NEW ZEALAND – Guest Writer – A series of articles will be published to introduce you to Bitcoin and what you can do with the cryptocurrency. Some hints and tips are provided, including some links to websites in order to guide you in your endeavour to understand Bitcoin, the “Internet of Money”.
Firstly, what is Bitcoin? Bitcoin (BTC) is a virtual currency, digital not physical, and independent of banks. It is a peer-to-peer network supported by its users via computing power with no central authority. It was designed in 2008 by Satoshi Nakamoto (alias) and released publically as open-source software in 2009. It has gained popularity as an online method for payments and may be used for anonymous transactions and is irreversible, thus to be treated like cash. Bitcoin has proved itself to be a “store of value”.
Bitcoin is basically software that follows a protocol and utilises a technology called the Blockchain. The Blockchain is a digital ledger where transactions are recorded in chronological order and cannot be altered. Processing the transactions is called mining.
All cryptocurrencies such as BTC (crypto) utilise the Blockchain. As cryptocurrencies are software you might be required to download a virtual wallet for the cryptocurrency you wish to store. In some cases when you download a virtual wallet you must also download the entire Blockchain, but not in always necessary. There are different types of wallets all having different security measures.
Just keep in mind that because cryptocurrency is software, you can, therefore, make the software do something, this is very useful such as smart contracts. The algorithm that dictates the software protocol can also be useful ie. cryptography.
Bitcoin is the first cryptocurrency and as a result, most widely used and the most popular, however, there are many cryptocurrencies with different market-caps (http://coinmarketcap.com) and are referred to as altcoins. Any altcoin including BTC can also be referred to as ‘coins’. In order to buy altcoins, BTC is mostly used. BTC is currently the main ‘gateway’ to purchase other altcoins, however, there is also other ‘pairing’ with other cryptocurrencies including Fiat currency such as USD, YUAN, YEN, KRW.
The term cryptocurrency is the technically correct term that can be used with Bitcoin/altcoins. ‘Crypto’ pertains to cryptography and is the base of these virtual currencies. Cryptography is about constructing and analysing protocols that prevent the public from reading private messages and/or to secure transactions. This is an intriguing part of mining and a high knowledge skill base is needed to be profitable.
Most importantly remember most cryptocurrency enthusiasts believe strongly in being decentralised and anonymous.
What can I do with BTC?
You can trade on the markets, buy/sell alt-coins, buy/sell BTC, buy/sell commodities, buy/sell other real currencies, loan/borrow, mine (digital mining) and buy/sell real products or pay expenses. Basically, whatever you can do now with money you can do also with BTC, but easier and cheaper.
Different countries accept BTC at different places and are becoming more widespread for payments as more people adopt BTC. Many online stores now accept BTC as payment.
Currently, in Australia, you can pay for utility bills and pay certain phone carriers with BTC. Australia also has BTC ATM’s in the cities and is made available to the general public. In fact, many countries in Europe accept BTC as payments including eateries and hotels. Some governments are also gauging cryptocurrency (eg. Switzerland, Ecuador, China, Senegal, Singapore, Tunisia, Estonia, Japan, Palestine, Russia and Sweden to name a few).
People around the world have bought houses/property with BTC and it is now available to purchase certain high-end luxury vehicles. This is becoming more readily acceptable in many countries.
BTC was previously linked to certain Mastercard and Visa Cards (designed for crypto) where you could load BTC onto the card and use your card to spend the BTC by swiping the card. Recently, Visa stopped this globally without warning leaving some Bitcoiners without access to their funds. Regulation is an attempt to limit criminal activity. Read more here.
When you trade BTC, the fee for doing so is normally low (eg. five cents to a few dollars 0.5%-1.5% trading fee) making trading cost effective. In recent times transferring BTC to different wallets has been a hot topic for discussion. At the end of last year, 2017 the median price for transferring BTC was US$31-$52. This is a high cost compared to previous costs of only of a few dollars earlier in the year. There are various options the core BTC team are investigating to decrease these fees at a more reasonable rate. Issues such as high transaction cost and extended transaction time on the BTC network (blockchain), is giving rise to new altcoins which aim to fill the gap as a fast, efficient payment system such as Bitcoin Cash, Dash and EOT.
There are altcoins with actual use cases as well as crypto’s that are simply clones of BTC derived for speculation. Also, there are many more ways to invest rather than just trading cryptocurrencies. Investing in Initial Coin Offerings (ICO) or ‘Internet Start-Ups’ are an option but this is more of an advanced skill in regards to researching your target company. Read more on cryptocurrencies to watch in 2018
How much do I need to Know to be involved?
You only need medium technical knowledge to trade with BTC. The analysis of charts can be as easy or complicated as you wish. The majority of traders are only beginners as they buy and sell hoping the coin will go in their favour without knowledge of charts or research into a coin.
If you wish to just buy BTC or other altcoins and only hold them hoping for the increase in value (easy skill level), then this would be the option with the minimal technical knowledge required, although knowing about online security is important.
Easy to medium skill would be someone who can register themselves on a website and then told how to secure their login with two-factor Authentication (2FA). Basically, at this skill level, you should be able to login into certain websites and wallets once shown how and to follow instructions. You then could buy and sell anything (eg. crypto/$US/commodities/currencies etc) once shown.
Medium to high-end level would be having the understanding of securing your funds, to the analysis of charts (candle-stick analysis) with varying degrees of skill. This includes being at ease of trading and transferring crypto-currency although you may require help with problem-solving such as funds not received or taking a while to be available. Mining at an entertainment level where you are told how to get setup would be included at this level. Different strategies can be learned and how to mine other coins. You may not be profitable but will learn a lot until you do make a profit.
Mining would be high-level technical knowledge to make a profit and to set up a mining-farm (multiple mining computers connected together). You should have ease and understanding of crypto-currency with profound knowledge of security, such as anyone in who works in IT or a deep understanding with computers. One would expect ease of analysing charts and the impact of environmental, political and governmental influence on crypto. Having knowledge of the Blockchain is very important and the use of smart contracts.
Depending on the country of use, BTC maybe treated as commodity trading, currency trading or as property and therefore subjected to tax requirements. Not all countries recognise BTC, thus no tax is applied to any profits or any losses recognised. On 1 April 2017, Japan became the first country to pass a law making BTC a legal payment system, which revealed the cryptocurrency to the retail investor, “Mrs. Watanabe” as well as increasing institutional, merchant and consumer adoption. Is your country on this list? Click Here
In a series of upcoming articles, we will cover the subjects below. Stay Tuned!
How Bitcoin is Processed
How can we make money?
Electronically Processing BTC- Mining
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