ethereum long term.”
“[...] It absolutely amuses me when Ethereum people start sounding just like Bitcoiners bitching about Ethereum. Just chill, take a breather and let the incentives play out,” he added.
We all know BSC is not going to threaten Ethereum long term but it absolutely amuses me when Ethereum people start sounding just like Bitcoiners bitching about Ethereum. Just chill, take a breather and let the incentives play out 🤝
— Larry Cermak (@lawmaster) February 19, 2021 ”Ethereum's Biggest Moat Is That ETH Has Been Deemed ‘Not a Security’ by the SEC.” Thibauld Favre, Chief Executive Officer at Fairmint, also pointed out on Twitter that he believes that BSC will not replace Ethereum: “Not for technical or philosophical reasons but for legal reasons: Ethereum's biggest moat is that ETH has been deemed ‘not a security’ by the SEC,” he said. “That's a massive competitive advantage.”
Does it mean that BSC could replace Ethereum? Rationally speaking, I'd say "no". Not for technical or philosophical reasons but for legal reasons: Ethereum's biggest moat is that ETH has been deemed "not a security" by the SEC. That's a massive competitive advantage.
— thibauld 🌍🔥⏳ (@thibauld) February 19, 2021 However, Favre did point out that Ethereum needs to address its technical shortcomings sooner rather than later. “As much as I love #ethereum, users & developers, unfortunately, don't care that it *has a soul* when retail is priced out for making transactions and developers are paying large fees every time they touch the blockchain,” he wrote.
“This reminds me of Linux. I remember thinking in the early 2000s that Linux was so vastly superior technically & philosophically to other proprietary competitors that it was bound to ultimately win the desktop. But, it never did... because end users never cared.”
The BSC vs. Ethereum Debate Will Be Settled by Users And, in the end, the users will be the ones who decide the fate of both BSC and Ethereum.
In fact, they already are, IDEX which is described as 'the first DApp on Ethereum', has recently made the decision to expand its platform to BSC. A spokesperson for the exchange told Finance Magnates that the platform plans to expand to Polkadot.
Alex Wearn, CEO of IDEX, explained to Finance Magnates that: “a major component of our decision is the fact the BSC is 100% compatible with Ethereum.”
“This means that we can deploy our application on top of BSC with almost no changes. Additionally, popular software wallets like Metamask also work with the BSC version of our application. This compatibility made it a natural choice for us and other protocols,” he said.
“Settlement on BSC is much cheaper than on alternatives, making it affordable for many more users. Within two weeks of launching we’ve already seen volume on our BSC version pass that of our ETH version, an accomplishment we largely contribute to the low settlement costs. BSC also contains many popular crypto assets such as BTC, LTC, etc., enabling us to offer more trading pairs to users.”
Of course, Ethereum’s community of dApps and developers remains larger than that of BSC’s. But, will it always be that way? Only time will tell.
Alex Wearn, CEO of IDEX.
Cryptocurrency markets are recovering after a massive selloff that took place throughout Monday and Tuesday. Bitcoin
Bitcoin
While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world. No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology. In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Bitcoin has now a global brand because of how everyone recognizes it even if they don’t really know what it is.Added to that, Bitcoin also has the largest market cap and liquidity pool which is why many find it to be the most attractive coin out there. Bitcoin summed up· Bitcoin is a decentralized digital currency operating with no type of central control nor oversight from banks or governments, relying solely on its cryptography and peer-to-peer software.· A public ledger keeps track of all transactions by recording them. Copies are then held around the world on servers called nodes (which anyone can set up) and consensus is thus achieved on the state of the network.· Every single transaction is broadcasted publicly to the network and then shared between nodes. Miners lump these together into groups called blocks and add them permanently to the blockchain, Bitcoin’s definitive account book.· May 22 is known as the Bitcoin Pizza Day, marking the anniversary of BTC’s first official commercial transaction with a real companyHow Does Bitcoin Work? Bitcoin is a completely neutral and decentralized asset which means no one is controlling it (no bankers or oligarchs pulling strings behind the curtain), and no central entity can issue or back it. Nonetheless, Bitcoin has been recognized as legal tender in El Salvador and as it makes its way into our every day lives, other countries might soon follow suit. Bitcoin uses cryptography to assure its safety and reliability. Bitcoin transactions are verified by a process called mining which basically runs on computing power to solve mathematical puzzles. When trading Bitcoin its name is often abbreviated as BTC. What is a Blockchain Bitcoin’s system can be described as a group of computers (often called miners or nodes) which stores the Bitcoin blockchain and runs the Bitcoin code. The blockchain itself can be visualized as a string of blocks and within every block one can find immutable information, usually a collection of transactions, that are permanently recorded and which everyone can look into. Given that all of the Bitcoin network’s computers are running the exact same list of blocks, participants are assured of the process transparency because the ledger is maintained safely in this decentralized database. This makes it so that no trusted third party is necessary, and no single person is in control, rather all network participants are. As new information comes along, a freshly added block is minted and added to the blockchain while other nodes verify the whole thing. P2P Explained Bitcoin peer-to-peer (P2P) technology is meant to make instant payments easier. Bitcoin was one of the first cryptocurrencies to implement P2P and its system shifts the responsibility of processing the blockchain transactions to Bitcoin miners while giving them rewards for doing so. Bitcoin miners act as a decentralized authority which enforces the Bitcoin network’s credibility by performing these tasks and maintaining the Bitcoin ledger. The best-known case for the success of peer-to-peer BTC transactions probably lies in countries like Venezuela and El Salvador in which the younger generations have made strides in the coin’s mass adoption in their respective countries. How Does Bitcoin Make Money? Many people are still purchasing Bitcoins for the asset’s investment value rather than its capabilities of being used as a medium of exchange. As such, the asset has a speculative side which cannot be ignored due to how it correlates with its price volatility. How To Get Bitcoin? How to get into Bitcoin is a fairly easy process. Aside from the Bitcoin mining process, the asset can be exchanged for standard currencies even though it is not backed by any form of government or central entity like a bank. The Bitcoin exchange rate against the US Dollar keeps attracting investors and traders. Luckily, even the uninitiated won’t be needing a “bitcoin for dummies” guide because the asset is normally bought through a Bitcoin exchange to which you can wire money or simply pay with your credit card. Just remember to look for BTC (BTC meaning is obviously Bitcoin but there are altcoins which might try to pose as the original). Bitcoin Mining: How Are Bitcoins Created? Bitcoins are created through a process which is open for everyone to participate known as Bitcoin mining. Bitcoin mining consists of solving mathematical puzzles by means