Blockchain, Bitcoin and Everything in Between

Bitcoin and technology behind it explained in simple terms

What is Bitcoin?

Bitcoin is the most popular and the most valuable digital currency. It has many uses (paying people, buying goods, loans etc), just like Dollars or Euros. However, instead of being linked to pieces of physical paper, it can only be used online.

  • Bitcoin uses peer-to-peer technology to operate; managing transactions is carried out collectively by the network.
  • Bitcoin is operated by a decentralized authority; hence they are not issued by banks or governments like other fiat currencies.
  • Bitcoins are not physical in nature but have balances that are kept on the public ledger containing all Bitcoin transactions.
  • Bitcoins are limited to 21 million coins.
bitcoin

What is the Value of Bitcoin?

The price of Bitcoin goes up and down. Some say it's a bubble, while others see it as a unique investment opportunity. But no one really knows.

Bitcoin was worth almost nothing back in 2009. Considering the decentralized nature of bitcoin and the anonymity of bitcoin transactions, the cryptocurrency received early affiliation with an illegal activity. Both risk takers and risk-averse investors kept their distance.

There are several factors that have contributed to the rapid increase in the price of bitcoin and one this is the changing sentiment among governments. At one point, governments globally appeared to collude in efforts to ensure that bitcoin never made it as far as it should. However, this has since changed seeing that some of the governments once opposed to bitcoin now support it with spirited zeal. Additionally, the growing user base has contributed to the rise of bitcoin. A good number of people who initially were skeptical of bitcoin are slowly believing in its legitimacy and opting to invest in it.

Buy Low, Sell High

The recent price surge in bitcoin up to highs of $20,000 has drawn much attention and attracted a lot more institutional and individual investors. However, there has been a sharp decline in prices across all crypto including bitcoin which has left many wondering what the future holds for bitcoin and the altcoins as well.


Bitcoin price to 10000

Will Bitcoin Hit 1 Million by 2020?

Bitcoin is currently trading below $15,000, a sharp decline from over $19,000 just a few days ago. Nonetheless, some crypto enthusiasts and bitcoin millionaires remain optimistic about the future of bitcoin.


  • John MacAfee
    John MacAfee

    John MacAfee, a millionaire, bitcoin enthusiast and the CEO of MGT Capital Investments recently tweeted predicting that the price of bitcoin will hit $1 million by 2020. John was backed by James Altucher during an interview with CNBC. He stated, "I'll say $1 million by 2020, as well, easily."

  • Marc Van Der Chijs
    Marc Van Der Chijs

    Marc Van Der Chijs is a Dutch millionaire who quite a remarkable penchant and knowledge of crypto besides being an investor in this market. He made his fortune originally by selling his video company to Alibaba for $4billion. According to Marc, the price of bitcoin will hit $150,000 by 2021 and he impresses that it is not too late to invest. Currently, Marc runs First Block Capital, a fund that is focused on investing in crypto companies.

  • Wences Casares
    Wences Casares

    Wences Casares is a technology entrepreneur with global business experience specializing in technology and financial ventures. A board member at PayPal, among various other roles. Casares believes that Bitcoin will hit $1 million sometime before 2027.

  • Chamath Palihapitiya
    Chamath Palihapitiya

    Chamath Palihapitiya is a venture capitalist. Palihapitiya was born in Sri Lanka, raised in Canada, and has worked for much of his life in Silicon Valley. He has predicted Bitcoin price will reach $100,000 in the next 3-4 years and in the next 20 years, it will be worth $1 million.

How to Get Bitcoin?

There are two ways you can get Bitcoins: buy it or earn (mine) it.


Buy Bitcoin for Cash

Buy Bitcoin for Cash

  1. Use a Bitcoin Exchange. There are many different businesses that can help you buy Bitcoin using your bank account.
  2. Find Bitcoin sellers in your area. Services like Local Bitcoins let you search and browse through people selling Bitcoin in your community
  3. Use a Bitcoin ATM. Coin ATM Radar has an interactive map to help you find the closest Bitcoin ATM near you.
Mine Bitcoin

Mine Bitcoin

  1. Purchase mining hardware. One of the most efficient miner at the moment is Antminer S9. Be aware that this hardware consumes quite a lot of electricity and makes a lot of noise.
  2. Get a cloud mining contract. Cloud mining entails purchasing mining capacity from hardware already installed in data centers. See our recommended cloud mining services here.

Recommended Cloud Mining Services

Start mining immediately. No need to buy expensive equipment and waste your time on setting it up. No need to worry about maintenance, cooling and power outages.

hashing24 bitcoin cloud mining

200,000+ customers

Major credit cards accepted.

  • Minimum Hashrate: 100 GH/s
  • Automatic payout in BTC
  • 3 year contract
  • Out of stock
  • $34.0 per 100 GH/s
hashflare bitcoin cloud mining

1,500,000+ customers

Major credit cards accepted.

  • Minimum Hashrate: 10 GH/s
  • Automatic payout in BTC
  • 1 year contract
  • Limited stock
  • $2.20 per 10 GH/s
genesis bitcoin cloud mining

1,000,000+ customers

Major credit cards accepted.

  • Minimum Hashrate: 100 GH/s
  • Automatic payout in BTC
  • 1 year contract
  • Out of stock
  • $35.8 per 100 GH/s
There are literally dozens of companies offering cryptocurrency cloud mining. However, only Hashflare, Genesis Mining and Hashing24 have received good ratings from the community.

Profit Potential

This is what you can earn if you invest $1000 USD in cloud mining today.


