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   CAN I MAKE MONEY WITH BITCOINS?

                                                            

WHAT IS BITCOIN ?

Bitcoin is a consensus network that enables a new payment system and completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user prospective, bitcon is pretty much like cash for the internet.

WHO CREATED BITCOIN ?

Bitcoin is first implementation of a concept called “crypto -currency” which was first described in 1998 by Wei Dai on the Cypherphunks mailing list, suggesting the idea of a new form of money that uses cryptography to control its creation and transactions, rather than a central authority. The first bitcoin specification and proof of concepts was published in 2009 in a cryptography mailing list by Satoshi Nakamoto.

Satoshi left the project in late 2010 without revealing much about himself. Satoshi’s anonymity often raised unjustified concerns, many of which are linked to misunderstanding of the open-source nature of Bitcoin. The Bitcoin protocol and software are published openly and any developed around the world can review the code or make their own modified version of the Bitcoin software. Just like current developers Satoshi’s influence was limited to changes he made being adopted by others and therefore he did not control Bitcoin. As such, the identity of Bitcoin’s investor is probably as relevant today as the identity of the person of invented paper.

Who controls the Bitcoin betwork?

Nobody owns the Bitcoin network much like no one owns the technology behind email. Bitcoin is controlled by all Bitcoin users around the world. While developers are improving the software, they can’t force a change in  the Bitcoin protocol because all users are free to choose what software and version they use. In order to stay compatible with each other, all users need to use software complying with the same rules. Bitcoin can

only work correctly with a complete consensus among all users.

Therefore, all users and developers have a strong incentive to protect this consensus.

How does Bitcoin works?

From a user perspective, Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and allows a user to send and receive bitcoins with them. This is how Bitcoin works for most users.

Behind the scenes, the bitcoin network is sharing a public ledger called the “block chain”. This ledger contains every transaction ever processed, allowing a user’s computer to verify the validity of each transaction. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses, allowing all users to have full control over sending bitcoins from their own Bitcoin addresses. In addition, anyone can process transactions using the computing power of specialized hardware and earn a reward in bitcoins for this service. This is often called “Mining”.

IS BITCOINS REALLY USED BY PEOPLE ?

Yes. This includes brick and mortar businesses like restaurants, apartments, law firms, and popular online sevices such as Namecheap, Wordpress, and Reddit. While Bitcoin remains a relatively new phenomenon. It is growing fast.

HOW DOES ONE ACQUIRE BITCOINS ?

As payment for goods or sevices.

Purchase bitoins at a Bitcoin exchange.

Exchange bitcoins with someone near you.

Earn bitcoins through competitive mining.

While it may be possible to find individuals who wish to sell bitcoins in exchange for a credit card or paypal payment, most exchanges do not allow funding via these payment methods. This is due to cases where someone buys bitcoins with Paypal, and then reverses their half of the transaction. This is commonly referred to as a chargeback.

WHAT HAPPENS WHEN BITCOINS ARE LOST ?

When a user loses his wallet, it has the effect of removing money out of circulation. Lost bitcoins still remain in the block chain just like any other bitcoins. However, lost bitcoins remain dormant forever because there is no way for anybody to find the private key(s) that would allow them to be spent again. Because of the law of supply and demand, when fewer bitcoins are available, the ones that are left will be in higher demand and increase in value to compensate.

HOW BITCOINS ARE CREATED ?

New bitcoins are generated by a competitive and decentralized process called “mining”. This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange.

The Bitcoin protocol is designed in such a way that new bitcoins are created at a fixed rate. This makes a Bitcoin mining a very competitive business. When more miners join the network, it becomes increasingly difficult to make a profit and miners must seek efficiency to cut their operating costs. No central authority or developer has any power to control or manipulate the system to increase their profits. Every Bitcoins node in the world will reject anything that does not comply with the rules it expects the system to follow.

Bitcoins are created at a decreasing and predictable rate. The number of new bitcoins created each year is automatically halved over time untul bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees.

WHAT DETERMINES BITCOIN’S PRICE ?

The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that must follow this level of inflation to keep the price stable. Because Bitcoin is still a relatively small market compared to what it could be, it doesn’t take significant amounts of money to move the market price up or down, and thus the price of a bitcoin is still very volatile.

CAN I MAKE MONEY WITH BITCOINS ?

You should never expect to get rich with Bitcoin or any emerging technology. It is always important to be wary of of anything that sounds too good to be true or disobeys basic economic rules.

Bitcoin is a growing space of innovation and there are business opportunities that also includes risks. There is no guarantee that Bitcoin will continue to grow even though it has developed at a very fast rate so far. Investing  time and resources on anything related to Bitcoins requires entrepreneurship. There are various ways to make money with Bitcoin such as mining, speculation or running new businesses. All of these methods are competitive and there is no guarantee of profit. It is up to each individual to make a proper evaluation of the costs and the risks involved in any such project.

Some concerns have been raised that private transactions could be used for illegal purposes with Bitcoin. However, it worth nothing that Bitcoin will undoubtedly be subjected to similar  regulations that are already in place inside existing financial systems. Bitcoin cannot be more anonymous than cash and it is not likely to prevent criminal investigations fron being conducted. Additionally, Bitcoin is also designed to prevent a large range of financial crimes.