of one’s computational power, meaning that mining systems will in fact compete with one another for the asset. How Do I Start Mining Bitcoin? Even though the bitcoin digital world welcomes all with open arms, mining new bitcoins isn’t really a Bitcoin for beginners type of thing. If you want to venture into mining Bitcoins, the most obvious entry barriers are the expensive ASIC systems which you will need and the high electrical bills they will run up. ASIC stands for application-specific integrated chip. Bitcoin ASIC systems are custom bitcoin mining machines and are unquestionably one of the largest investments for bitcoin miners given that prices start at 4 figures and miners organize thousands of these into their mining pools (one ASIC system alone will potentially generate less than one single bitcoin). Network infrastructure may also be an issue as miners will need uninterrupted internet access with the least possible latency. The Bitcoin mining process has thus turned into a costly endeavor with no guaranteed results. Bitcoin Security Explained Bitcoin is a decentralized currency which is distributed in a peer-to-peer network, making it very resistant to censorship and confiscation. Bitcoin technology boasts its safety by relying on several factors such as its blockchain, the fact that it is cryptographic, decentralized, and permissionless. Being public and decentralized boosts the asset’s security as nodes verify every transaction and maintain the ledger. As such, theoretically, one would need to control over half of all the nodes to be able to manipulate it, something which albeit not impossible is certainly highly unlikely. How To Use Bitcoin Bitcoin has been growing at a steady pace and some brick-and-mortar merchants have begun to accept it as means of payment for goods and services. Online, the asset has also found its way as an accepted online payment option on pair with credit cards or Paypal. How to Buy Bitcoin Buying Bitcoin is a straightforward process. A buyer will simply need to pick a broker, opt for a paying option (wiring money, credit card, etc.), place an order, and select a safe storage option for his or her coins. Keep in mind that you should be looking for Bitcoin or BTC and not things like “Bit coin” or “bitcoin cryptocurrency” because there have been known scams and fake coins, so stick with reputable brokers. Where Can I Buy Bitcoin? Buying Bitcoin is mostly done through Bitcoin brokers, many of which will ask you for your KYC data (know your customer data: name, address, and so forth). As such, some concerns were raised over the asset’s security and user anonymity, which is why non-KYC options were also created. However, non-KYC Bitcoin buying might not be entirely legal depending on where the buyer lives. Storing your Bitcoins There are different ways of storing your Bitcoins. Regarded as the safest way of holding Bitcoin, an offline wallet (also known as cold storage or hardware wallet) is usually the go-to option for most people because of how these Bitcoin wallets are not accessible through the Internet and thus keep the asset safe offline. By not being connect to the internet, cold wallets have a much smaller risk of being compromised. However, some will prefer to store the asset in hot wallets which run on internet-connected devices (phones, computers, etc.). Investing in Bitcoin Why Is Bitcoin Valuable? Scarcity is an important element to why Bitcoin has value. Having unlimited supply will obviously not translate to being a good store of value. Bitcoin supply is capped at 21 million. Another factor to consider is that the asset is being considered by many as “freedom money” given that it cannot be inflated away, nor can it be censored or confiscated. This makes it self-evident that Bitcoins are standing above concepts like sovereignty, user’s personal preferences, creeds, and so forth. Moreover, the monetary policy some of the newer crypto projects out there can be altered at a moment’s notice, whereas Bitcoin’s monetary policy was fixed at its inception, meaning that it is a much steadier asset than any of its other digital counterparts. Can Bitcoin be converted to cash? Bitcoin can be converted to cash through third-party broker exchanges. The process requires the seller to deposit his or her Bitcoins into the exchange and, once verification that the asset was received takes place, a withdrawal request for fiat currency can be made. The money will then be wired into the sellers account and usually the broker will require you to use the same account which is connected to it (as to prevent money laundering schemes). Another less used method one can resort to are peer-to-peer selling platforms.There are at least 3 things to consider before cashing out your Bitcoin: taxes, fees, and speed Bitcoin Investing Risks Every investment comes with risk. Bitcoin, albeit being a digital asset, is no different. In fact, there are some risks you should know about when dealing with BTC. Regulatory risk Decentralization comes at a price. As Bitcoin makes great strides into our everyday lives and begins to be recognized as legal tender, it inherently becomes a competitor to fiat, or government currency. Obviously, it can (and many are certain that it already has) become a digital medium for illegal activities such as money laundering, tax evasion, and other underground market payments. This makes it clear that governments will look into either regulate, restrict, or even attempt to ban its use and/or sale. Other efforts might include actively enforcing KYC requirements to brokers or having participants reporting transactions over a certain amount. Regardless, the lack of Bitcoin regulation, especially in a uniformed manner, will certainly make some weary about its longevity and universality. Security risk As the Bitcoin mining process barriers of entry get higher and higher, it comes as no surprise that many Bitcoin holders will have acquired it by resorting to one of the many available online exchanges. As it happens with everything digital, these exchanges are also risk prone either by malware, glitches or even hackers. If a hacker takes over one’s computer and manages to get his or her hands on a private encryption key, they will be easily able to steal Bitcoin (and remember, Bitcoin transactions are permanent and there is no insurance or refunds). The exchanges themselves are honeypots due to how some of their users simply aren’t resorting to holding their Bitcoin in safer places. Insurance risk Bitcoin accounts and exchanges are usually not insured in any way. However, some exchanges have begun to provide Bitcoin insurance to its investors, namely with FDIC insurance for a portion of transactions which involve cash. Fraud risk Bitcoin encryption through private keys allows for ownership verification and transactions to be registered. However, there have been known cases of scammers attempting to sell fake Bitcoin or operating Bitcoin Ponzi schemes. Market risk Bitcoin value fluctuates and cryptocurrency volatility is a quite common occurrence in the digital crypto sphere. As such, Bitcoin price swings are to be expected. As an example of how extreme things can go, Bitcoin fell about 80% in one single day in 2014. People have brought up the subject of the Bitcoin bubble time and time again, but the truth is that the project is holding on despite having plenty of competitors. So, Is Bitcoin a Good Investment? A good investment can be defined in many ways. Bitcoin investments can greatly vary due to how some people interpret it as a speculative short-term play while others see it as a hedge against inflation or aim for long-term adoption and appreciation. It will come down to one’s own perception and assessment of the investment’s risk and reward. What Are the Issues with Bitcoin? Volatility is still and issue with Bitcoin as is the lack of true