While this is a bit different than what I normally write about, I believe it is important we steward our finances wisely, so from time to time like to share things about money. Like it or hate it, Bitcoin and cryptocurrencies as a whole seem to be here to stay. I have put my hand it the crypto-currency pie, and expect many others will do so in the future as well. It is rapidly growing in both publicity and popularity, but many people still have a lot of questions. In this article I will address what I call “Bitcoin Basics.”
What is Bitcoin?
Bitcoin (BTC) is a cryptocurrency, which is basically a form of electronic money. While it might seem silly to some, in that the currency has, in some ways, been formed out of thin air (there is a little more behind it, but I digress), all forms of money are basically the same. None of them have inherent value outside of the value afforded it by the organizations that support them.
There are a number of places you can trade US dollars for Bitcoin, and a variety of places you can exchange bitcoins and other cryptocurrencies back and forth from one to another.
To buy Bitcoin from US dollars as well as Etherium, Litecoin, and BitcoinCash), I use Coinbase. If you use this link, you and I will each get $10 worth of Bitcoin free: Coinbase Link
A fairly new exchange, Cobinhood, has just opened up which seems to have some rewards along with it, and this one also is a no-fee exchange. I’m not sure how they make money, but I personally think it’s worth a try: https://cobinhood.com
Changelly.com is one that a lot of people use, but I have found it not only hard to use, but they don’t give you much information up front. There are limits to how much you can purchase at first, and that information is hidden deep within the bowels of their site, not up-front in a FAQ/Directions page. I avoid Changelly for that reason, but decide for yourself.
Originally this was how people got Bitcoin when it first came out, but now it’s a way that you can get a small amount of bitcoin (measured in “Satoshi”, the smallest unit of a bitcoin, named after its inventor). Most bitcoin faucets won’t make you much more than a few dollars over time, but some are better than others. The nice thing about most faucets is that they cost you nothing. How? The person who runs the site usually makes money from ad revenue and/or other ways they get you involved on the site. Some people use it as a gambling thing (which is a bad idea).
The following are faucets I use (affiliate links). The first one is an app that I put on my phone, but can also be accessed from a desktop/laptop. It will give you a very small amount of Bitcoin (a few Satoshi) every hour you click on the captcha, and if you have over a certain balance in the account, it will begin accruing interest, compounded daily. Currently it pays 4.08% a year, slightly better than most savings accounts. The difference is that if the price of Bitcoin goes up, the value of the “money” you are making will give you more bang for your buck.
The link is here: Free Bitcoin
The next two that are “slots” actually have a comparatively decent payout overall, one in Bitcoin, the other in Etherium. Etherium is worth a lot less than Bitcoin, but it’s not a bad idea to diversify a little bit, especially since it’s free. I personally am using the Bitcoin I win from the slot and depositing it into the Savings Account at freebitco.in (the first one listed). Thus, my free money will make me even more free money over time. This isn’t a get-rich-quick thing, but a gradually-earn- bitcoin-over-time thing. The links are as follows:
There is another way to make money with Bitcoin (or cryptocurrencies as a whole) called “mining” or “farming” which I will explain in a bit.
In order to have any kind of Cryptocurrency, you need a way to store it. There are a variety of methods, and each individual will have to decide which works best for him or her. One of the easiest ones to use that is stored on your computer is the Exodus wallet, and it supports a wide range of cryptocurrencies: https://www.exodus.io/ It is limited to one computer, so you have to have some backup in place in case your computer has a problem.
Each wallet has its limitations and benefits, such as what devices it can be accessed on, how safe it is from hacking and/or theft, what cryptocurrencies it supports, and how easy it is to use.
The safest overall are called Hard Wallets, or sometimes Cold Wallets and they are similar to a flash drive that disconnects from your computer. They are virtually unhackable. There are other options, such as online wallets and paper storage, but they also have various ups and downs–at the end of the day, use a comparison chart (google it) to help decide which works best for you. For those using Coinbase for buying and selling, it comes with its own online wallet you can use, but again, as with anything online, it is only as secure as the company that keeps it, so it’s up to you whether that is a good idea or not. Bitcoin is hard to recover once it is stolen, so while it can be tracked/traced, it’s still not easy to “get back” if hacked. That’s why you have to decide what works well for you.
Some of the best-rated Hard Wallets out there are Trezor and Ledger, available on Amazon.
