Complete Guide to Mastering Bitcoin

Intro to Bitcoin ​Bitcoin (commonly denoted as either BTC or XTC) is a relatively new, rapidly growing, and open-source entirely virtual currency (or, cryptocurrency) system powered by its users. Part of its appeal is a decentralized nature, a lack of a middleman or a primary authority including that of a government or bank. This places the power directly into the hands of its users, Other appealing features are Bitcoin's simplicity in use, instantaneous payments, less expensive transaction system compared to other methods and the resulting freedom from transaction fees for users, somewhat anonymous payments (usernames are never revealed, only public digital wallet IDs and anonymity is further protected when users only use each Bitcoin address once), refreshing ease of international payments, and lack of need of a bank account to receive payments. 

Other cryptocurrencies and digital goods pose the problem of double spending, but this problem is answered by Bitcoin's unique blockchain system and peer-to-peer (P2P) network. Since its recent surge in popularity, many more people have grown curious about Bitcoin and how to utilize it for investment and profit, as well as acknowledging its possibility and potential as the future of a modern currency. ​New Bitcoins are generated by voluntary user computer power. 

When users engage in what is called mining, where transactions are verified by blocks being solved (covered more thoroughly in later chapters), hashes are created and a small compensation or fee is paid to the miner. Each time 210,000 new blocks are added to the blockchain, generally every four years in accordance with current trends, the feel is halved. 

The fee will keep being halved until it reaches zero and exactly 21 million Bitcoins are in circulation. Bitcoin symbol, a capital letter B with two falling strokes at the top and bottom. ​Renowned for its innovation in fraud control, cost efficiency, transparent payment ledger system, and global accessibility, Bitcoin transcends simply sending money back and forth. Some of its current common uses include donations, paying tips, micropayments such as those used to pay online services by the second, and crowdfunding campaigns such as those seen on Kickstarter. A list of verified and well-established foundations that accept Bitcoin donations can be found here: https://en.Bitcoin.it/wiki/Donation-accepting_organizations_and_projects. These include Blendernation, a project for the popular free 3D art modeling tool Blender, and LibreOffice, free open-source word software, as well as the Human Rights Foundation and Mozilla Foundation. 

There is even a church on the list, the Shoreline Unitarian Universalist Church. Universities are even jumping on board, as the University of Nicosia now accepts Bitcoins as a valid tuition payment. ​Other uses for the service are constantly being contemplated and eventually implemented, and what Bitcoin is not yet being used for is perhaps the most exciting. Bitcoins can even be used to purchase virtual gift cards on popular company website Gyft. ​Drawbacks to Bitcoin currently include the lack of universal acceptance of the currency, the constantly shifting value, and the fact that Bitcoin is still in beta and actively being developed. Most Bitcoin companies do not offer insurance and many features are still incomplete. 

Taxes and tax liability are still included within certain jurisdictions, according to the user's area, and users should be diligent in knowing their location's specific guidelines for the digital currency. ​Getting started with the basic aspects of Bitcoin, while seemingly overwhelming, is a relatively simple process once sufficient research has been done. ​A user begins by carefully choosing and downloading a digital wallet for their Bitcoins to be stored in. This is a delicate process as not all digital wallets are created with equal security or the same features, and so research must be conducted in order to make a wise, informed decision. Chapter six of this book discusses digital (and non-digital) wallet options and features in detail. ​Next, the user will add Bitcoins to their wallet using that wallet's address. 

Bitcoins can be purchased from a variety of places. The main website's buying page (found here: https://buy.Bitcoin.com/), however, is the first place many users start. A screenshot of the main website's buying page When the user is ready to receive Bitcoin, they share their public address with the future sender. When the user is ready to send Bitcoin, they enter the future receiver's public address into a Send box in their digital wallet. When the amount and receiver address are confirmed, they are sent. ​The History of Bitcoin. 

While Bitcoin is not the first cryptocurrency, it is the most successful. In 2007, a paper called Bitcoin: A Peer-to-Peer Electronic Cash System was published to a mailing list under the author name Satoshi Nakamoto. The paper described an electronic transaction system that would, in the fall of 2008, become Bitcoin. The first block of Bitcoins, the genesis block, was mined by Nakamoto himself.

This block was said to yield 50 Bitcoins, while today one block yields approximately 12.5 Bitcoins, thus increasing the demands and difficulty of Bitcoin mining. The first receiver of a Bitcoin transaction and long-time supporter and contributor was Hal Finney, for 100 Bitcoins. Nick Szabo – the creator of Bitcoin's predecessor, Bit Gold – was another early supporter. "Nakamoto" is believed to have mined one million Bitcoins before ceasing all involvement with the Bitcoin project.