anonymity. However, the main issue with the digital asset is as its popularity keeps growing, it becomes slower and slower, cumbersome, and, more importantly, expensive to use. Transactions take a long time to be validated and fees have skyrocketed, meaning that Bitcoin is slowly walking a path in which might lead to its unviability as medium of exchange. Electricity consumption has also been a source of concern. The History: Who created Bitcoin? While some people still believe that there is someone who owns Bitcoin, the truth is that Bitcoin has had a somewhat immaculate conception in the world of finance. It is a unique historical “accident” that one might say it would probably be impossible to recreate (as many of the newer digital projects have unfortunately shown us). Anonymous Bitcoin creator Satoshi Nakamoto (who can either be an individual or group of individuals) left the project very early on and as we all know every prominent cryptocurrency creator who sticks around can be turned into a single point of failure of the project, meaning that taking credit for the project could in fact hurt it. Moreover, Bitcoins value was near zero for a long time given despite having first mover advantage. That got to fly under the radar of both the public and the regulators unlike the newer projects out there. When Was Bitcoin Created? The Bitcoin white paper was published by Satoshi Nakamoto in 2008 and the original software which runs the asset was released the following year. Bitcoin Forking History Throughout Bitcoin’s history there have been some accounts of disagreement between miners and developers with even factions being created. These led to significant splits in the community which surrounds crypto and the asset, some of which led to the point in which a “fork” had to be performed on the network. Forking happens as developers or miners believe that a significant change must be made in the network’s protocol.In this particular case, the process led to the creation of a new type of Bitcoin with a completely different name. If the new coin is set to share the previous coin’s transaction history up to the split point, the process is considered to be a “hard fork”. Bitcoin Cash (launched in August 2017), Bitcoin Gold (launched in October 2017), and Bitcoin Satoshi’s Vision (launched in November 2018) were all a result of a hard fork in Bitcoin’s network. If the fork, however, allows for the protocol to remain compatible with its previous iteration, that it is known as a “soft fork”. Bitcoin’s functionalities like SegWit are a result of soft forks in the network. What is Bitcoin Concluded While some believe Bitcoin to be the future of currency, others see it as a speculative play. Regardless of how people see Bitcoin, the decentralized aspect of the project completely revolutionized finance and the world itself much akin to how gold overcame seashells many, many centuries ago. With no central control or oversight from governments or banks, Bitcoin is inessence an unbelievably strong social consensus with a monetary policy written in stone and a max supply which can be compared to a religious dogma. FAQ Can Bitcoin be Considered a Real Currency? Bitcoin is referred to by many as a form of digital currency and/or the main alternative to fiat money which is controlled by central entities such as banks. Bitcoin differs due to how no monetary authority can issue it and, as we know, currencies offer value due to their ability to operate as a store of value and, obviously, as a unit of exchange. People who aren’t digitally native or who can’t go beyond the concept of fiat currency may still wonder what do bitcoins look like but there are other countries which have made great strides into adapting themselves to this new currency. Countries like El Salvador, for example, have recognized it as legal tender, which means that if you ask someone over there questions like how to get into bitcoin, what is bitcoin and how does it work, they’ll have the answer on the tip of their tongue even if they don’t know bitcoins definition. The revolution might have just begun, and we might see Bitcoin being used on a daily basis much like credit cards. Why do people want Bitcoins? The reasons why people want Bitcoins can greatly vary. While some believe it will be the currency of the future, assuming that we’re going digital on all fronts, others just use it for speculative plays and quick profits. What makes Bitcoin a new kind of money? Mainly, what makes Bitcoin a new kind of money is its digital, decentralized nature. Many crypto enthusiasts call Bitcoin “freedom money”. Your bank accounts can be frozen, your licenses can even be revoked, the list goes on. If a government has immunity over their actions and is able freeze your assets on just the slight suspicion of wrongdoing (or if they find out you don’t support their “regime”) then it might be the time to do so and start looking at Bitcoin differently because they can try and try again but no one will be able to fully stop peer-to-peer bitcoin or lightning transactions to and from non-custodial wallets, meaning people will still be able to receive and send bitcoins as they please. What is the purpose of Bitcoin? Bitcoin’s original purpose was to provide a way for people to be able to send money over the internet and to provide a digital, decentralized alternative in what concerns payment systems. This is the main reason why some people out there love bitcoin more than cash. How Many Bitcoins Are There? By design, Bitcoins supply is hard capped at 21 million, meaning that its supply is finite.After the asset’s supply reaches 21 million, no additional coins will be generated. Is Bitcoin a Scam? Bitcoin is intangible but its value is certainly real and its presence in the financial world is robust and longstanding. With that being said, there are scammers out there who will try to swindle people with nefarious tactics and scams. Nonetheless, these problems are rooted in human behavior and not in the coin itself. The digital asset’s code is open source, and anyone can download and review it. Can you buy a house with Bitcoin? Buying a house with Bitcoins or another digital crypto asset is certainly a very real possibility. To do so, one should look for a real estate agency which has experience dealing with Bitcoins and crypto transactions. However, keep in mind that a mortgage on the property might not be possible due to how some banks are still hesitant on the asset. Even if the coin is world famous now, there are still many places where you’ll be asked what is btc. However, if the seller will accept Bitcoin, the only thing left is to negotiate the selling price in BTC. Who controls Bitcoin price? Bitcoin is not issued by an entity like a central bank, nor it is backed by a government. Accordingly, monetary policy, and other measurements of economic growth simply do not apply when dealing with Bitcoins. However, its price can still be influenced by a variety of factors like the digital asset’s supply, the market’s demand, the cost of producing it, the miners’ rewards, regulations regarding the asset’s sale and use, news developments, competing crypto, and so forth. How long does it take to mine 1 Bitcoin? The length it takes can vary depending on the block reward’s amount (how much will crypto miners will receive for generating a new block).It is estimated that on average a new block is produced every 10 minutes, meaning that a new Bitcoin gets mined approximately every 1.6 minutes. Is mining Bitcoin illegal? The legality of this process will most likely solely depend on your geographic location. As Bitcoin threatens fiat currencies’ dominance and governmental control, the digital asset has been declared to be completely illegal in some countries. With that being said, ownership and the coin’s mining process are still legal in many more countries than not.