Bitcoin mining, known as Bitmining, is the process of obtaining Bitcoin by working for it. The very abbreviated version of how this works is that the miner provides computational power to the Bitcoin “machine”, and the person who does the mining gets compensated with Bitcoin. Mining is an automated process, so it’s mostly a “set it and forget it” type of action. A slightly more in-depth version of this narrative is that the computer searches for blocks of bitcoin, then solves a complex algorithm, and in so doing earns a “Block Reward”, which began at 50 bitcoin per block solved when it first originated. Miners typically group together in what is known as a mining pool, so each miner only wins a portion of a Bitcoin when the mining for that block is finished, but the overall number and speed of blocks mined is significantly increased. Bitcoin “blocks” are derived from all of the Bitcoin transactions that occur, and miners have to locate and essentially “solve” block equations to successfully mine the block.
There is a built-in process by which Bitcoins are generated, and there is a fixed number of Bitcoins. At every 210,000 blocks mined, the Block Reward gets cut in half, down from 50 to 25, down to 12.5, and so on. A good link for to countdown the time to the block-halving is here: http://www.bitcoinblockhalf.com/ It also has other related information and statistics as well.
For all of this to make sense, you have to understand blockchain technology. In short, it is a decentralized process of computers solving algorithms, but I can’t explain blockchain technology very well myself, so read this article here to learn more: Blockchain Technology
The benefit of mining is that it produces bitcoin over time, in what could be considered a type of *residual income*. With the price of a single Bitcoin fluctuating in the $13,000 to $16,000 range right now, but which was at about $7,000 two months ago, and close to $20,000 a month ago with a yet-to-be-determined price cap, mining has the potential to be profitable. However, mining is not without risk. A single miner is far cheaper than a single bitcoin, running around $4-6,000 right now from most places online, it could break, your pool could perform poorly, or as happened to me recently, the pool I was in got hacked, and I am waiting for the company I was working with to get the bitcoin back. Additionally, I recently bought a second miner, or so I thought, from a company called BitmainMasters. Turns out they are a total fraud and I literally tossed about $1800 down the drain, so prayers for them to be stopped and the money returned to everyone who has been swindled are appreciated. I’m not one who generally gets taken by online scams, so I was surprised when it happened to me, so be aware that it *can* happen.
While it used to be profitable to mine with a spare computer, or even your regular PC when you are sleeping or at work, given the number of people involved, you basically need a special kind of machine designed to mine cryptocurrencies to be successful these days. If you want to mine Bitcoin, the Antminer S9, sold by Bitmain (the makers of the Antminer, and a real company), is currently the most profitable miner out there in that it cost the least electric for the most computing power. Computing power is calculated in hashes per second, and the Antminer S9 is able to do an average of 13.5 to 14.0 Terahashes per second (Th/s). This will cost you roughly $130-$150 in electric each month and net you around 0.07 to 0.1 Bitcoin a month at the current difficulty rate.
The difficulty rate changes depending on the price of Bitcoin and the number of miners involved, so it isn’t a static, fixed value, adding yet another risk point into the equation. If the difficulty of mining increases over time (which it has consistently so far), causing you to make less BTC per day, and the price goes up, increasing the value of the BTC one has already mined, whether you will lose or make money, given the ongoing electric cost is up to the barometric pressure, wind speed, whether or not Jupiter is currently retrograde in Sagittarius, and a whole lot of complicated math. Thus, here’s a handy calculator to help you figure it out: https://www.cryptoground.com/bitcoin-mining-calculator.
There are other Cryptocurrencies out there, with some of the main ones right now being Bitcoin Cash, Etherium, Litecoin, Monero, and others. There is a whole other subject I won’t get into called a Hard Fork which was a split-off of Bitcoin Cash from Bitcoin, and there may be others down the road, so it’s worth reading a little about. As for which other currencies to buy, it all depends. Some newer cryptos may perform well comparatively, in that the ability for your investment to double or even quintuple over time is greater with currencies that only cost a few dollars today, much like Bitcoin did back in the early 2010s. As for what is the right choice for you, you will have to figure that out. A reminder, there are links up at the top of this article to help you purchase your own Bitcoin, win some for free over time, and store it in a wallet of your choosing.
In closing, I hope this has helped you understand some of the Bitcoin Basics, and gain a basic understanding of how cryptocurriencies as a whole work. They can be used for buying and selling goods, services, or for trading like stocks, as many people are doing right now. Cryptocurrencies are here to stay, although to what extent is yet to be seen. As a final and somewhat more spiritual note, many prophets have prophesied in recent years that there is a great transfer of wealth that God is orchestrating. Given the potential impact this new wave of currencies is already having on many business and people’s personal finances, I can’t help but wonder if these currencies aren’t a vehicle for that transfer. Thanks for reading, and I pray you find favor as you enter the world of electronic currencies!