Bitcoin Explained

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Bitcoin which happens to be the first and most famous digital cryptocurrency has been racking up headlines due to a breathtaking rise in value.

However, the idea behind Bitcoin still seems to be strange to some. A lot of questions regarding the digital currency still bothers them. We intent to shed more light on the bitcoin currency in this article.

What is Bitcoin?
How Can You Mine Bitcoin?
How is The Value of Bitcoin Determined
What Are The Risks Involved in Bitcoin?
Are Bitcoins Legal?
Is Bitcoin a Good Investment?
Pros and Cons of Bitcoin Investment
Bitcoin Merchant Services
Bitcoin Mining Cloud Computing
How to Buy Bitcoin in Australia
How to Invest in Bitcoin
Top 10 Bitcoin Investment Platforms
6 Best Bitcoin Mining GPU

What is Bitcoin?

Bitcoin, often described as a cryptocurrency, a virtual currency or a digital currency – is a type of money that is completely virtual.

It’s like an online version of cash. You can use it to buy products and services, but not many shops accept Bitcoin yet and some countries have banned it altogether.

The physical Bitcoins you see in photos are a novelty. They would be worthless without the private codes printed inside them. Each Bitcoin is basically a computer file which is stored in a ‘digital wallet’ app on a smartphone or computer.

Bitcoin was invented in 2009 by a person (or group) who called himself Satoshi Nakamoto. His stated goal was to create “a new electronic cash system” that was “completely decentralized with no server or central authority.”

After cultivating the concept and technology, in 2011, Nakamoto turned over the source code and domains to others in the bitcoin community, and subsequently vanished.

People can send Bitcoins (or part of one) to your digital wallet, and you can send Bitcoins to other people. Every single transaction is recorded in a public list called the blockchain.

This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undo-ing transactions.

How Can You Mine Bitcoin?

A person (or group, or company) mines bitcoin by doing a combination of advanced math and record-keeping. Here’s how it works. When someone sends a bitcoin to someone else, the network records that transaction, and all of the others made over a certain period of time, in a “block.”

Computers running special software — the “miners” — inscribe these transactions in a gigantic digital ledger. These blocks are known, collectively, as the “blockchain” — an eternal, openly accessible record of all the transactions that have ever been made.

Using specialized software and increasingly powerful (and energy-intensive) hardware, miners convert these blocks into sequences of code, known as a “hash.”

This is somewhat more dramatic than it sounds; producing a hash requires serious computational power, and thousands of miners compete simultaneously to do it.

It’s like thousands of chefs feverishly racing to prepare a new, extremely complicated dish — and only the first one to serve up a perfect version of it ends up getting paid.

When a new hash is generated, it’s placed at the end of the blockchain, which is then publicly updated and propagated. For his or her trouble, the miner currently gets 12.5 bitcoins — which, in February 2018, is worth roughly $100,000. Note that the amount of awarded bitcoins decreases over time.

How is The Value of Bitcoin Determined

Simply put, the value of a bitcoin is determined by what people will pay for it. In this way, there’s a similarity to how stocks are priced.

The protocol established by Satoshi Nakamoto dictates that only 21 million bitcoins can ever be mined — about 12 million have been mined so far — so there is a limited supply, like with gold and other precious metals, but no real intrinsic value.

(There are numerous mathematical and economic theories about why Nakamoto chose the number 21 million.) This makes bitcoin different from stocks, which usually have some relationship to a company’s actual or potential earnings.

Without a government or central authority at the helm, controlling supply, “value” is totally open to interpretation. This process of “price discovery,” the primary driver of volatility in bitcoin’s price, also invites speculation (don’t mortgage your house to buy bitcoin) and manipulation.

Bitcoin has made Satoshi Nakamoto a billionaire many times over, at least on paper. It’s minted plenty of millionaires among the technological pioneers, investors and early bitcoin miners.

The Winklevoss twins, who parlayed a $65 million Facebook payout into a venture capital fund that made early investments in bitcoin, are now billionaires according to Fortune.

What Are The Risks Involved in Bitcoin?

Legal and regulatory hazards aside, as both an investment and currency, bitcoin is very risky. When you wake up in the morning, you know pretty precisely how much a dollar can buy. The financial value of a bitcoin, however, is highly volatile and may swing widely from day to day and even hour to hour.

Bitcoin transactions cannot be traced back individuals — they are secured but also obscured through the use of public and private encryption keys. This anonymity can be appealing, especially with companies and marketers increasingly tracking our every purchase, but it also comes with drawbacks.