While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world. No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology. In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Bitcoin has now a global brand because of how everyone recognizes it even if they don’t really know what it is.Added to that, Bitcoin also has the largest market cap and liquidity pool which is why many find it to be the most attractive coin out there. Bitcoin summed up· Bitcoin is a decentralized digital currency operating with no type of central control nor oversight from banks or governments, relying solely on its cryptography and peer-to-peer software.· A public ledger keeps track of all transactions by recording them. Copies are then held around the world on servers called nodes (which anyone can set up) and consensus is thus achieved on the state of the network.· Every single transaction is broadcasted publicly to the network and then shared between nodes. Miners lump these together into groups called blocks and add them permanently to the blockchain, Bitcoin’s definitive account book.· May 22 is known as the Bitcoin Pizza Day, marking the anniversary of BTC’s first official commercial transaction with a real companyHow Does Bitcoin Work? Bitcoin is a completely neutral and decentralized asset which means no one is controlling it (no bankers or oligarchs pulling strings behind the curtain), and no central entity can issue or back it. Nonetheless, Bitcoin has been recognized as legal tender in El Salvador and as it makes its way into our every day lives, other countries might soon follow suit. Bitcoin uses cryptography to assure its safety and reliability. Bitcoin transactions are verified by a process called mining which basically runs on computing power to solve mathematical puzzles. When trading Bitcoin its name is often abbreviated as BTC. What is a Blockchain Bitcoin’s system can be described as a group of computers (often called miners or nodes) which stores the Bitcoin blockchain and runs the Bitcoin code. The blockchain itself can be visualized as a string of blocks and within every block one can find immutable information, usually a collection of transactions, that are permanently recorded and which everyone can look into. Given that all of the Bitcoin network’s computers are running the exact same list of blocks, participants are assured of the process transparency because the ledger is maintained safely in this decentralized database. This makes it so that no trusted third party is necessary, and no single person is in control, rather all network participants are. As new information comes along, a freshly added block is minted and added to the blockchain while other nodes verify the whole thing. P2P Explained Bitcoin peer-to-peer (P2P) technology is meant to make instant payments easier. Bitcoin was one of the first cryptocurrencies to implement P2P and its system shifts the responsibility of processing the blockchain transactions to Bitcoin miners while giving them rewards for doing so. Bitcoin miners act as a decentralized authority which enforces the Bitcoin network’s credibility by performing these tasks and maintaining the Bitcoin ledger. The best-known case for the success of peer-to-peer BTC transactions probably lies in countries like Venezuela and El Salvador in which the younger generations have made strides in the coin’s mass adoption in their respective countries. How Does Bitcoin Make Money? Many people are still purchasing Bitcoins for the asset’s investment value rather than its capabilities of being used as a medium of exchange. As such, the asset has a speculative side which cannot be ignored due to how it correlates with its price volatility. How To Get Bitcoin? How to get into Bitcoin is a fairly easy process. Aside from the Bitcoin mining process, the asset can be exchanged for standard currencies even though it is not backed by any form of government or central entity like a bank. The Bitcoin exchange rate against the US Dollar keeps attracting investors and traders. Luckily, even the uninitiated won’t be needing a “bitcoin for dummies” guide because the asset is normally bought through a Bitcoin exchange to which you can wire money or simply pay with your credit card. Just remember to look for BTC (BTC meaning is obviously Bitcoin but there are altcoins which might try to pose as the original). Bitcoin Mining: How Are Bitcoins Created? Bitcoins are created through a process which is open for everyone to participate known as Bitcoin mining. Bitcoin mining consists of solving mathematical puzzles by means of one’s computational power, meaning that mining systems will in fact compete with one another for the asset. How Do I Start Mining Bitcoin? Even though the bitcoin digital world welcomes all with open arms, mining new bitcoins isn’t really a Bitcoin for beginners type of thing. If you want to venture into mining Bitcoins, the most obvious entry barriers are the expensive ASIC systems which you will need and the high electrical bills they will run up. ASIC stands for application-specific integrated chip. Bitcoin ASIC systems are custom bitcoin mining machines and are unquestionably one of the largest investments for bitcoin miners given that prices start at 4 figures and miners organize thousands of these into their mining pools (one ASIC system alone will potentially generate less than one single bitcoin). Network infrastructure may also be an issue as miners will need uninterrupted internet access with the least possible latency. The Bitcoin mining process has thus turned into a costly endeavor with no guaranteed results. Bitcoin Security Explained Bitcoin is a decentralized currency which is distributed in a peer-to-peer network, making it very resistant to censorship and confiscation. Bitcoin technology boasts its safety by relying on several factors such as its blockchain, the fact that it is cryptographic, decentralized, and permissionless. Being public and decentralized boosts the asset’s security as nodes verify every transaction and maintain the ledger. As such, theoretically, one would need to control over half of all the nodes to be able to manipulate it, something which albeit not impossible is certainly highly unlikely. How To Use Bitcoin Bitcoin has been growing at a steady pace and some brick-and-mortar merchants have begun to accept it as means of payment for goods and services. Online, the asset has also found its way as an accepted online payment option on pair with credit cards or Paypal. How to Buy Bitcoin Buying Bitcoin is a straightforward process. A buyer will simply need to pick a broker, opt for a paying option (wiring money, credit card, etc.), place an order, and select a safe storage option for his or her coins. Keep in mind that you should be looking for Bitcoin or BTC and not things like “Bit coin” or “bitcoin cryptocurrency” because there have been known scams and fake coins, so stick with reputable brokers. Where Can I Buy Bitcoin? Buying Bitcoin is mostly done through Bitcoin brokers, many of which will ask you for your KYC data (know