In the early 1990s the desire to remove centralized institutions for financial transactions in digital currency was needed. The problem came in that there was no reliable method of performing secure transactions while maintaining detailed information about the transactions to avoid theft, illicit use or double-spending.
It wasn’t until late 2008 when a white paper was released stating that a peer-to-peer cash system was developed following the file sharing model. At the time, Satoshi Nakamoto didn’t even know he had created a digital cash solution. He just wanted to invent a decentralized method of cash management.
How Digital Cash Was Created
To make digital cash an actual realization you had to overcome a single obstacle: Prevent double-spending without the use of a centralized institution. Many companies tried, and failed, such as DigiCash, Inc. It wasn’t until Satoshi invented Bitcoin that anyone even thought it was possible.
The idea is to use a database to convert transactions into data that relies on all previous transactions. This process is called a blockchain. What Satoshi did was remove the centralized entity (like a bank) and provide an encrypted method to handle every single transaction without duplication. This prevented a user from spending the same amount twice.
When the decentralized blockchain was created, the side effect led to digital cash. Cryptocurrency was born and Bitcoin was the only one to have it. Seemingly overnight Bitcoin skyrocketed to the top of the markets and was an instant success.
How To Get Bitcoins
There are tow standard methods for collecting Bitcoins: you can mine them or buy them.
Buying Bitcoins is a fairly straightforward process. You can use cash, dollars, pounds, euros, etc. and convert them into Bitcoins. Just like trading US dollars for UK pounds, you can trade your cash for digital coins.
The other method, mining, is a more complex scenario. Mining is the process of verifying a transaction and adding the details to the blockchain to prevent alteration. Once the transaction is added to the blockchain it is marked complete and the transfer goes through.
Here is how it works. If you were to send your friend a bitcoin, the transaction would begin. You make the request to send your friend the bitcoin and the request is sent to the node. The node is a series of peer-to-peer computers that are linked to each other.
Once the transaction request enters the node it is split among the node for verification. After you sign the transaction using your private key, every node in the system is updated with the transaction details. Using algorithms, each node verifies the signature and the transaction as valid.
Once the transaction is marked valid it is added to a block. The block is your transaction along with details of other verified transactions put together. The block is then added by miners to the blockchain where it becomes unable to be altered and acts as a record for all future transaction verifications.
The blockchain for Bitcoin is an ever-growing encrypted mass of past transactions that are used to verify all future transactions by combining the bits of the keys used. Only miners can verify transactions.
Mining is the use of the software for that particular cryptocurrency system to verify transactions. The reward for being a miner is payment with Bitcoins.
The Price of Bitcoin
Bitcoin skyrocketed almost overnight when the technology was proven to be effective. It soon reached milestones faster than anyone could have predicted.
By the end of the 4th quarter of 2016 Bitcoin had reached over $1000 USD. A year later through controversy and Bank of America baning the transfer of Bitcoin. China also put a ban on the transfer of cryptocurrency.
However, as of November 2017, the Chinese ban was lifted and Bitcoin value reached $20,000 USD in two months.
Bitcoin to USD
Cashing out Bitcoins and converting them to hard currency can be done through the cryptocurrency exchanges. Just like transferring any other funds, it is subject to current pricing and exchange rates.
On average a single Bitcoin is valued at about 98 percent of the current market share. At the time of this writing the market share is 15,341 USD and the exchange rate to cash out is $14,990.
The overall price and value of Bitcoin is expected to surge even higher in the next two years with the Chinese embargo lifted and the reliance on cryptocurrency becoming more prevalent.
When you hold digital currency, you need a place to store it. Because it is not a tangible item you can’t keep Bitcoins in your pockets or purses. Instead you use a virtual wallet.
A wallet is a digital folder that holds your transactions and secures your deposits. It works much the same way as your savings account at your local bank. You can log in and see your balance, make transfers, request exchanges or buy Bitcoin.
Once your money is in your wallet the security and details of it are known only to you. There are no records or proof and if your wallet is ever broken into or stolen you will have a very difficult time proving anything happened.
There are several companies that provide wallets for cryptocurrency such as Bitcoin. Each one will have pros and cons and you should research them individually to find which one will be best for you.
There are also wallet security issues you should adhere to help protect yourself. While this sounds dangerous and the threat of complete loss is always possible, bitcoin wallets have proven more safeguarded and secure than an account with a financial institution.
The main difference is that Bitcoin wallets are not insured or covered by any government or institution, such as the FDIC. Once you take control of your wallet, the security and verification of it are up to you.
You should also understand that while the Federal Government doesn’t recognize Bitcoin as an official currency, it still holds a value and as such you will be required to report it. When you file your income tax you must disclose your Bitcoin as part of your income, investments, withholdings or other status in accordance with your government laws.
Bitcoin Calculators are programs used to convert Bitcoins to cash, in any form. You can also use them to convert to or from other cryptocurrency denominations. For example, you can trade Bitcoins for Ripples or vice versa.
You should always check where the calculator pulls its exchange rates from. Most will use the cryptocurrency exchange rates just like a normal stock broker would use the current NASDAQ rates.
If you are unsure where to go, you can do an internet search for Bitcoin calculator and find many options available Once such option is coindesk, which has become one of the top cryptocurrency exchanges bases online.
Here you will find more information about the current Bitcoin exchange rates, which denominations you want to convert too as well as trusted partners to buy or sell Bitcoins directly.
Buying Bitcoin is just like buying stocks or EFTs. You will find a dealer, or broker, and make a purchase based on the current rate. When you buy Bitcoins, you will need a wallet to store them in and a secure method of transferring.
Most sellers and vendors will provide the secure transfer for you, but you will be required to either pay a trade fee, or have a minimum order amount.
Bitcoins as a currency is a revolutionary thing that wasn’t even possible 15 short years ago. It wasn’t until Satoshi Nakamoto stumbled upon a peer-to-peer method for having a decentralized financial system that was both secure and virtually unbreakable that cryptocurrency was even more than an idea.
Since 2009, Bitcoin and other cryptocurrency companies have blossomed. With talks of China lifting the ban on cryptocurrency import, the sky really is the limit for the value, security and availability of the cryptocurrency craze.
You should understand that even though the process is now a decade old, it is still highly scrutinized and very volatile. Bitcoin is still in testing phases and each new advancement makes it stronger while still producing other avenues of illicit use or damaging issues.
Having Bitcoin will allow you to make transactions, purchases and sales on the internet virtually instantly. All with a secure and untraceable system of record keeping. However, because Bitcoin and all cryptocurrencies are valued based on their current exchanges, you need to watch them closely.
You could end your day with enough Bitcoin value to retire and wake up with nothing. Bitcoin is an investment and a risk just like any other high-risk stock, EFT or fund. It should be treated as such and closely monitored at all times.