Bitcoin is an independent international bank in the Internet network, working on extremely reliable software allowing billions of people to open and maintain own longterm savings account. And this is just one point of view on Bitcoin network.
bitcoins.menu is the right place to start with bitcoin. General information is provided in simple words from the user perspective for better understanding. The key to fast learning is to determine what minimum you should know about bitcoin.
Table: What you need to learn about bitcoin
Wallets / Security
The roles presented in the table have different tasks. Thus, information needed is different:
Bitcoin mining is not an easy task because of constantly changing conditions. The more miners in the network — the more expensive mining cost becomes. If you add to it significant price volatility and mining equipment ageing, then you realize the difficulties that miners have to face. Besides thorough understanding of blockchain and other technical aspects, successful miner have to be able to calculate economic part and to consider all possible risks.
Currently, it is not necessary to buy mining equipment to become a miner. There is a service that allows people to buy hashing power remotely and allocate it to mine bitcoin or other cryptocurrencies. The task here is to buy computing resources cheaply and make a profit from mining.
The same service offers the owners of mining equipment a software that automatically calculates and uses the most profitable mining algorithm. The service includes mining equipment profitability calculator to estimate the mining profit from different hardware whether it is a graphic card or a powerful ASIC.
Simply speaking, bitcoin is advanced money of the Internet. Like Internet itself, Bitcoin doesn't belong to a single person, group of people or organization. Anyone can use Bitcoin. The minimum needed is an internet access. New bitcoins are created at certain speed that cut in half every 4 years (approximately). This event is called bitcoin halving. Therefore, bitcoin has a predictable monetary supply. By the year of 2140 here will be 21 million bitcoins in total ever to be produced with more than 89% already in existence.
The slogan “Be your own bank” describes the nature of Bitcoin. Not only bitcoin has all the properties of money, but the advantages never seen before. Bitcoin is a medium of exchange, that is divisible (the smallest value is 0,00000001 BTC), portable and fungible etc. (see the full money features table) Unlike any currency, its supply is strictly limited — bitcoin is designed to be a store of value over long period of time. Bitcoin has superior privacy capabilities and it can't be confiscated. Bitcoin transactions can't be cancelled, sanctioned or censored.
Bitcoin was launched in 2009 as an open source cryptographic project by a person or group of people using Satoshi Nakamoto name. Many see bitcoin as the answer to a financial crisis of 2008 and as the solution to fight poverty giving people the possibility to accumulate wealth long-term. Independent bitcoin network has grown into a big infrastructure over the years. The system has proven to be stable and resistant to hackers. Bitcoin price chart shows how bitcoin value has multiplied many times over the years.
About bitcoin addresses and transactions
If you haven't done so, please see what bitcoin address is before learning about wallets.
Despite the fact that hardware wallets are the safest way to store bitcoin, many people use other types of wallets. First, hardware wallets costs from around $50 while other wallets are mostly free. So if you use bitcoin only for small payments, you should be fine using free alternatives.
Secondly, there are situations where you have to use other types of wallets. For example, when you buy bitcoin, you are likely to do so on an exchange with web wallet service provided. When creating a web wallet account, please use long unique password with random characters that you don't use anywhere else like e-mail etc.
Almost every web service will suggest you use so-called 2FA (stands for 2-factor authentication). This is a great way to add very strong layer of security to your account. If you access your online wallet or exchange from the PC, you can install small 2FA app (e.g. Google Authenticator) to your mobile phone. Whenever you log in to your web wallet, apart from your password, you will be asked for a short code generated by your 2FA mobile app. This way even if a hacker intercepts your password on a PC, he won't be able to get access without 2FA code. Remember, 2FA security with a mobile app is stronger that 2FA with SMS codes.
If you access your web wallet from a smartphone, it is recommended to use another device for 2FA app, not the same smartphone. The idea behind 2FA security layer is to separate account access point from the 2FA code generator point.
If you are very confident in a computer security, you may prefer to use solid desktop wallet. If you are not a tech-savvy, you better use mobile or online wallet for small transactions and hardware wallet for bigger amounts. In case you use bitcoin in everyday life, then mobile wallet is the most convenient option — most mobile bitcoin wallets are able to read QR-codes.
If you invest your life savings in bitcoin, certainly get yourself a hardware wallet. History shows us that multiple exchanges, PCs and passwords were hacked over time. If you can't get yourself a hardware wallet, please always use 2FA and learn more about bitcoin wallet security issues, how exactly an account may be attacked and what are preventative measures to be safe. Don't be paranoid, just get educated.
Here are some trusted wallets in each category:
There are two most popular manufacturers of hardware wallets on the market — Trezor and Ledger. Trezor is considered the oldest (since 2014) and the safest with its open source code (independently audited). Besides, it is more affordable. User interfaces are rather different, so you may have a look at the wallets from both manufacturers.
Localbitcoins offers an online wallet that currently has the lowest fees for the transactions than other types of wallets. This has become possible as the platform combines transactions from many users into one transaction saving on total fee. Moreover, users on Localbitcoins since 2013 can easily buy or sell bitcoins to each other at competitive rates.
Veriphi startup has conducted comprehensive comparison between 25 mobile and PC bitcoin wallets. 48 criteria, including security, support, 2FA, functionality, compatibility etc. were taken into account. The inclusive report, presented in reader-friendly table, should help you when choosing the best bitcoin software wallet.
Bitcoin blockchain is a chain of blocks consisting of all confirmed bitcoin transactions. One block is created after another in 10 minutes on average.
This was predefined in bitcoin open source code by the creator of bitcoin Satoshi Nakamoto in order for bitcoin blockchain not to grow in size too fast, because it keeps history of all transactions since the creation of bitcoin.
Blockchain, also known as distributed ledger, exists as many identical copies in the bitcoin network. When a new block is created, all the copies get updated.
Yes. Blockchain integrity and chronological order of blocks verified by cryptography. Each block contains digital signature that confirms the authenticity of all the previous blocks.
Bitcoin miners provide their computational resources to maintain the bitcoin network. They compete with each other to confirm the transactions and find new blocks faster.
Unconfirmed bitcoin transactions are added to the memory pool (also known as mempool) by the senders. From there miners are picking the transactions with higher fees first.
The bitcoin transaction fee is set by the sender. The more fee he decides to pay for the transaction — the better chances that the transaction gets confirmed in the nearest block.
Most bitcoin wallets suggest current recommended transaction fee. This value depends on the number of unconfirmed transactions in mempool and average fees set by other senders. You can see current mempool state and fee level in mempool observer.
New bitcoins are created in every new block. Together with the fees for transactions they are rewarded to the miner or to the mining pool who found the block before others did.
Individual miners are likely to unite into mining pools in order to have better chances competing with other miners finding new blocks faster and getting rewarded.
Blockchain introduced the most robust way to store data unchanged. The data is kept very safe being stored as multiple copies across the world. The data integrity is ensured by cryptography. No one can alter any block of information unless the majority of network participants decides to do so, while participants are incentivized to keep the data unchanged.
Blockchain technology can be utilized differently with potential use cases yet to be discovered. There are many developing areas including transparent voting, decentralized finance, smart-contracts, see-through funds distribution, asset tokenization, counterfeit prevention, digital identity services etc.
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