your customer data: name, address, and so forth). As such, some concerns were raised over the asset’s security and user anonymity, which is why non-KYC options were also created. However, non-KYC Bitcoin buying might not be entirely legal depending on where the buyer lives. Storing your Bitcoins There are different ways of storing your Bitcoins. Regarded as the safest way of holding Bitcoin, an offline wallet (also known as cold storage or hardware wallet) is usually the go-to option for most people because of how these Bitcoin wallets are not accessible through the Internet and thus keep the asset safe offline. By not being connect to the internet, cold wallets have a much smaller risk of being compromised. However, some will prefer to store the asset in hot wallets which run on internet-connected devices (phones, computers, etc.). Investing in Bitcoin Why Is Bitcoin Valuable? Scarcity is an important element to why Bitcoin has value. Having unlimited supply will obviously not translate to being a good store of value. Bitcoin supply is capped at 21 million. Another factor to consider is that the asset is being considered by many as “freedom money” given that it cannot be inflated away, nor can it be censored or confiscated. This makes it self-evident that Bitcoins are standing above concepts like sovereignty, user’s personal preferences, creeds, and so forth. Moreover, the monetary policy some of the newer crypto projects out there can be altered at a moment’s notice, whereas Bitcoin’s monetary policy was fixed at its inception, meaning that it is a much steadier asset than any of its other digital counterparts. Can Bitcoin be converted to cash? Bitcoin can be converted to cash through third-party broker exchanges. The process requires the seller to deposit his or her Bitcoins into the exchange and, once verification that the asset was received takes place, a withdrawal request for fiat currency can be made. The money will then be wired into the sellers account and usually the broker will require you to use the same account which is connected to it (as to prevent money laundering schemes). Another less used method one can resort to are peer-to-peer selling platforms.There are at least 3 things to consider before cashing out your Bitcoin: taxes, fees, and speed Bitcoin Investing Risks Every investment comes with risk. Bitcoin, albeit being a digital asset, is no different. In fact, there are some risks you should know about when dealing with BTC. Regulatory risk Decentralization comes at a price. As Bitcoin makes great strides into our everyday lives and begins to be recognized as legal tender, it inherently becomes a competitor to fiat, or government currency. Obviously, it can (and many are certain that it already has) become a digital medium for illegal activities such as money laundering, tax evasion, and other underground market payments. This makes it clear that governments will look into either regulate, restrict, or even attempt to ban its use and/or sale. Other efforts might include actively enforcing KYC requirements to brokers or having participants reporting transactions over a certain amount. Regardless, the lack of Bitcoin regulation, especially in a uniformed manner, will certainly make some weary about its longevity and universality. Security risk As the Bitcoin mining process barriers of entry get higher and higher, it comes as no surprise that many Bitcoin holders will have acquired it by resorting to one of the many available online exchanges. As it happens with everything digital, these exchanges are also risk prone either by malware, glitches or even hackers. If a hacker takes over one’s computer and manages to get his or her hands on a private encryption key, they will be easily able to steal Bitcoin (and remember, Bitcoin transactions are permanent and there is no insurance or refunds). The exchanges themselves are honeypots due to how some of their users simply aren’t resorting to holding their Bitcoin in safer places. Insurance risk Bitcoin accounts and exchanges are usually not insured in any way. However, some exchanges have begun to provide Bitcoin insurance to its investors, namely with FDIC insurance for a portion of transactions which involve cash. Fraud risk Bitcoin encryption through private keys allows for ownership verification and transactions to be registered. However, there have been known cases of scammers attempting to sell fake Bitcoin or operating Bitcoin Ponzi schemes. Market risk Bitcoin value fluctuates and cryptocurrency volatility is a quite common occurrence in the digital crypto sphere. As such, Bitcoin price swings are to be expected. As an example of how extreme things can go, Bitcoin fell about 80% in one single day in 2014. People have brought up the subject of the Bitcoin bubble time and time again, but the truth is that the project is holding on despite having plenty of competitors. So, Is Bitcoin a Good Investment? A good investment can be defined in many ways. Bitcoin investments can greatly vary due to how some people interpret it as a speculative short-term play while others see it as a hedge against inflation or aim for long-term adoption and appreciation. It will come down to one’s own perception and assessment of the investment’s risk and reward. What Are the Issues with Bitcoin? Volatility is still and issue with Bitcoin as is the lack of true anonymity. However, the main issue with the digital asset is as its popularity keeps growing, it becomes slower and slower, cumbersome, and, more importantly, expensive to use. Transactions take a long time to be validated and fees have skyrocketed, meaning that Bitcoin is slowly walking a path in which might lead to its unviability as medium of exchange. Electricity consumption has also been a source of concern. The History: Who created Bitcoin? While some people still believe that there is someone who owns Bitcoin, the truth is that Bitcoin has had a somewhat immaculate conception in the world of finance. It is a unique historical “accident” that one might say it would probably be impossible to recreate (as many of the newer digital projects have unfortunately shown us). Anonymous Bitcoin creator Satoshi Nakamoto (who can either be an individual or group of individuals) left the project very early on and as we all know every prominent cryptocurrency creator who sticks around can be turned into a single point of failure of the project, meaning that taking credit for the project could in fact hurt it. Moreover, Bitcoins value was near zero for a long time given despite having first mover advantage. That got to fly under the radar of both the public and the regulators unlike the newer projects out there. When Was Bitcoin Created? The Bitcoin white paper was published by Satoshi Nakamoto in 2008 and the original software which runs the asset was released the following year. Bitcoin Forking History Throughout Bitcoin’s history there have been some accounts of disagreement between miners and developers with even factions being created. These led to significant splits in the community