Cryptocurrency is a digital currency that has significant differences from real money. The first ones are a code based on a special block chain, called a blockchain. This feature allows any cryptocurrency to be maximally protected from hacking. It can exist only on the Internet.
For the extraction of coins using a specially built farm with large computing power. They are necessary for solving blockchain blocks, for which they give cryptocurrency.
The first and most popular of them is Bitcoin. Appeared in 2009 thanks to the efforts of Satoshi Nakamoto. Until now, no one knows what kind of person that once again confirms the security of the crypt as a whole.
Until a certain time, I could not find good value for myself, and those programmers who knew about the system and the coin did not believe in their success, but later a real “boom” occurred, after which the whole world learned about Bitcoin. Today there are hundreds of thousands of transactions every day.
The principle of operation of Bitcoin and BlockChain technology
In order to store Bitcoins somewhere, you need to create a wallet with a public address and private key. The first one is the wallet number, you can transfer funds to it (you can draw an analogy with any e-wallet services like JAD, WM, Qiwi, PayPal), and the second is a password that is known only to the owner of the address.
Transactions are accomplished by using a blockchain — a chain of blocks that cannot be cracked. Information is transferred from one unit to another, which allows you to create not only a safe coin, but also a decentralized one of the biggest advantages of any cryptocurrency, because it becomes beyond the control of any government.
The work of the blockchain consists of five stages:
- Decide on the network within which the transaction will take place.
- The operation enters the network, after which a new block is formed, which has a connection with the previous block. This forms a chain of blocks.
- After creating a new block, information about it is distributed to all nodes of the system, which allows you to add a block to the database.
- After that, the block receives its place in the chain, as well as the private key, which gives access to information only to its owner. All the rest will be able to find out only general information about the operation performed.
- Now the block is a full part of the whole chain.
What is a bitcoin address?
The bitcoin address is an alphanumeric identifier of the account, which can be interpreted as a QR code. Each address has an owner, but there is no information about it. Anyone can get the address; you only need to install software for BTC.
The address will be used as a wallet in electronic money systems. In contrast, no proof of identity is required, which allows the owner to be made anonymous.
What can you do with virtual money
Bitcoins allow you to make transactions. Transfer of funds can be directed not only to the exchange of large sums, for example, between global companies. Something to pay for BTC can also be an ordinary person, for example:
- a restaurant;
- hotel;
- the Internet;
- products;
- utilities, but only in some parts of the world;
- car rental and more.
The development of Bitcoin allows you to find more and more places where the crypt is taken. But if this kind of money is inconvenient for a person, then he can easily exchange them for USD or Euro in an online exchanger that works with coins.
Also some people make money on bitcoin. There are many exchanges that allow you to trade cryptocurrency in the same way as real money. With sufficient experience and knowledge, you can get a large flow of funds, but you can easily go bankrupt.
How to earn them
There are several ways to make money. Each of them has its pros and cons, so you should carefully consider all the methods.
Mining (classic, cloudy)
Mining is the extraction of currency at the expense of computing power. This is the first way that enthusiasts used to get virtual coins. For the classic version of the user will need a real farm, consisting of a large number of video cards, processors or other components.
Such an event was especially profitable at the beginning.
When taking into account everything needed to build a farm (expensive equipment, cooling system, supply of a sufficient amount of electricity), many reject the idea of creating their own mining point. She simply ceases to bring substantial income.
Cloud mining is a mining that uses rented power on a large farm. The client simply pays the rent to the power of interest that generates a certain coin, for example, Bitcoin, and then waits for the receipt of funds.
In fact, such services are located mainly in countries with cheap electricity and a cold climate, which allows saving on cooling and increasing the efficiency of the farm.
Purchase sale
All cryptocurrencies have a feature - instability. Bitcoin can drop several thousand dollars in a day, and then rise to a value that exceeds this amount. Due to this, many traders are moving from the world of forex, securities and real currencies into a crypt.
The system of earnings on the purchase is very simple:
- The user tries to buy BTC as cheap as possible.
- When the course rises - BTC is sold.
Thus, the user receives a profit, expressed in monetary terms. But in the area of exchanges there is a large number of fraudsters, so before choosing the exchange on which the work will be conducted, it is necessary to familiarize yourself with its reputation.
Bitcoin Futures
Futures are a financial instrument that originates in a derivative. A derivative is an agreement between the parties to a transaction based on the future value of the underlying asset. To complete a transaction, a basic asset is required, which in this case is Bitcoin.
Futures are the most common type of derivative transactions. This is a futures contract that allows you to buy or sell an N-amount of an asset at a fixed price until a certain point in time. When the deadline expires - must be committed to the sale between the parties. The sale of futures themselves is permitted until they expire. Futures are transferred as part of the total value.
The average futures price varies in the region of 10-15 percent of the total transaction amount. Such a transaction allows you to get a relatively high income compared with the usual purchase and sale.
Example:
Bitcoin costs 10,000 USD, but the trader expects a further increase to 14,000 USD, so he concludes a 1-month futures contract with 10 percent of the security. This made it possible to acquire BTC at the market price.
As soon as the price reaches 14,000 USD, the contract can be sold to another market participant, receiving additional funds (in this case, 10% of 14,000 USD = 1,400 USD). But you can also keep the contract at home, if the forecasts say a further increase in value.
But provided that the price has not reached the specified point (in this case, 14,000 USD) after the expiration of the contract, the transaction closes at the market price. This does not allow losing more money than was invested in the contract.
Advantages and disadvantages of cryptocurrency
Cryptocurrency, like any phenomenon, has its pros and cons.
Benefits:
- Money can be mined using mining. It can be used for classic or cloud mining. Today, the second method is more preferable, since the threshold for entering it is much lower than when acquiring its own computing power.
- Transactions are completely anonymous, and access to the purse number does not give any information about its owner.
- The coins are absolutely decentralized thanks to the blockchain system, which does not have a specific place of existence. This allows you to get rid of the influence of politics and any state on the crypt.
- Each cryptocurrency has a limited circulation (a limited number of blocks that can be generated), which does not allow an excess emission to occur in any case.
- Cryptocurrency is well protected thanks to a unique electronic code. This allows not only to be protected from thieves, but also from counterfeit coins.
- Transactions have minimal fees. The only way to lose money when transferring is to use banks and other third parties (for example, exchangers that allow you to get fiat for bitcoins - real currencies: euro or rubles).
Disadvantages:
- Loss of the password from the wallet or the wallet itself means a complete loss of money. This is the negative side of security, as only the address owner has access to the password.
- High volatility has a negative effect on the rate of coins - it can quickly soar, and just as quickly fall. This makes any crypt completely unpredictable. The United States and China have a particularly strong influence.
- Cryptocurrencies can be prohibited by decision of various legal structures, or restrictions on crypto operations are imposed.
- With each mined block, getting the coveted reward becomes more difficult. This is due to the limited amount of coins available in the system.
Bitcoin is a promising direction, but very unstable. It is for this reason that countries are not ready to accept a crypt as equal to ordinary currencies. Due to the external simplicity, the concept of Bitcoin may become known to everyone, but in fact, behind the simplicity of any crypt there is a blockchain, the possibilities of which are still not fully known.
