Things to know before investing in Bitcoin
Bitcoin is a decentralized digital currency build using peer-peer technology functioning without any central authority or agency controlling the value. Issuing, managing, valuing were managed by the network of users itself.
Bitcoin is an open-source, publicly used currency that can be used to pay for a transaction. First Cryptocurrency was invented in 2008. The currency started transactions in 2009. Each transaction will be verified through cryptography and recorded in a public ledger called the blockchain.
It is the first and most valuable cryptocurrency. It reached the market capital of 1.1 Trillion US Dollars in 12 years of its existence. It became popular in social media and every normal investor was at least holding few pieces of Bitcoin.
How does the Bitcoin work?
A bitcoin transaction is verified in a ledger called the blockchain. Like any other currency, Bitcoin should be mined, the transaction is done from one peer to another and stored in a ledger.
Bitcoin should be mined or created by the process called mining. Mining is the process of solving the mathematical problem through hashing, this process indeed creates Bitcoin every 15 minutes once as a reward to Miners. Mining can be done using a high-end GPU. Only 6.25 bitcoin is provided as a reward every 15 minutes.
Thousand and thousands of miners will be competing for getting the reward, miners with better GPU as more chances of getting rewards. Mined bitcoins will be stored in crypto wallets. Miners can then sell the bitcoins in market place into Fiat currency like Dollars, Yen, Rupees, etc.
How coins created in a specified time frame:
In its lifetime, only 21 Million bitcoins will be available. Currently, 18.5 Million bitcoins were available in the market circulation and all the bitcoin will be mined by 2140.
From May 2020, 6.25 bitcoin is given as a reward for every 15 minutes for miners. So remaining 2.5 million bitcoins will be mined by 2140. Every 4 years once, the reward for mining will be halved. That means by 2024, the reward will be 3.125 bitcoins every 15 minutes.
Miners will not only receive the bitcoins but also receives the transaction fees of all peer-peer transaction performed. Even after 2140, the transaction fees will be collected by the miners. Transaction fees will be ideally 0.25-0.5 bitcoin.
Brief History of the coin and its holding:
The domain name bitcoin.org was registered on 18 August 2008. On 31 October 2008, a link to a paper authored by Satoshi Nakamoto titled Bitcoin.
After early “proof-of-concept” transactions, the first major users of bitcoin were black markets, such as Silk Road and Tor.
In 2011, the price started at $0.30 per bitcoin, growing to $5.27 for the year. The price rose to $31 on 8 June. Within a month, the price fell to $11.00. The next month it fell to $7.80, and in another month to $4.77.
In 2013, prices started at $13 rising to $770 by January 2014. On 1 July 2018, bitcoin’s price was $6,300. The price on 1 January 2019 was $3,747, down 72% for 2018 and down 81% since the all-time high. On 30 November 2020, bitcoin hit a new all-time high of $19,860 topping the previous high from December 2017.
In February 2021, Bitcoin hit 50,000 marks for the first time. Most of the bitcoins were owned by 0.5% of the wallet. Once they start dumping the bitcoin, the price can fall drastically. Bitcoin is a speculative currency. It is extremely volatile, it can lose 50% -60% of its value in a month and can double in a month unlike any other instrument in the market.
Market cap and ranking of the coin:
The current market cap of Bitcoin is 700 Billion and it is the first ranked cryptocurrency. It reached the peak market cap of 1.15 Trillion in April 2021. Bitcoin is traded in almost all crypto exchanges. People invest in bitcoin even to buy another cryptocurrency.
How to Buy/invest:
Bitcoin can be bought in any of the top crypto exchanges like Coinbase, Binance, warix. Bitcoin will be bought using any other cryptocurrency or any fiat currency based on the currency day’s price. Transaction fees will be marginally around 0.1-0.5% of the total value bought.
How to mine:
Mining is a record-keeping service done through the use of computer processing power. Miners keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block, which is then broadcast to the network and verified by recipient nodes. Each block contains an SHA-256 cryptographic hash of the previous block, thus linking it to the previous block and giving the blockchain its name.
Power consumption for bitcoin is about 0.5% of the total consumption of the whole world. It is the primary reason Elon musk came out rejecting payment for Tesla causing the fall in price by May 2021.
Solo miners should have a room full of hard devices full of GPUs to solve the mining problems of Blockchain. The regard from the Blockchain will not be split between many people One person gets the reward based on the problem-solving.
For Example, Bitcoin provides 12.5 bitcoin for every 15 mins and it will be paid to a person who solves the problem at that time. The remaining millions of miners will not get paid. To get the reward, you need large hardware requirements to compete will large blockchain farms. Many software companies possess acres of mining farms with the latest GPU to get rewarded. If you are not having more hardware, it is better to start mining coins for a new blockchain where competition is low. So it increases the probability of getting the rewards.
Join the pool:
To solve the mining problem for solo people, Blockchain can be mined using a pool of miners. The pool consists of many solo miners using their hardware devices to solve blockchain problems. Miners get paid based on the performance and hash rate of their machine. You can use your existing computer to mine. You can use the CPU or GPU of the machine to mine for the pool. The reward from the pool may not be transparent but you will be paid in coins and you can use the rewards transferred to your digital wallet.
Best Pool for Bitcoin Mining: https://slushpool.com/home/
Solo Mining Software: https://bitcoin.org/en/download
Best Exchange: https://www.coinbase.com/join/jayend_r