which surrounds crypto and the asset, some of which led to the point in which a “fork” had to be performed on the network. Forking happens as developers or miners believe that a significant change must be made in the network’s protocol.In this particular case, the process led to the creation of a new type of Bitcoin with a completely different name. If the new coin is set to share the previous coin’s transaction history up to the split point, the process is considered to be a “hard fork”. Bitcoin Cash (launched in August 2017), Bitcoin Gold (launched in October 2017), and Bitcoin Satoshi’s Vision (launched in November 2018) were all a result of a hard fork in Bitcoin’s network. If the fork, however, allows for the protocol to remain compatible with its previous iteration, that it is known as a “soft fork”. Bitcoin’s functionalities like SegWit are a result of soft forks in the network. What is Bitcoin Concluded While some believe Bitcoin to be the future of currency, others see it as a speculative play. Regardless of how people see Bitcoin, the decentralized aspect of the project completely revolutionized finance and the world itself much akin to how gold overcame seashells many, many centuries ago. With no central control or oversight from governments or banks, Bitcoin is inessence an unbelievably strong social consensus with a monetary policy written in stone and a max supply which can be compared to a religious dogma. FAQ Can Bitcoin be Considered a Real Currency? Bitcoin is referred to by many as a form of digital currency and/or the main alternative to fiat money which is controlled by central entities such as banks. Bitcoin differs due to how no monetary authority can issue it and, as we know, currencies offer value due to their ability to operate as a store of value and, obviously, as a unit of exchange. People who aren’t digitally native or who can’t go beyond the concept of fiat currency may still wonder what do bitcoins look like but there are other countries which have made great strides into adapting themselves to this new currency. Countries like El Salvador, for example, have recognized it as legal tender, which means that if you ask someone over there questions like how to get into bitcoin, what is bitcoin and how does it work, they’ll have the answer on the tip of their tongue even if they don’t know bitcoins definition. The revolution might have just begun, and we might see Bitcoin being used on a daily basis much like credit cards. Why do people want Bitcoins? The reasons why people want Bitcoins can greatly vary. While some believe it will be the currency of the future, assuming that we’re going digital on all fronts, others just use it for speculative plays and quick profits. What makes Bitcoin a new kind of money? Mainly, what makes Bitcoin a new kind of money is its digital, decentralized nature. Many crypto enthusiasts call Bitcoin “freedom money”. Your bank accounts can be frozen, your licenses can even be revoked, the list goes on. If a government has immunity over their actions and is able freeze your assets on just the slight suspicion of wrongdoing (or if they find out you don’t support their “regime”) then it might be the time to do so and start looking at Bitcoin differently because they can try and try again but no one will be able to fully stop peer-to-peer bitcoin or lightning transactions to and from non-custodial wallets, meaning people will still be able to receive and send bitcoins as they please. What is the purpose of Bitcoin? Bitcoin’s original purpose was to provide a way for people to be able to send money over the internet and to provide a digital, decentralized alternative in what concerns payment systems. This is the main reason why some people out there love bitcoin more than cash. How Many Bitcoins Are There? By design, Bitcoins supply is hard capped at 21 million, meaning that its supply is finite.After the asset’s supply reaches 21 million, no additional coins will be generated. Is Bitcoin a Scam? Bitcoin is intangible but its value is certainly real and its presence in the financial world is robust and longstanding. With that being said, there are scammers out there who will try to swindle people with nefarious tactics and scams. Nonetheless, these problems are rooted in human behavior and not in the coin itself. The digital asset’s code is open source, and anyone can download and review it. Can you buy a house with Bitcoin? Buying a house with Bitcoins or another digital crypto asset is certainly a very real possibility. To do so, one should look for a real estate agency which has experience dealing with Bitcoins and crypto transactions. However, keep in mind that a mortgage on the property might not be possible due to how some banks are still hesitant on the asset. Even if the coin is world famous now, there are still many places where you’ll be asked what is btc. However, if the seller will accept Bitcoin, the only thing left is to negotiate the selling price in BTC. Who controls Bitcoin price? Bitcoin is not issued by an entity like a central bank, nor it is backed by a government. Accordingly, monetary policy, and other measurements of economic growth simply do not apply when dealing with Bitcoins. However, its price can still be influenced by a variety of factors like the digital asset’s supply, the market’s demand, the cost of producing it, the miners’ rewards, regulations regarding the asset’s sale and use, news developments, competing crypto, and so forth. How long does it take to mine 1 Bitcoin? The length it takes can vary depending on the block reward’s amount (how much will crypto miners will receive for generating a new block).It is estimated that on average a new block is produced every 10 minutes, meaning that a new Bitcoin gets mined approximately every 1.6 minutes. Is mining Bitcoin illegal? The legality of this process will most likely solely depend on your geographic location. As Bitcoin threatens fiat currencies’ dominance and governmental control, the digital asset has been declared to be completely illegal in some countries. With that being said, ownership and the coin’s mining process are still legal in many more countries than not.
Read this Term has rebounded past the $50,000 mark, and the tokens that belong to two competing chains, Ethereum and Binance Smart Chain (BSC), have also improved their price performances.
At press time, data from Messari showed that Ether (ETH) was up by nearly 17 percent over the past 24 hours, with a price of ~$1,690. Binance Coin (BNB), which is associated with the BSC, was up by nearly 30 percent, bringing the price to ~$265. Over the past 30 days, BNB was up by more than 530 percent; ETH was up by 27 percent.
While the price drops that started off the week may have shifted the discussion away from the roles that these two chains play in the cryptocurrency ecosystem, the market rebound has allowed some of the spotlight to shine back onto these two blockchains. The big question is this: which one of them has more long-term viability as the 'backbone' of the DeFi ecosystem?
