Friday, 14 October 2016

What You Should Know About Bitcoin And Mining

For a while now I have been hearing bitcoin and mining everywhere i turn! At a point i felt the need to actually find out what it is all about and not be left in the dark each time i hear people talk about it. I did a little research and found out a lot about it which i also decided to share here.

I surfed the internet and asked people questions and i actually found out a lot about bitcoin and mining. This post is just a summary of what i got from various sources.
Image result for images of bitcoin

Bitcoin also called BTC, XBT, TBC etc is a cryptocurrency and a payment system invented by an unidentified programmer(s), under the name of Satoshi Nakamoto. Bitcoin was introduced on 31 October 2008 to a cryptography mailing list, and released as open-source software in 2009. There have been various claims and speculation concerning the identity of Nakamoto, none of which are confirmed.
The system is peer-to-peer and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called blockchain, which uses bitcoin as its unit of account. Since the system works without a central repository or single administrator, it has been categorized as a decentralized virtual currency. Bitcoin is often called the first cryptocurrency, although prior systems existed and it is more correctly described as the first decentralized digital currency. Bitcoin is actually the largest of its kind in terms of total market value.
Bitcoins are created as a reward in a competition in which users offer their computing power to verify and record bitcoin transactions into the blockchain. This activity is referred to as mining and successful miners are rewarded with transaction fees and newly created bitcoins. Besides being obtained by mining, bitcoins can be exchanged for other currencies, products, and services. When sending bitcoins, users can pay an optional transaction fee to the miners. This may expedite the transaction being confirmed.
In February 2015, the number of merchants accepting bitcoin for products and services passed 100,000. Instead of 2–3% typically imposed by credit card processors, merchants accepting bitcoins often pay fees in the range from 0% to less than 2%. Despite the fourfold increase in the number of merchants accepting bitcoin in 2014, the cryptocurrency did not have much momentum in retail transactions. Actually, some sources have warned that bitcoin users are not protected by refund rights or chargebacks. The use of bitcoin by criminals has attracted the attention of financial regulators, legislative bodies, law enforcement, and even the media. Though, bitcoin can provide legitimate financial services, criminal activities are known commonly attached to it. .

 Image result for images of bitcoinmining

(Bitcoin) Mining on the other hand is a record-keeping service. Miners keep the blockchain consistent, complete, and unalterable by repeatedly verifying and collecting newly broadcast transactions into a new group of transactions called a block. Each block contains a cryptographic hash of the previous block, using the SHA-256 hashing algorithm, which links it to the previous block, thus giving the blockchain its name.
In order to be accepted by the rest of the network, a new block must contain a so-called proof-of-work. The proof-of-work requires miners to find a number called a nonce, such that when the block content is hashed along with the nonce, the result is numerically smaller than the network's difficulty target. This proof is easy for any node in the network to verify, but extremely time-consuming to generate, as for a secure cryptographic hash, miners must try many different nonce values before meeting the difficulty target.
Every 2016 blocks (approximately 14 days), the difficulty target is adjusted based on the network's recent performance, with the aim of keeping the average time between new blocks at ten minutes. In this way the system automatically adapts to the total amount of mining power on the network.
Between 1 March 2014 and 1 March 2015, the average number of nonces miners had to try before creating a new block increased from 16.4 quintillion to 200.5 quintillion.
The proof-of-work system, alongside the chaining of blocks, makes modifications of the blockchain extremely hard, as an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted. As new blocks are mined all the time, the difficulty of modifying a block increases as time passes and the number of subsequent blocks (also called confirmations of the given block) increases.

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Cryptocurrency is simply a digital or virtual currency. It is the _direct opposite_ of fiat currency or paper money.

Digital or cryptocurrencies are used for online transactions and payments. Bitcoin, Onecoin, Litecoin, are a just a few examples of cryptocurrencies while Pounds, Naira, Dollar, Euro are examples of fiat currencies or paper money.

Of them all, Bitcoins is the one with the highest value and indeed, the most acceptable on the global arena.

It all started in 2009 when a Japanese man called Satoshi Nakamoto incensed by perceived anomalies and exploitation, invented the pioneer cryptocurrency called Bitcoin. To get people to accept and use Bitcoin, the people had to invest in mining the digital currency.

So people were invited to invest in mining the coins. But Central Banks and Commercial Banks fearing that if bitcoin succeeds in creating alternative currency, could threaten their relevance and existence, sponsored disparaging writeups and reviews against Bitcoin and it's founder. Unscrupulous journalists and bloggers were willing tools that were used in disuading people from investing in Bitcoin, calling it scam, ponzi and pyramid schemes. This scared away a lot of would-be investors.

However, there were those who took the risk and invested in Bitcoin in 2009, at a starting price of 10 cents. By 2013, the price of bitcoin had moved from 10 cents per coin to $200 per coin, thereby creating phenomenal fortune for ALL the early miners. Nobody lost their investment, rather all become millionaires and multi millionaires depending on amount invested.