There are speculations that Nakamoto was, in fact, several people under one name, but the true identity of Bitcoin's creator remains a much-discussed mystery. Developer Gavin Andersen took over as lead developer at Bitcoin's face community, the Bitcoin Foundation. As Bitcoin's popularity began to grow, more businesses and vendors began to accept the cryptocurrency, and as a result, the value of the coin began to expand. The first physical Bitcoin transaction to take place was when an individual paid 10,000 Bitcoins to order pizza. One of the early businesses to accept Bitcoin was popular computer dealer Dell and, naturally, Microsoft.

A current list of businesses who accept Bitcoins as payment can be found here: http://spendBitcoins.com/places/. In late 2009, the value of Bitcoin was established at 1,309 Bitcoins for $1, and Bitcoin 0.2 was publicly released. Mining difficulty increased for the first time. In 2010, the Bitcoin market cap hit above one million dollars. In five years’ time, one Bitcoin's worth rocketed from $0 to $1,000. ​In 2011, physical Bitcoins were created by a company in the United States. However, the U.S. Treasury did not approve when they discovered the company's actions. 

They have since closed down. Alderney was the first jurisdiction to begin and sustain the creation of physical Bitcoins and reportedly still does today. ​It has not been exclusive the United States. 

The Bitcoin donation given to Jet Li's charity sparked an interest of the currency in China. The first Bitcoin ATM was established in Vancouver, Canada. When Argentina's currency saw considerable inflation, Bitcoin rocketed in popularity in the country. ​Bitcoin has also not been exclusive to wholesome activities. 

Ross Ulbricht – under the username Dread Pirate Roberts – was arrested for operating the Silk Road website in 2013. The site made a good deal of money in running a Bitcoin exchange geared towards illegal activities, such as the sale of drugs, prostitution, and hitman services. Besides drugs and hitmen, Bitcoins are also capable of being used to buy pizza, cars, plane tickets, and several other goods and services, depending on the specific business and its location. ​Despite constant declarations of "the death of Bitcoin," the numbers have continued a steady climb over the last several years and Bitcoin has been gaining lots of media attention. 

Today, there are 20,000 computers acting as nodes, powered by Bitcoin miners. One Bitcoin is now worth approximately $4,000 and this value is still increasing over time. This is despite its chaotic changes, such as dropping in value by $200 in just one day and raising again the next. 2140 is estimated to be the year the last Bitcoin will be mined, but this is ultimately only an educated guess. Currency conversion chart for Bitcoin to US Dollar (2011 - 2017) ​Addresses. Before users can send or receive Bitcoins, they need to first obtain a digital address. Addresses are obtained upon download of the Bitcoin client or of a digital or online wallet. Bitcoin Core is the most popular client choice for users who have the free disk space to spare, while slightly more compact alternatives are available such as BLANK. 

Previously, popular clients Multibit and Multibit HD praised for their compactness, well-established reputations, and strong security are as of recently no longer in service. Prior Multibit users were encouraged by developers to move their wallets to Electrum due to ease of import between the two applications and Electrum's automatic multiple address pre-generation. ​When Bitcoins are sent, cryptographically signed messages are actually being sent and associated with the address of the recipient. The blockchain processes these transactions using non-biased mathematical equations ran by nodes, user computers mining blocks in return for profit. Typos are not a typical issue as Bitcoins cannot be sent to invalid addresses.

Via creating many different addresses and only using each address one time only for purchases, user anonymity can be sufficiently protected. Several addresses can be held within a single wallet, but there are some security advantages to using multiple wallets and storage methods. Users do not need to be online to receive coins but do need to be online to access them. Leaving the Bitcoin client running ensures the best connectivity, flow of the blockchain, and faster transaction speeds. ​User information is protected by these addresses. That being said, users do not always know who they are buying or selling from. Fortunately, the Bitcoin and blockchain systems rely on not needing an absolute trust of buyers or sellers, because the network itself takes care of ensuring the security of transactions. Bitcoin transactions cannot be canceled, user information cannot be traced, and anonymity is well protected. ​Buying Bitcoin. A new user's first Bitcoin purchase will usually take the longest, and then the process will significantly speed up. Where Bitcoins should be bought depends on the specific needs and goals of the buyer, namely how they would prefer to purchase Bitcoins (with a credit card, cash, etc.) and where they would prefer to go (offline and in-person versus online locations).

