With all the media attention surrounding Bitcoin lately, I just had to get involved in this craze. Over the next few weeks I will be creating tutorial videos showing you how to build Bitcoin miners for just a few hundred dollars. But before that, I figured I should give an overview about what exactly is Bitcoin all about.
So here is my list of the 10 things to know about Bitcoin
1. What is Bitcoins?
Bitcoin is a form of currency. In fact, it is a form of DIGITAL currency that is not backed by any raw material such as gold or silver. It is an open source peer-to-peer network for sending and receiving payments.
2. Who created Bitcoins?
As far as we know, Bitcoin was created in 2009 by a man named “Satoshi Nakamoto”. There is a lot of controversy as to whether or not this is the creators real identity. It seems as if the creator completely disappeared sometime in the year 2010 and has been kept primarily anonymous.
3. Where do you keep Bitcoins?
Before you can use Bitcoins, you need to establish a Bitcoin wallet. This is a digital form of your everyday wallet. It basically holds your Bitcoins. These wallets can be kept on your personal computer or at an online website. With a Bitcoin wallet, you can then send and recieve Bitcoins.
4. How do you use Bitcoins?
You can send and receive Bitcoins by using a unique Bitcoin address that is attached to your wallet. This is somewhat similar to using PayPal. When you send a payment through PayPal, you are given an email address.
Unlike PayPal, each Bitcoin transaction is given a unique wallet address. This increases the privacy of your transactions and keeps them practically anonymous.
5. How do you get Bitcoins?
There are 3 ways to get Bitcoins
1. Receive it as payment for a good or service that you provide
2. You can purchase them at exchanges, just like exchanging US dollars for foreign currency
3. The third option is Bitcoin mining
6. What is Bitcoin mining?
In the simplest explanation. In order to create more Bitcoins to the market, you need to solve complex mathematical problems. Bitcoin miners use computing power to solve these problems. Once a problem is solved, the Bitcoin miner is then rewarded with a certain amount of Bitcoins.
With the difficulty of these mathematical problems increasing everyday, it is almost impossible to solve these problems alone. Most Bitcoin miners tend to join a Mining Pool to increase the chances of recieving Bitcoins.
7. What is a Bitcoin Mining Pool?
Since the difficulty of Bitcoin math problems are rapidly increasing, you would need a lot of money to afford some very expensive equipment to mine for Bitcoins alone. Instead, most Bitcoin miners join together as a group to solve these problems.
A mining pool networks all the computing power of each miner, solving the mathematical problems together. This increases the odds of generating more Bitcoins to the market. The Bitcoins that are rewarded for solving the problems are then divided among the group base off of each miner’s contribution.
8. What hardware is need to mine for Bitcoins?
Originally all you needed was to use your computer’s CPU power to mine for Bitcoins. As the difficulty increased, miners began using their graphics cards, know as GPU’s. Unfortunately both these options are now insufficient to successfully mine for Bitcoins. You now have to look into ASIC hardware.
ASIC stands for “Application Specific Integrate Circuit”. These chips have one job and one job only, that is to mine for Bitcoins. These ASIC miners can be had for as little has a few hundred dollars all the way up to several thousand dollars.
9. Where do you buy ASIC miners?
You can purchase ASIC miners online from a few different manufacturers. However, due to the high demand and limited supply, these devices are often back ordered and require you to wait several months before even getting your hands on the device.
You can also build ASIC miners yourself! We will cover this topic in future articles.
10. Should I invest in Bitcoins?
Unfortunately no one can answer this questions for you. Bitcoin is still very new and the value of a Bitcoin is extremely volatile. It really depends on how much you believe in the Bitcoin system and if you personally feel the value will continue to increase.
So there is my list of 10 things to know about Bitcoin. It is hard to say how long Bitcoin craze will last but it is definitely exciting to watch. The idea of using Bitcoins is truly fantastic and I personally have high hopes.
As mentioned earliar, I will be creating tutorial videos demonstrating how to build your own ASIC miner. This will be a fun and fairly inexpensive project to complete. Definitely stay tuned for that!