BSC vs. Ethereum: A History in Brief The BSC initially appeared on the scene in September. A blog post detailing the launch of the chain said at the time that the “Binance Chain will enable the creation of smart contracts and the staking mechanism for BNB.” The post also mentioned that: “Any interested individuals and/or organizations can gather BNB stakes to become a validator of this new Blockchain
Blockchain
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others.
Read this Term .”
The blog post specifically said that the BSC was launched just “in time DeFi (decentralized finance) revolution, as the public shows increased interest in alternative financial solutions powered by blockchain.”
And indeed, the public was showing massive interest in the 'DeFi revolution'. The upward price movements of a number of DeFi-associated tokens were so powerful throughout June, July and August that the warmer months of the year came to be known as the 'DeFi summer'.
Throughout this 'DeFi summer', a great deal of the projects that were performing so well price-wise were struggling in another way. As DeFi was growing, the Ethereum network, the network that many of these projects were built on, was beginning to strain under the weight of their success.
At the time, Finance Magnates reported that the Ethereum network was raking in record-high transaction fees as increased network congestion stepped up transaction times and continued to slow down.
“The reason that the network fees went up was because of Ethereum’s popularity: the more users and protocols that the network attracts, the more transactions that are sent through the network,” Finance Magnates reported at the time. “The more traffic there is on the network, the more congested it becomes; as it becomes more congested, fees go up, and transaction times slow down.”
Was “the Demise of the Narrative That ETH 2.0 Is a Viable Future Platform” the “Biggest 2020 Development in DeFi”? As such, the conversation around the Ethereum network began to shift. The viability of the network, which is known as the original smart contract-enabled blockchain network, became uncertain. A growing number of reports emerged claiming that DeFi developers were looking beyond Ethereum for blockchains that could support higher numbers of transactions without skyrocketing fees or vastly slowed transaction times.
At the time, Stuart Popejoy, Co-founder and President of blockchain infrastructure firm, Kadena told Finance Magnates that: “the demise of the narrative that ETH 2.0 is a viable future platform” was the “biggest 2020 development in DeFi.”
Stuart Popejoy, Co-founder and President of blockchain infrastructure firm, Kadena.
Indeed, while Ethereum’s software upgrade to Eth2.0 is already underway, some members of the community believe that the update will take too long, and that another smart contract-enabled blockchain could become dominant in the meantime.
Competitors to the Ethereum network were already on the market when Ethereum began to struggle under the weight of the DeFi ecosystem: Polkadot, Cardano, Quantum (QTUM) and NEO, to name a few.
However, none of these competing chains seemed to have managed to pick up traction that could make them truly viable competition to good old Ethereum.
BSC Was Originally Billed as a “Support Network” for Ethereum Enter the Binance Smart Chain.
Right away, Binance Chief Executive, Changpeng Zhao (CZ) began to encourage DeFi projects to leave Ethereum in favor of the BSC. However, CZ has maintained that BSC is a 'support network' for the Ethereum ecosystem and is not intended to threaten the Ethereum network.
In a tweet that appears to have been deleted, CZ allegedly wrote in mid-September that: "BSC never aimed to replace ETH, BSC is just ETH-compatible. Smart projects are giving their users more options. Option for cheaper fees." At the time, CZ allegedly wrote that Binance Smart Chain transaction volume recently reached 10% of Ethereum's network a few days ago.
Then, in late October, he wrote that: “#BSC is not a #ETH replacement or killer. I believe ETH 2.0 will be awesome, when it comes out... Until then,#BSC is more like a #ETH 1.8. 100% backward compatible, faster and lower fees (97% lower).”
#BSC is not a #ETH replacement or killer. I believe ETH 2.0 will be awesome, when it comes out... Until then,#BSC is more like a #ETH 1.8. 100% backward compatible, faster and lower fees (97% lower).
— CZ 🔶 Binance (@cz_binance) October 29, 2020 “#BNB Started as a Token on #ETH, but Maybe #ETH Will End up as a Token on #BSC.” Since then, CZ has stated that BSC and Ethereum can continue to coexist with one another. “For those holding ETH, no need to attack #BSC. We together make the industry bigger. ETH price did not drop. It increases together with #BNB. Have an infinite mindset,” he wrote on Twitter on February 20th.
For those holding ETH, no need to attack #BSC . We together make the industry bigger. ETH price did not drop. It increases together with #BNB . Have an infinite mindset. Read: Infinite Game by Simon Sinek Innovation Stack by Jim McKelvey https://t.co/kRvNlh83GP
— CZ 🔶 Binance (@cz_binance) February 20, 2021 On February 23rd, CZ wrote that: “to think a new coin takes value away from existing ones shows a finite mindset. It's like saying whenever a new company is formed, Telsa or Google or Bridgewater loses value. That's not the case. The world is not finite. Value is can be created by more/new use cases.”
To think a new coin takes value away from existing ones shows a finite mindset. It's like saying whenever a new company is formed, Telsa or Google or Bridgewater loses value. That's not the case. The world is not finite. Value is can be created by more/new use cases.
— CZ 🔶 Binance (@cz_binance) February 23, 2021 However, CZ’s rhetoric seemed to take a more competitive turn against Ethereum when it was revealed earlier this month that the transaction volume on the BSC surpassed that of the Ethereum network. Indeed, on Wednesday, February 10th, reports emerged that the Binance Smart Chain (BSC) had surpassed the daily transaction volume of Ethereum by 30%. Then, on Thursday, February 18th, further reports emerged that BSC was processing 70 percent more transactions than the Ethereum network. On that day, BSC recorded 2.5 million transactions on its network; Ethereum processed 1.3 million transactions.
“As expected, I get a bit of ‘heat’ from #ETH lovers given the increased adoption of #BSC. I have no issues with ETH. We support it. We trade it. We futures it. We mine it. As a #BNB holder, I will of course continue to relentlessly shill #BSC and #BNB,” he wrote.
As expected, I get a bit of "heat" from #ETH lovers given the increased adoption of #BSC . I have no issues with ETH. We support it. We trade it. We futures it. We mine it. As a #BNB holder, I will of course continue to relentlessly shill #BSC and #BNB .