The limit to how many Bitcoins a new user can purchase is usually initially relatively small and grows as the user proves to be reliable. ​Two of the most popular places to purchase Bitcoins online are Coinmama and Coinbase. SpectroCoin is a popular option for users mainly in Europe, while Kraken serves as a popular and well-established place to buy and exchange Bitcoins as well as other cryptocurrencies. For users planning on buying Bitcoins with a debit or credit card, there is an increased chance of fraud as well as typically higher fees involved in the transaction process. ​

Local Bitcoin ATMs can be found in many areas using Bitcoin ATM maps, such as the Coin ATM Radar found here: https://coinatmradar.com/. There are currently approximately 1,560 Bitcoin ATMs in existence. Different models of ATMs can change how they're used to buy or sell Bitcoins. The different machine types are the Genesis1, Lamassu, Satoshi1, Robocoin, Skyhook, BitAccess, General Bytes BATMTwo, and General Bytes BATMThree.

A two-way Bitcoin ATM in Toronto that allows users to buy or sell bitcoins with cash. ​Despite some differences in these different models, a general buying process is followed by all ATMs. There may be first a verification step – such as providing a mobile phone number and entering a verification code sent to that phone – and then the user will provide their Bitcoin address for deposit, enter cash, and Bitcoins are deposited into the user's digital wallet upon confirmation. If a user purchases Bitcoins without previously having their own wallet already established, the Satoshi1 and BATMThree systems may print a paper wallet for the user. It is strongly encouraged to move Bitcoins from this receipt to a safer wallet as soon as possible, and paper wallets are not on their own a secure form of storage. ​

The only purchase methods that provide total anonymity and do not reveal any of the buyer's personal information are cash and cash deposit. Bank transfers, PayPal, debit or credit cards, and other methods may reveal identifying information. 

Cash exchanges, typically, have no limits, though the limit to how many Bitcoins you can purchase and how much you can spend will vary from seller to seller. 

​Selling Bitcoin. Users looking to sell their Bitcoins have three primary options; in-person sales, ATM sales, and online selling. Each selling method provides their own set of advantages and disadvantages regarding convenience, security, and timeliness. ​
In-person selling provides all parties involved with the most privacy and often buyers won't request any personal information from sellers. 

These sales are typically cash-only and sellers must execute caution when agreeing to meet up with potential buyers. LocalBitcoins is the most popular place to search for potential in-person Bitcoin sale opportunities. Most of these will include cash deposits in exchange for the seller's Bitcoins. The website can be found here:
https://localBitcoins.com/.

Local Bitcoin meetup groups are another option for in-person selling and possess the potential to connect sellers with regular buyers. Meetup groups, however, are not established in all areas. Meetup provides a list of groups for sellers to join, found here: https://www.meetup.com/topics/Bitcoin/. 

Searching for local Facebook groups involved in Bitcoin exchanges is another potential option, often providing more leads than Meetup can when conducted in smaller areas that are less aware of Bitcoin. ​In areas where there are Bitcoin ATMs, selling is occasionally an option from directly on the ATM. Many Bitcoin ATMs only offer the option to buy, but the Coin ATM Radar provides information and maps regarding which machines offer both buying and selling. 

Fees for these ATM exchanges should be carefully observed, as many fees will severely decrease profits and may not be at all worth it. ​Online selling is, naturally, probably the most popular and convenient Bitcoin sales method. This method does lack the same level of privacy that is offered by the other two methods. Users can create sell orders on available Bitcoin selling websites. If a buyer accepts the order offer, the buyer receives the seller's bank account information and makes a cash deposit. Popular websites used for selling include Coinbase and Circle Internet Financial (https://www.circle.com/en/), praised for its mobile texting format design. ​Legality. 

Despite any of those individual concerns, Bitcoin is legal in a majority of jurisdictions. Locations where foreign currency is restricted or banned, such as Russia, may pose a concern when using Bitcoin. While rules are still in the process of being established for virtual currencies such as Bitcoin, the Financial Crimes Enforcement Network of the United States Treasury Department has released legal guidance on its classifications regarding online virtual currency activities. In short, Bitcoin is a legal activity in most countries. ​Concerns surrounding illegal activities being more easily conducted using currencies such as Bitcoin, taking advantage of the system's ease of use and anonymity, are no different than those surrounding cash. Countries Where Bitcoin is Legal: ● Argentina ● Australia ● Bosnia ● Belgium ● Bulgaria ● Brazil ● Canada ● Colombia ● Chile ●  China – it is only legal here for private parties to exchange Bit Bitcoin, not banks, companies, or similar institutions ● Croatia ● Cyprus ● Czech Republic ● Denmark ● Estonia ● Finland ● France 