You can never be certain who is selling you bitcoin or buying them from you. Opportunities for money laundering abound; in 2016, authorities in the Netherlands arrested 10 men for just this.

Theft is also a risk. The bitcoin subreddit is rife with individuals’ stories and even established exchanges are targets. Mt. Gox, based in Japan, “lost” 750,000 of its customers’ bitcoins in 2014 and hackers took $60 million from NiceHash in December 2017.

There are few avenues for pursuing refunds, challenging a transaction or recovering such losses. Once a transaction hits the blockchain, it’s final.

Are Bitcoins Legal?

As of August 2020, Bitcoin was legal in the U.S., Japan, the U.K., Canada, and most other developed countries. In the emerging markets, the legal status of Bitcoin still varied dramatically.

China heavily restricted Bitcoin without actually criminalizing the holding of bitcoins. India banned banks from dealing in bitcoins and left the overall legal status of cryptocurrencies unclear. In general, it is necessary to look at Bitcoin laws in specific countries.

Even where Bitcoin is legal, most of the laws that apply to other assets also apply to Bitcoin. Tax laws are the area where most people are likely to run into trouble. For tax purposes, bitcoins are usually treated as property rather than currency. Bitcoin is generally not considered legal tender.

Is Bitcoin a Good Investment?

Similar to any speculative investment, buying bitcoin is risky business. It is still very much a gamble.

This cryptocurrency carries some well-known risks: The price could drop precipitously and one online hacking or crashed hard drive incident can wipe out an investor’s stash of bitcoin, leaving you with no recourse.

Bitcoin has seen dramatic run-ups in price followed by some painful crashes but has consistently retained a significant portion of its previous gains every time it plummets.

Since its inception, Bitcoin was the first digital asset to beget the current ecosystem of cryptos. For quite a while, it grew an underground following of investors who saw its future as a possible replacement to the physical monetary system.

The decision to invest in bitcoin comes down to your appetite for risk.

Pros and Cons of Bitcoin Investment

Pros

The overwhelming performance of bitcoin — as a currency and investment — has attracted traditional and institutional investors alike. Bitcoin as an investment tool provides you with the following advantages over traditional investments.

Liquidity: Bitcoin is arguably one of the most liquid investment assets due to the worldwide establishment of trading platforms, exchanges and online brokerages. You can easily trade bitcoin for cash or assets like gold instantly with incredibly low fees. The high liquidity associated with bitcoin makes it a great investment vessel if you’re looking for short-term profit. Digital currencies may also be a long-term investment due to their high market demand.
Lower inflation risk: Unlike world currencies — which are regulated by their governments — bitcoin is immune to inflation. The blockchain system is infinite and there’s no need to worry about your cryptos losing their value.
New opportunities: Bitcoin and cryptocurrency trading is relatively young — new coins are becoming mainstream on a daily basis. This newness brings unpredictable swings in price and volatility, which may create opportunities for massive gains.
Minimalistic trading: Stock trading requires you to hold a certificate or license. You must also go through a broker to trade a company’s shares. Bitcoin trading, however, is minimalistic: simply buy or sell bitcoin from exchanges and place them in your wallet. Bitcoin transactions are also instant — unlike the settlement of stock trading orders, which could take days or weeks.

Cons

Bitcoin may be the future of monetary exchange, but it is equally important that you are aware of the concerns surrounding cryptocurrency investing. Here are some serious risks associated with bitcoin investments.

Volatility: The price of bitcoin is always rippling back and forth. If you happened to buy bitcoin on December 17, 2017, the price was $20,000. Weeks later, you couldn’t sell your investment for more than $7,051. The bitcoin market is constantly changing. With such an unpredictable market, you can hardly get a good return on your investment. To avoid huge loss, keep a close eye on the market.
Threat of online hacking: Hacking is a big threat facing a bitcoin investor. Bitcoin exchanges let you buy and sell your cryptos using a mobile app or website. This leaves them susceptible to hacking and theft of all your investment. Besides, bitcoin held on exchanges isn’t insured by the FDIC.
Little or no regulation: The bitcoin market currently operates with no major regulations. It isn’t taxed and governments have no clear stance on it. As a result, you could stand exposed to fraud and malpractice.
Limited use: Bitcoin is currently only accepted by few online merchants. Many companies don’t also recognize bitcoin as a legitimate exchange, making it an unfeasible investment vessel. Besides, there’s only a fixed supply of bitcoin — 21 million.
Wallets can be lost: If your hard drive crashes or virus corrupts your wallet file, you lose your bitcoins. You can go from a wealthy to bankrupt investor within seconds, with no way to recover.