— CZ 🔶 Binance (@cz_binance) February 20, 2021 Later, he joked that that “#BNB started as a token on #ETH, but maybe #ETH will end up as a token on #BSC.”
Will Low Fees Be Enough to Carry BSC into the Future? And, indeed, while the two networks are coexisting for now, Binance seems to be betting on BSC’s low fees for future growth of the network.
On February 20th, a Binance spokesperson explained to Cointelegraph that the higher number of transactions may be due to lower fees on the BSC.
“BSC daily transaction volume is up by 300% from YTD and bolsters an ecosystem of 100+ DeFi projects,” the spokesperson said. “Furthermore, the platform has succeeded in maintaining GAS costs as low as $0.04. Compared to Ethereum’s $5.53, BSC is 135 times less expensive.”
Additionally, CZ retweeted a meme of a person holding an empty wallet next to the Ethereum logo captioned with: “After paying all these gas fees, #Ethereum logo makes sense to me.”
After paying all these gas fees, #Ethereum logo makes sense to me pic.twitter.com/ElzBMRKtAC
— Milana Valmont (@milanavalmont) February 21, 2021 ”Real Builders Make the Customers King and Their Needs #1 Welcome to Reality.” Whether or not CZ was fostering the “BNB vs. ETH” narrative, much of the crypto community seems to have been picking the narrative up on its own. Much debate has ensued over whether BSC or Ethereum will ultimately hold the crown as the premier chain of the DeFi ecosystem.
Ajit Tripathi, Head of Institutional Business at DeFi lending protocol, Aave, wrote on Twitter that: “my final take on #BSC is that consumers get to choose whether they want high throughput and low transaction costs, or security and autonomy. Fellow #Ethereum believers can either build and promote the tech consumers deserve or continue to do what Netscape did (ie assume victory).”
Ray Youssef, Chief Executive of crypto exchange, Paxul, also described the apparent surge of activity on BSC as par for the course: “The Eth bros are now seeing the cost of ignoring the customer,” he said.
The Eth bros are now seeing the cost of ignoring the customer. Cryptocrats are kings only in their own minds. Real builders make the customers king and their needs #1 Welcome to reality. https://t.co/PVTRNFH2pW
— Ray “Adewale⚡️Uwaifo” Youssef (@raypaxful) February 20, 2021 “Cryptocrats are kings only in their own minds. Real builders make the customers king and their needs #1 Welcome to reality.”
“We All Know BSC Is Not Going to Threaten Ethereum Long Term.” However, other members of the crypto community have questioned whether the surge in BSC trading activity is the start of a long-term trend or merely a short-term phenomenon.
“...Tbh, it is still far too early to say #BSC will replace $ETH,” wrote Andy Cheung, Founder & Executive Chairman of ACDX.io. on Twittter on February 19th. “Just a few years ago, a similar discussion was on $BCH & $BTC.”
Now all eyes are on #BSC . I do appreciate what @cz_binance has done. But tbh, it is still far too early to say #BSC will replace $ETH . Just a few years ago, a similar discussion was on $BCH & $BTC .
— Andy Cheung (@AndyC0125) February 19, 2021 Larry Cermak, Director of Research at The Block, also tweeted on the 19th that: “we all know BSC is not going to threaten Ethereum long term.”
“[...] It absolutely amuses me when Ethereum people start sounding just like Bitcoiners bitching about Ethereum. Just chill, take a breather and let the incentives play out,” he added.
We all know BSC is not going to threaten Ethereum long term but it absolutely amuses me when Ethereum people start sounding just like Bitcoiners bitching about Ethereum. Just chill, take a breather and let the incentives play out 🤝
— Larry Cermak (@lawmaster) February 19, 2021 ”Ethereum's Biggest Moat Is That ETH Has Been Deemed ‘Not a Security’ by the SEC.” Thibauld Favre, Chief Executive Officer at Fairmint, also pointed out on Twitter that he believes that BSC will not replace Ethereum: “Not for technical or philosophical reasons but for legal reasons: Ethereum's biggest moat is that ETH has been deemed ‘not a security’ by the SEC,” he said. “That's a massive competitive advantage.”
Does it mean that BSC could replace Ethereum? Rationally speaking, I'd say "no". Not for technical or philosophical reasons but for legal reasons: Ethereum's biggest moat is that ETH has been deemed "not a security" by the SEC. That's a massive competitive advantage.
— thibauld 🌍🔥⏳ (@thibauld) February 19, 2021 However, Favre did point out that Ethereum needs to address its technical shortcomings sooner rather than later. “As much as I love #ethereum, users & developers, unfortunately, don't care that it *has a soul* when retail is priced out for making transactions and developers are paying large fees every time they touch the blockchain,” he wrote.
“This reminds me of Linux. I remember thinking in the early 2000s that Linux was so vastly superior technically & philosophically to other proprietary competitors that it was bound to ultimately win the desktop. But, it never did... because end users never cared.”
The BSC vs. Ethereum Debate Will Be Settled by Users And, in the end, the users will be the ones who decide the fate of both BSC and Ethereum.
In fact, they already are, IDEX which is described as 'the first DApp on Ethereum', has recently made the decision to expand its platform to BSC. A spokesperson for the exchange told Finance Magnates that the platform plans to expand to Polkadot.
Alex Wearn, CEO of IDEX, explained to Finance Magnates that: “a major component of our decision is the fact the BSC is 100% compatible with Ethereum.”
“This means that we can deploy our application on top of BSC with almost no changes. Additionally, popular software wallets like Metamask also work with the BSC version of our application. This compatibility made it a natural choice for us and other protocols,” he said.
“Settlement on BSC is much cheaper than on alternatives, making it affordable for many more users. Within two weeks of launching we’ve already seen volume on our BSC version pass that of our ETH version, an accomplishment we largely contribute to the low settlement costs. BSC also contains many popular crypto assets such as BTC, LTC, etc., enabling us to offer more trading pairs to users.”
Of course, Ethereum’s community of dApps and developers remains larger than that of BSC’s. But, will it always be that way? Only time will tell.
Alex Wearn, CEO of IDEX.