● Germany ● Greece ● Hong Kong ● Iceland ● India ● Indonesia ● Ireland ●  Israel – miners and traders here are taxed as businesses ● Japan ●  Jordan – discouraged by government, Bitcoins are accepted here by small businesses, but cannot be accepted by banks, financial companies, payment services, or currency exchanges ●  Lebanon – discouraged by government, but is regardless still legal ●  Liberland – the Free Republic here actually holds part of its reserves in digital currencies ● Luxembourg ● Malaysia ●  Malta – the country's 2017 prime minister has approved a national strategy to promote and encourage Bitcoin and blockchain systems ● Mexico ● Nicaragua ● Nigeria ● Netherlands ● New Zealand ● Norway ●  Pakistan – as of 2017, the Federal Board of Revenue is investigating digital currency trade for money laundering and tax evasion ● Philippines ● Poland ● Portugal ● Romania ● Saudi Arabia ● Singapore ● Slovakia ● Slovenia ●  Spain – Bitcoin transactions are subject to the same laws here as barter exchanges ● South Africa ● South Korea 

● Switzerland ● Sweden ●  Taiwan – ATMs dealing in Bitcoins are banned here, but the coins can still be purchased and used at popular convenience stores ●  Thailand – previously declared illegal in 2013, now business licenses are required to use or transfer Bitcoins ● Turkey ● United Kingdom ●  United States – it is taxed here as a commodity per IRS regulations ● Vietnam ● Zimbabwe Countries Where Bitcoin is Illegal: ● Bangladesh ● Bolivia ● Ecuador ● Kyrgyzstan ● Russia* *While Bitcoin use and trading in Russia is not yet technically illegal and is still considered unregulated, it is widely discouraged and generally considered illegal.

Anonymity. Bitcoin transactions do not use users' name, identity, or any identifying personal information. Only the user's public Bitcoin address is visible during transactions. However, the public address reveals how many Bitcoins a user has in their possession and every transaction that user has ever made. ​Users might hide their public address or IP address using services such as a VPN. Previously, users implemented the services of popular and well-established Bitmixer.io, but this website is no longer in service due to the owner's change of interests in deciding that Bitcoin's openness was not a mistake and the benefits of this system outweighed the benefits of individuals' privacy. 

The owner, in their parting note, commented on similar services to their own being used for illegal activity and how, because of this, privacy protection services like this one would all be ruled illegal in the near future.

With the closing of Bitmixer.io, many users speculated law enforcement became involved and demanding the high-profiting service be shut down. Bitmixer.io denied all claims of law enforcement involvement or government pressure and insisted it was simply a change of interests with the best intentions for Bitcoin's future in mind, concerned about the effect illegal dealings would eventually surely have on Bitcoin. However, there is a lot of user speculation that there was much more going on behind the shutdown of the website and services. Currently, there are no well-established alternatives to Bitmixer.io, at least not on the same level of success and user trust. ​Hacking and Quantum Computer Concerns. Blockchain technology is anti-fraud in nature in that it becomes more difficult to break into the more users are on the network. 

Today, Bitcoin's network has a computing power already greater than the world's fastest supercomputers. Taking over this network would prove to be very, very difficult if not virtually impossible. Hacking would be mostly futile anyway as there isn't much to be done once the network is taken over. Hackers cannot, from this network, steal other users' Bitcoin funds, create counterfeit or copy coins, or process false transactions. A hacker can reclaim their recently sent coins or prevent transactions from gaining confirmations. This kind of attack, however, would be extremely costly and would deplete many of the hacker's resources. 

The costs would far outweigh any incentives to hack the Bitcoin system, and the network would resume normal functions immediately when the attack came to a stop. ​While a sufficiently large quantum computer would be capable of disrupting the Bitcoin network, it is very unlikely for this to happen, let alone for it to do much damage, due to the way the Bitcoin system is set up. 

The top concern for this kind of breach would be against cryptography of public keys. It would take a relatively large quantum computer to perform this kind of breach, but it is a possibility using Shor's Algorithm. However, a quantum computer capable of performing this task against Bitcoin would need approximately 1,500 qubits. 

The biggest modern-day quantum computer only has less than 10. While it cannot be predicted how soon the kind of technology needed to execute a breach might advance, it is known that – in present day – it is impossible. One company, D-Wave, has made claims to possess a special-purpose quantum computer containing over 1,000 qubits. These claims have not been verified. In addition, a special-purpose quantum computer would be incapable of attacking Bitcoin technology. 