Bitcoin Merchant Services

Merchants who are running an online business on WordPress or Shopify or anything similar online platform can now start accepting Bitcoin.

But Bitcoin is not only limited to online businesses… offline business should also start accepting Bitcoin as payment.

To do this, you will need to know about Bitcoin payment gateways for merchants. These make it possible for your business to start accepting Bitcoin.

Here are seven Bitcoin payment gateways that will make your life easier when accepting Bitcoin.

CoinPayments

CoinPayments has been around 2013 and is the most popular cryptocurrency payment gateways out there. With Coinpayments, you can accept more than 1480+ cryptocurrencies including Bitcoin, Monero, Ethereum and many others.

They offer many pre-made shopping cart plugins that you can use for your merchant store or you can code it yourself as well. Some of the many supported plugins are for the following stores:

Shopify
WooCommerce
Magento
Opencart
OsCommerce
WP eCommerce
Easy Digital downloads
Business directory plugin (WordPress)

CoinPayments offer multi-cryptocurrency wallet which ensures you can store your accepted currencies in a secure wallet.

However, you should not store the accepted currencies for long term and if not sure, better convert it into a stable coin to ensure you don’t get affected by volatility.

BitPay

BitPay is a leading Bitcoin payment processor based out of the US since the early days of Bitcoin in 2011.

With the BitPay app, you can accept Bitcoin as payment for more than 40 integrations with popular e-commerce platforms and point-of-sale systems as well as convert it into 8 fiat currencies for bank deposits in 38 different countries.

There are also lots of other features.

Coinbase

Coinbase is one of the world’s biggest Bitcoin exchanges. But apart from trading Bitcoin on Coinbase, you can also use it for accepting Bitcoin payments for your business.

Coinbase has a merchant app for businesses to start accepting Bitcoin where you can accept payments in Bitcoin and instantly convert it into fiat to save yourself from price volatility.

There are a variety of options for both offline and online businesses to start accepting Bitcoin via Coinbase merchant solutions.

Some of which are:

Method	How	Requires
Website or Blog	Add a payment button, page, or iframe to your website	Ability to edit website HTML
eCommerce Store	Install a shopping cart plugin for WordPress, Zen Cart, Magento, and others.	Ability to install a plugin
Email Invoice	Send email invoices to request payment	Web browser
Custom Integration	Integrate with API	Programming experience

Currently, Coinbase is only available in limited countries, so don’t forget to check that your country is on this list before choosing Coinbase as a cryptocurrency payment processor.

CoinGate

CoinGate allows your business to accept Bitcoin/altcoin payments and receive payouts in EUR, USD, or BTC.

It provides a wide range of solutions for various types of business needs like plugins for E-commerce, APIs, and point of sale applications with payment buttons for different platforms such as web, Android, and iOS.

It also supports altcoin payments with ShapeShift integration.

You can see this example of an e-commerce platform to see how Bitcoin/altcoin payment integration will look in real time.

Blockchain.info

Blockchain.info is one of the oldest Bitcoin wallet players in the crypto world. They also provide Bitcoin payment APIs for personal or business purposes.

But the process is not so straightforward because they don’t have ready-to-use plugins yet. That said, they are one of the best and most trustworthy solutions for merchants.

If you have some programming language knowledge, you can integrate their payment processor for free which gives you access to their free Bitcoin wallet.

SpectroCoin

SpectroCoin is another Bitcoin payment gateway for merchants based out of Europe. They have a decent customer base and provide a variety of options for businesses.

They aim to create alternative payment options for customers and businesses around the world with their ready-to-use solutions such as e-commerce plugins, Bitcoin payment processing APIs, and other payment integration tools.

Currently, SpectroCoin supports withdrawals in these countries with these fee schedules.

GoUrl

GoUrl is an open-source project that provides unique Bitcoin payment solutions for its users. It is based out of the Commonwealth of Dominica and provides ready-to-use plugins for E-commerce and APIs along with free customer support for GoUrl payment integrations.

Bitcoin Mining Cloud Computing

Cloud mining is the process of cryptocurrency mining utilizing a remote datacenter with shared processing power.

This type of cloud mining enables users to mine bitcoins or alternative cryptocurrencies without managing the hardware.

The mining rigs are housed and maintained in a facility owned by mining company and the customer simply needs to register and purchase mining contracts or shares.

Since cloud mining is provided as a service, there is generally some cost and this can result in lower returns for the miner.

