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Bitcoin has risen 51 times in value since the start of 2017.

Money that doesn't exist is worth more than oil and gold. I will tell you how you can make money on it.

Antonina Asanova

Tried bitcoin trading on the stock exchange

In May 2017 I tried bitcoin trading. In 2 weeks I earned 30%. Then I lost 15% in a month.

Cryptocurrency trading is a risky business. Here's what you should know if you like this kind of risk.

IMPORTANT

This article describes the author's personal experience. If you are planning to buy or sell bitcoins we recommend that you first check with your bank how the bank treats such transactions to avoid being suddenly blocked.

What is bitcoin

Bitcoin is digital money. The bitcoin does not physically exist, but there are special logs that keep track of who has how many bitcoins and where they are transferred to. These registers are called blockchains.

It's similar to the way cashless payments in banks are set up: when you pay with a card in a shop, you don't hand over any physical money or gold to anyone, either. It's just somewhere in the bank register that your transaction is recorded.

Bitcoins differ from regular currency in that registries are not stored centrally in banks and payment systems, but simultaneously on all the computers that are occupied by bitcoins. Anyone can view all transactions of all bitcoins throughout history.

The registers are protected by cryptography. It is impossible to tamper with them all at the same time. It is impossible to rewrite the data in the blocks and claim that someone now has millions. Bitcoin is pretty secure in that sense. It is true that there is already an attack that allows you to pay with the same bitcoins twice, so it is impossible to say that bitcoin is completely secure.

Where Bitcoins come from

Bitcoin is a currency that is issued by the state. It is very indirectly connected to gold reserves, but in fact it is not connected to anything - the state will print as much as it needs.

Bitcoins are not linked to any one state. New bitcoin units emerge as computers in that payment network serve the needs of that same network.

For example, somewhere in China, a person paid in bitcoins for a pizza. This transaction must be recorded in the registries on all computers which are connected to the Bitcoin network. To record the transaction in the registry, you need to seal it with a special signature, like a wax seal. This signature has to be calculated, which is a complex computer task.

Somewhere in Venezuela there is a computer that maintains the bitcoin network. It has just calculated this cryptographic signature. As a token of gratitude, the owner of this computer receives a reward in the form of a bitcoin penny.

For a Venezuelan who set his computer to compute cryptographic signatures, it looks like this: his computer rustles up something and bitcoin pennies drop into his account. It is as if the computer is mining bitcoins, when in fact it is simply encrypting and sealing other people's transactions. This sort of "mining" of bitcoins is called mining.

What is actually being mined is not the bitcoins themselves, but the "sealing wax" to protect the registries. Bitcoins are a reward for service.

The number of bitcoins is limited - there can be a maximum of 21,000,000. In the summer of 2020, miners have mined about 90% of the coins.

Mining is a separate big topic. In a nutshell: the equipment is expensive, the efficiency is low, you have to compete with the megawatt Chinese mining clusters that are built on power plants. We wrote a separate article about mining and published a reader's story.

Why Bitcoin is needed

The cryptocurrency allows you to transfer money under an alias and without the involvement of banks.

The average cost of transferring bitcoins in early April 2021, according to 

You can buy an AirBaltic ticket, a Dell computer with bitcoins. You can even donate bitcoins to a Buddhist temple in Seoul.

Bitcoins are traded on exchanges and invested in.

Since 2015, bitcoin has risen in value from $200-300 to $60,000 and continues to rise. This has made cryptocurrencies interesting for investment and speculation.

The interest is fuelled by success stories. In 2009, Norwegian student Christopher Koch bought $24 worth of bitcoins at random. He recalled the investment four years later, when his fortune reached $885,000. He used part of the money to buy a flat in Oslo.

Bitcoin wallets are used for transfers and payments. They store the digital keys needed for transactions. If you lose the private key, the money is gone forever. You cannot get them back by calling your bank. The bitcoin system has no single centre or regulator. According to chainalysis.com, about 20% of bitcoins are lost, an estimated $140 billion as of early 2021.

Under an alias is not anonymous

Bitcoin transaction registers contain the entire history of transactions over time for all wallets. If you bought something bad with bitcoins, and then somehow it becomes known that you have that wallet, an interested person will be able to see all your transactions.

For example, if you purchased a plane ticket with bitcoins and specify.

 

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