Another thing you should know is that there are different types of bitcoin wallets which include Digital wallet, Electrum bitcoin wallet, Bitcoin paper wallet (which can be generated at, Trezor hardware wallet etc.

A wallet stores the information necessary to transact bitcoins. While wallets are often described as a place to hold or store bitcoins, due to the nature of the system, bitcoins are inseparable from the blockchain transaction ledger. A better way to describe a wallet is something that "stores the digital credentials for your bitcoin holdings" and allows you to access (and spend) them. Bitcoin uses public-key cryptography, in which two cryptographic keys (one public and one private), are generated. At its most basic, a wallet is a collection of these keys.
Software wallets (another form of wallet) connect to the network and allow spending bitcoins in addition to holding the credentials that prove ownership. Software wallets can be split further in two categories: full clients and lightweight clients.
  • Full clients verify transactions directly on a local copy of the blockchain (over 80 GB as of November 2016). Because of its size / complexity, the entire blockchain is not suitable for all computing devices.
  • Lightweight clients on the other hand consult a full client to send and receive transactions without requiring a local copy of the entire blockchain. This makes lightweight clients much faster to setup and allows them to be used on low-power, low-bandwidth devices such as smartphones. When using a lightweight wallet however, the user must trust the server to a certain degree. When using a lightweight client, the server can not steal bitcoins, but it can report faulty values back to the user. With both types of software wallets, the users are responsible for keeping their private keys in a secure place.
Besides software wallets, Internet services called online wallets offer similar functionality but may be easier to use. In this case, credentials to access funds are stored with the online wallet provider rather than on the user's hardware. As a result, the user must have complete trust in the wallet provider. A malicious provider or a breach in server security may cause entrusted bitcoins to be stolen. An example of such security breach occurred with Mt. Gox in 2011.
Physical wallets also exist and are more secure, as they store the credentials necessary to spend bitcoins offline. Examples combine a novelty coin with these credentials printed on metal, Others are simply paper printouts. Another type of wallet called a hardware wallet keeps credentials offline while facilitating transactions.

 Image result for images of buying and selling bitcoin

Now, let me say a bit about buying and selling bitcoins.

Bitcoins can be bought and sold both on- and offline. Participants in online exchanges offer bitcoin buy and sell bids. Using an online exchange to obtain bitcoins entails some risk, and, according to a study published in April 2013, 45% of exchanges fail and take client bitcoins with them. Exchanges have since implemented measures to provide proof of reserves in an effort to convey transparency to users. Offline, bitcoins may be purchased directly from an individual or at a bitcoin ATM. Bitcoin machines are not however traditional ATMs. Bitcoin kiosks are machines connected to the Internet, allowing the insertion of cash in exchange for bitcoins. Bitcoin kiosks do not connect to a bank and may also charge transaction fees as high as 7% and exchange rates $50 over rates from elsewhere.

Aside the criminal activities associated with it, there have been some Ponzi scheme concerns. Various journalists, economists, and the many others have voiced concerns that bitcoin is a Ponzi scheme. Eric Posner, a law professor at the University of Chicago, stated in 2013 that "a real Ponzi scheme takes fraud; bitcoin, by contrast, seems more like a collective delusion." But in 2014, reports by both the World Bank and the Swiss Federal Council examined the concerns and came to the conclusion that bitcoin is not a Ponzi scheme.

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Now, here is a few value forecast about bitcoin by some people.
Financial journalists and analysts, economists, and investors have attempted to predict the possible future value of bitcoin. In April 2013, economist John Quiggin stated, that bitcoins will attain their true value of zero sooner or later, but it is impossible to say when. A similar forecast was made in November 2014 by economist Kevin Dowd. In December 2013, finance professor Mark T. Williams forecast a bitcoin would be worth less than $10 by July 2014. In the indicated period bitcoin has exchanged as low as $344 (April 2014) and during July 2014 the bitcoin low was $609. In December 2014, Williams said, "The probability of success is low, but if it does hit, the reward will be very large." In November 2014, David Yermack, Professor of Finance at New York University Stern School of Business, forecast that in November 2015 bitcoin may be all but worthless. In the indicated period bitcoin has exchanged as low as $176.50 (January 2015) and during November 2015 the bitcoin low was $309.90. In May 2013, Bank of America FX and Rate Strategist David Woo forecast a maximum fair value per bitcoin of $1,300. Bitcoin investor Cameron Winklevoss stated in December 2013 that the "small bull case scenario for bitcoin is... 40,000 USD a coin".
And so on and so forth!
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Whew!!!! At this point, I realized that bitcoin is fast becoming a course and I need more time to fully exhaust everything about it. 
For now, this is where I will stop!

Helpful Sources: Wikipedia, Bitcoin
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Model, Computer Techie, PR, Social Media Marketer, App Developer, Freelancer, Blogger! . . . Oh, I forgot to add Social Worker! Plus, I like writing my thoughts down! . . AND . . I LOVE making new FRIENDS! . . . Contact me on social media -- Rosy Omeje


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