The process is very simple and only requires a person to open an account with a cloud mining company via its website and select certain things like the contract period and hashing power.

However, the presence of fraudulent companies or imposters cannot be refuted, and thus one must be sure of the cloud mining company.

How to Buy Bitcoin in Australia

Cryptocurrencies are bought through exchanges. Once you’ve signed up with one, you can log in, deposit money (preferably AUD) into your account.

And then you can use that money to buy and trade cryptocurrencies like BTC on the crypto exchange. Our favourite exchange is Swyftx, it’s easy to sign up and they have 70+ coins available for you to purchase (including Bitcoin of course).

1. As mentioned above, Swyftx is our go-to for trading cryptocurrencies in Australia, definitely if you’re starting out. It’s the most trustworthy exchange available and it makes trading buying, selling and switching coins incredibly easy.

After creating your account the first thing you’ll want to do is SETUP MFA (2-factor authentication, adds an extra step for logging in to your account, very easy to setup), you can find this on your Profile page under “Security”.

2. Before you do anything on Swyftx you’ll have to verify your account. It has the fastest verification process we’ve tested so it won’t take long.

Click in the left navigation bar on “Profile” then the “Verification” tab. You’ll have to verify your email, mobile number and identity to begin trading.

You will then have to fill in all of your personal information including documents, don’t be alarmed uploading this information, every exchange requires it. It’s to ensure your safety and make everyone on the platform accountable.

3. You’ll first need to deposit AUD on the platform so you can buy an sell cryptocurrency. You can also deposit Bitcoin straight into the platform if you already have some and would prefer trading with that.

Click the left navigation on Deposit AUD

You can then either choose BPAY or PayID to Deposit AUD on the platform.

Once your account is verified and you’ve added AUD or BTC you can start buying and selling cryptocurrency.

4. Once you’ve decided what you want to buy you can indicate how much AUD you want to buy of each coin.

Easy as that! You now have bought some cryptocurrency. We highly recommend moving your cryptocurrency to a hardware wallet if you are planning on holding it for a while. If you are planning on day trading, or trading fairly regularly we suggest keeping it on the Swyftx platform.

If you have already purchased Bitcoin on another platform then you can easily transfer it to Swyftx and sell it within their platform. From there you can withdraw straight to your bank account. You can also easily sell it to another cryptocurrency within the platform.

How to Invest in Bitcoin

Investing in BTC is similar to investing in stocks, except far more volatile because of the daily swings in BTC. Here are the steps to invest in stocks from the beginning:

Open a brokerage account at a firm that allows crypto investments
Deposit funds from your bank into the brokerage account.
Buy a stock using deposited funds (cash balance).
Later sell the stock for a gain or loss. Funds are returned to your cash balance.

The main difference with BTC is for step three; you buy BTC or another cryptocurrency instead of stock.

With BTC, the above flow is similar in most cases but it depends on the exchange or trading platform. In some cases, you can buy BTC using your credit card or by transferring funds from your bank account.

For other platforms, you must transfer BTC directly. This is known as a direct deposit of BTC.

Top 10 Bitcoin Investment Platforms

1. Coinbase

As we have mentioned already in this article, Coinbase is by far the most popular because you can invest directly with USD. However, you can only currently purchase Bitcoin, Ethereum, and Litecoin on the plaform.

2. eToro

eToro has been around for a while in the UK and throughout Europe, but they are now allowing traders in the United States. They offer a huge variety of digital assets to buy and sell on their platform, and even better, they have a practice trading account so you can give it a try before you actually use real funds.

3. Robinhood

Robinhood offers free crypto trades on their platform. They are starting in just a few states, and with just Bitcoin and Ethereum, but they plan on expanding this quickly. There are limitations, but it’s free!

4. Gemini

Gemini is a popular platform to invest in crypto because of its focus on security and transparency. Unlike some exchanges that appear vulnerable, Gemini makes it a focus to protect its customers.

5. BitStamp.net

Allows direct deposit of Bitcoin. Not as easy to use as some of the top platforms on this list.

6. Bitfinex.com

Multiple cryptocurrencies. Trade on margin. Not as easy to use as some of the top platforms on this list.

7. Hitbtc.com

Advertised as the most advanced Bitcoin exchange. Not as easy to use as some of the top platforms on this list.

8. Binance

A great platform for getting into some currencies like Cardano or Neo. Not as easy to use as some of the top platforms on this list.

9. Kraken.com

Allows margin trading. Not as easy to use as some of the top platforms on this list.