​Who Can Use Bitcoin? The use of Bitcoin is not restricted exclusively to business masterminds and computer geniuses, but rather can be used by practically anyone with the right information and tools at their disposal. Bitcoin mining, investing, and trading can be conducted as either an easy currency transaction system to buy everyday goods and services or as a promising new source of extra supplemental income. Bitcoin developers have stressed that they do not promise anyone investing or mining their coins to become rich, but there is still a variety of potential for a profit to be made. 

​The number of those using Bitcoin has grown enough that the total value of Bitcoin currency has exceeded 20 billion US dollars since the end of April 2017, and millions of more coins are traded in the network every single day. Popular businesses, stores, salons, and online services including well-known sites such as Reddit, among many others, use Bitcoin. While not every business accepts the currency, its popularity is continually growing. ​

Bitcoin for Business Owners. Cryptocurrency can be somewhat difficult to understand or embrace for business owners who aren't well versed in technology. What business owners should primarily know about accepting Bitcoin as payment for their goods and services is that it is a relatively simple process. Customers either scan a wallet code or click a button, payment shows up, and that payment is confirmed within an hour. These payments are also final, there are no chargebacks, which greatly reduces the risk of fraud for business owners. Bitcoin also removes all of the complications found in dealing with international currencies, including the fees. In addition to those benefits, accepting Bitcoin payments reaches out to a broader market and provides a sense of impressive modernity to customers. Payments in Bitcoins can be deposited into a banking account immediately and payment processors such as Coinbase 

(the most trusted payment processor for use in the United States, in addition to being free of fees and easily set up) handle all of the technical processing as well as keeping all sales records, making the exchange user-friendly and low maintenance. ​

The drawbacks to using payment processors are the same drawbacks found in most technology dealing with finances. Hacking and theft is always a possibility, as well as malicious entities releasing a business' information from the processors should they be compelled to do so. ​

Exchange Communities. Users can acquire Bitcoins through exchanges, user trading, payment for goods and services, or mining. Receiving payments through Bitcoin is as simple as downloading a Bitcoin wallet program on your computer or mobile device, generating a one-time usage Bitcoin address, sharing this address to the person you want to pay you, and then creating more single-use addresses whenever you need them. ​Exchanges allow you to interchange your other currency – such as U.S. dollar, PayPal, credit card, or debit card – for Bitcoins. This is how coins may be transferred between users. A master list of popular participarticipating Bitcoin exchanges can be found on Bitcoin's website, categorized by country, here: 
https://Bitcoin.org/en/exchanges. ​

To better understand Bitcoin amounts and their most current worth, a unit conversion chart goes as follows: ●  1 BTC = 1 Bitcoin ●  1 Satoshi = 0.00000100 BTC ●  1mBTC = 0.001000000 BTC ●  1 Bitcent (cBTC) = 0.01 BTC ●  1 BTC = 3,592 U.S. Dollars ●  1 BTC = 3,007 Euros ●  1 BTC = 399,067 Japanese Yen ​Blockchain Processing. 

A group of cooperating computers or nodes, operated by the system's users, is used to confirm Bitcoin transactions in the processing stage by entering them into the blockchain system after being agreed upon. 

These agreements, powered by the user-ran nodes, are based on unbiased mathematical algorithms and strict automatic rules. 

This entails allowing users to compete in utilizing their hardware to solve complex mathematical equations and in turn be rewarded with the Bitcoin transaction fees within the block. Each new block is added in this way to a preexisting chain, starting with block 1 or the genesis block. This process enforces a chronological order in the chain and protects network neutrality. 

Transactions must follow a very rigid set of cryptographic rules in order to be confirmed, and these rules do not allow previous blocks to be altered, replaced, or deleted. Bitcoin Core is a program designed to determine the authenticity of block transactions. Nodes are only capable of accepting valid transactions to be added to the blockchain. This protects the decentralized element of the blockchain network and Bitcoin. 

A lack of bias is also presented by the software following all the same mathematical rules to evaluate processing blocks. ​As the web begins to evolve and adapt to include Bitcoin and other cryptocurrencies, the everyday consumer will more often begin running into Bitcoin features and machines. Already in several small businesses Bitcoins are accepted as payments and Bitcoin ATMs are present. 

To further service to the everyday customer, there are discounts available to users shopping with their Bitcoins online. 

Apps and websites now exist enabling Bitcoin payments to be used on popular online stores and websites, such as Amazon. Purse.io is a website that provides just that capability for Bitcoin users. Here, a user can search for Amazon items and pay for them in Bitcoin at a discount compared to paying in U.S. dollars.

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