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Bitcoins Checklist For Newbies was summarized from long article about bitcoins  for easy reading. Originally, I wrote these checklist for my own research, since I’m beginning to indulge myself into cryptocurrency thingy. But, at second thought I decided to post it here for sharing and especially dedicated to Micha.
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Bitcoin Background

First Successful Cryptocurrency

Originally meant to be a peer-to-peer payment system  to Addressed the problem of double spending

Founder: Satoshi Nakamoto (pseudonym)

Year Invented: 2008
Technology Used: The Blockchain

1 bitcoin = 100,000,000 Satoshis
Only 21,000,000 bitcoins will ever be created

No actual intrinsic value
Only took 5 years to breach $1000 mark

Bitcoin Advantages

  •   Very fast payments
  •   Very low transaction fees
  •   Can pay or receive bitcoins anytime of day
  •   Don’t need a bank account
  •   Decentralized, open-source, transparent
  •   No banks or government controls it
  •   Not subject to politics and corruption
  •   Anyone can create a bitcoin wallet
  •   You have total control of your bitcoins
  •   Protects users from identity theft
  •   Transactions are irreversible once verified by network
  •   No threat of chargebacks

    Disadvantages of Bitcoin

  •   Extremely risky
  •   High volatility
  •   Still relatively new
  •   Not fully matured and developed

What You Can Buy with Bitcoins

  •   Common household items
  •   Gift cards
  •   Video games
  •   High-tech gadgets
  •   Plane tickets
  •   Rent vehicles
  •   Pizza, burgers, sandwiches, etc.
  •   Coffee, beer, etc.
  •   Donate to charity
  •   Reddit gold
  •   Many more items!

Methods to Acquire Bitcoin

 Buy bitcoins

  •   Fastest method of getting bitcoins
  •   Will need to spend fiat money
  •   Top cryptocurrency exchange / brokers: Coinbase/GDAX o Kraken
  •  Cash exchanges LocalBitcoinsWall of Coins
  •  Trade other cryptocurrencies for bitcoin

– Great if you already have other crypto

– Don’t need to spend fiat money

  •   Crypto to crypto exchangeo ShapeShift

 Get paid with bitcoins

  •  Work for bitcoins
  •   Sell products or services
  •   Receive tips from customers
  •  Complete small tasks on websites, such as:

    Complete surveys

o Watch videos
o Click ads
o Answer questions
o Sign up for trial offers
o Download mobile apps
o Play online games
o Shop online
o Join bitcoin faucets
o Get a few Satoshis at regular intervals

 Mine your own bitcoins Bitcoin Mining

 Role of miners
 Verifies transactions
 Create new bitcoins
 Without miners, there will be no new bitcoins

Bitcoin Mining Terminology

  •   Blocks
  •   Bitcoins per block / reward
  •   Bitcoin difficulty
  •   Electricity rate
  •   Hash
  •   Hash rate
  •   Pool fees
  •   Power consumption
  •   Time frame

Bitcoin Mining Hardware Used By Miners

  •   CPU (Computer Processing Unit)
  •   Used in the early days
  •   GPU (Graphical Processing Unit) – More efficient than CPUs
    – 50-100 times more productive than CPUs
  •   FPGA (Field-Programmable Gate Array)
    –  More powerful than CPUs and GPUs o Less power hungry
  •   ASIC (Application-Specific Integrated Circuit) o Primary hardware used today
    –  Used solely for mining
    –  Most efficient hardware –  Consumes less power than FPGAs

Mining difficulty

–  Average mining time – 10 minutes

–  More miners, mining difficulty increases

Mining rewards

  •  Reward is halved every 210,000 blocks
    Initial reward was 50 bitcoins
    November 28, 2012 – reward was halved to 25 bitcoins o July 9, 2016 – reward again halved to 12.5 bitcoins
    Year 2021 – reward will drop to 6.25 bitcoins
  •   Mining pools
    Allow miners to pool resources
    Divide bitcoin reward among themselves
  •   Cloud mining
    No need to buy own hardware
    No need to worry about electric bills o Pay a subscription fee start mining o Very few legit cloud mining sites
    Most are Ponzi-style scams

Bitcoin Wallets

 Hot wallets
o Easy and free

o Can be hacked
o Can be accessed anywhere with Internet

o Private keys are stored online
o Example hot wallets

  • Online wallets from crypto exchanges
  • Mobile app wallets
  • Desktop wallets

 Cold wallets
o Very difficult to hack

o Offline storage
o Much safer than hot wallets o Example cold wallets

  • Paper wallets
  • Hardware wallets

Common Bitcoin Scams

 Fake bitcoin exchanges
o Offers too good to be true exchange rates o Unknown in the industry

 Phishing scams
o Email phishing scams o Malware scams

  Ponzi scams
o Offers outlandish ROI
o Usually guarantees daily profits forever

  Cloud mining scams Trading vs Investing

 Trading is short-term
o Takes advantage of volatility o Buy low and sell high method o Very risky

 Investing is long-term
o Buy and hold method
o Dollar cost averaging method

Future of Cryptocurrency

  •  Blockchain technology will become mainstream
  •   Combat crime and corruption
  •   Massive adoption in developing economies

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