10. Coinmama.com

Bitcoin and Ether. Buy with a credit card, Bitcoin or Ether. Not as easy to use as some of the top platforms on this list.

Investing in BTC isn’t much different from investing in stocks. With BTC, you need to open an account with an exchange. With stocks, you open an account with a brokerage. Then you deposit funds.

The only difference with investing in BTC is that you have to purchase BTC, first using deposited funds, before you can trade BTC. Although, your initial purchase of BTC is your first opening trade.

6 Best Bitcoin Mining GPU

1. AMD Radeon VII

7nm, meet cryptocurrency

AMD made headlines in 2017 when it released the AMD Vega 64, as not only was that graphics card good at gaming, but it also quickly rose to fame as a cryptocurrency mining champion.

The AMD Radeon VII takes things to a whole new level, tripling the Vega 64’s hash rate to 90MH/s right out of the box. That’s more powerful than the significantly pricier Nvidia Titan V, making the Radeon VII the new king of the cryptocurrency mining scene. It helps that this card is only $700.

2. Nvidia GeForce GTX 1070

Low power draw, high hash rate

The Nvidia GeForce GTX 1070 isn’t just a great graphics card for gaming, it’s also an excellent mining GPU. This is because it manages a high hash rate of around 30 mh/s without needing too much power.

Remember, the more power a GPU requires, the more expensive it is to run, which will eat into your cryptocurrency profits.

As with many recent Nvidia GPUs, the 1070 is on the pricey side, so you will have to take an initial hit when starting up, but if you’re into cryptocurrency mining for the long run, the 1070 is easily the best mining GPU currently available

3. AMD Radeon RX580

AMD’s GPU is a mining winner

The AMD Radeon RX580 is one of the most outstanding GPUs for mining, so much so that it is a bit of a victim of its own success, as it can sometimes be difficult to find.

However, its popularity is well-deserved, as it offers an excellent hash rate of 29 mh/s while also keeping the electricity consumption low. Additionally, it is cheaper than the GTX 1070, and if you don’t mind changing a few settings, you’ll be very pleased with this card’s mining performance.

4. AMD Radeon RX Vega

Punchy graphics performance above its weight

The AMD Radeon RX Vega 56 is one of the best value-loaded graphics card on the market right now. Benchmarks confirm that it runs faster than the Nvidia GTX 1070 and, thanks to the Bitcoin mining craze, it’s also cheaper to boot.

Again, it can be a tricky GPU to track down, and it’s power consumption means it might end up being an expensive GPU to run 24/7 in a mining rig. Still, it’s excellent at mining, so if you can find one, it’s definitely a worthy contender.

5. Nvidia GTX 1080 Ti

A brilliant, yet expensive, GPU for mining

Until either Volta or Turing comes along to replace it, the Nvidia GTX remains and will remain as one of the most powerful graphics cards out there.

However, as good as it is a gaming GPU and also an excellent mining one, there are a few limitations that prevent it from taking over the top spot on the list. For instance, it’s an extremely expensive GPU, and it also draws more power than its competition.

This means you’ll be getting less of a return on your investment, and it’ll take some time to cover your costs. However, if you don’t mind shelling out the extra cash for this GPU, (or if you want to game with the best graphics card around), then you’ll be happy with its performance since if you do a bit of tweaking, you can reach a hash rate of 32 mh/s.

6. Nvidia GTX 1070 Ti

A recent update to the 1070

While the GTX 1070 sits atop our list of the top mining GPUs, its follow up, the GTX 1070 Ti, isn’t too far behind. Another fantastic mining graphics card with a number of power upgrades, such as a higher base clock, the 1070 Ti also does a very good job.

However, there are a few reasons why it ranks lower than its older sibling. For a start, because it’s newer, it costs more than the 1070, reducing your profits from mining. It also has a higher power consumption, making it more costly to run.

Finally, there have been incidents of a bug in the driver software, which makes this GPU hash lower than expected, though an upcoming fix should sort that. If you’re prepared to adjust a few settings, however, this is an impressive mining GPU.

Conclusion

Since bitcoin largely exists outside government regulation, it poses more risk than dealing with government currency and other asset classes. However, it isn’t hard to sell or buy and you can make a limited amount of purchases.

If you decide to dabble in bitcoin, classify it under your high-risk, high-reward portfolio. You can reap huge profits in the short-term and lose heavily if the value drops.

Understand that bitcoin is a relatively new technology, and even futurists aren’t sure about its fate. Use the philosophy “buyer beware” when investing in bitcoin.