Investment Price Hashrate Maintenance Revenue
(1 day)
Revenue
(1 month)
Revenue
(1 year)
Profit
(1 year)
Hash Flare $1000 USD $2.20
per 10 GH/s
4545 GH $0.0035
per 10 GH/s/day
9.12 USD
0.00075509 BTC
282.86 USD
0.02340769 BTC
3394.32 USD
0.2808 BTC
1814.34 USD
181%
Genesis Mining $1000 USD $35.8
per 100 GH/s
2793 GH $0.0028
per 10 GH/s/day
5.47 USD
0.00045305 BTC
169.57 USD
0.01404462 BTC
2034.84 USD
0.1685 BTC
748.68 USD
75%
Hashing 24 $1000 USD $34.0
per 100 GH/s
2941 GH $0.0033
per 10 GH/s/day
5.88 USD
0.00048661 BTC
182.13 USD
0.01508496 BTC
2185.56 USD
0.1810 BTC
831.43 USD
83%
Assumptions: BTC price is 14095.3863 USD (constant), mining difficulty is 1 873 105 475 221 (constant).

Frequently Asked Questions

Not sure what a certain term means? Here you may find answers to the most frequently asked questions.

The blockchain is incorruptible digital ledger that can be programmed to record virtually everything in a verifiable and permanent way. It is a decentralized network that verifies transactions. Because of the decentralized nature, the shared records and digital assets cannot be hacked or corrupted even if everyone in the network can be able to view it.

A blockchain comprises of a growing list of records called blocks which are linked and secured using cryptography. Each block contains a hash pointer (that links it to the next block), a timestamp and transaction data. With the nature in which blockchain is designed, data cannot be tampered with or changed.

The blockchain is managed by a peer-to-peer network that collectively adheres to a protocol for validating new blocks. Once data is recorded, it is permanently stored in the network and any alteration of a single block will result in alteration of all subsequent blocks. The rationale behind blockchain is to ensure that virtually everything of value, not just financial transactions is secured and cannot be manipulated in any way whatsoever.

Blockchain pulls off the need of third parties as it creates trust, security, and transparency.

As mentioned earlier, a blockchain comprises of a growing list of records called blocks which are linked using cryptography. The recorded data is put together into encrypted blocks that can never be changed or modified and then scattered across a worldwide network of distributed computers, thus maintaining a shared list of records. These shared records are called blocks and each one of them contains a history of all the blocks that came before them down to the most current and the process of chaining the encrypted blocks brought about the name blockchain.

The blocks are made up of transactions. A transaction simply means that one party can send whatever currency their blockchain uses to another party. And the only way that one can use to send the transaction is via digital wallets that contain a digital signature that validates the transactions to ensure that they come from a legitimate source. All transactions are then bundled together and comprehended into 32 bytes with a hash.

Cryptocurrencies, such as Bitcoin, popularised blockchain because they rely on this revolutionary technology. There are far-reaching opportunities offered by blockchain technology due to its decentralized mode of control.

To begin with, blockchain has smart contracts that act automatically according to predefined rules. This means that transactions can be validated without the need of third parties or human intervention. Completion of the transaction can be triggered by an action or event which can take the form of an amount or a date. A chosen representative can also give an authorization inform of a certain number. In the financial sector, this concept can be applied in the process of granting a loan or freeing up of secluded funds.

Another great opportunity that blockchain technology offers is the elimination of middlemen. Blockchain is a digital ledger of transactions that are distributed across a wide range of computers. Blocks of information are linked together to form a blockchain, with specific parameters given to users which allow them to access information in the ledger securely without the need of a central oversight. Eliminating those central oversights reduces time and cost that could be used to process a transaction.

Blockchain has an immutable ledger that is maintained in the network and cannot be manipulated. Notably, this is one of the greatest advantages of blockchain technology that can be embraced by businesses as it will enable them to store their data and records safely, securely and transparently. This curbs the issues of data loss and data hacking.

Despite blockchain technology being hyped on how it will solve data insecurity, the technology has limitations and is inappropriate for many digital interactions. Through research and development on success and failures of blockchain technology, these are some of the current issues and limitations of this technology:

  • Complexity. Blockchain technology takes into account an entirely new vocabulary. It has made cryptography more established, but the highly specialized industry is completely full of jargons and complex terminologies that are not easily understood, hence most people shy away and do not want to be associated with it. Thankfully there are several efforts aimed at providing vocabularies and indexes that are detailed and easy to understand.
  • Network Size. Because of their antifragility nature, blockchain responds to attacks and grow faster and this requires a large network of users. However, this makes it difficult to reap the full benefits if blockchain is not a strong network with a widely distributed grid of nodes.
  • Human Error. For blockchain to be used as a database, high-quality data with zero error capability must be stored in it. It is said that man is in error, thus data stored on a blockchain is not inherently trustworthy so the events need to be recorded accurately from the start.
  • Unavoidable Security Flaw. Satoshi Nakamoto highlighted "51% Attacks" when launching bitcoin. This is a notable security flaw in bitcoin and another blockchain whereby if more than half of the computers working as nodes to service the network tell a lie, the lie automatically becomes the truth.

Bitcoin is a first digital currency (cryptocurrency). It uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoins are operated by a decentralized authority; hence they are not issued by banks or governments like other fiat currencies.

Bitcoins are not physical in nature but have balances that are kept on the public ledger containing all Bitcoin transactions. These transactions are verified by a massive amount of computing power.

In 2009 when the bitcoin network was established, Satoshi Nakamoto mined the genesis block, which was the first block on the chain for a reward of 50 bitcoins. To date, no one knows exactly who Satoshi is. Another programmer Hal Finney downloaded the bitcoin software the day it was released and received 10 bitcoins from Satoshi in the world’s first bitcoin transaction. Blocks mined in 2009 have very few transactions in them with the majority including only a single transaction.

Despite drawing most of its credibility from its tenure of existence, bitcoin draws credibility and traction from its supply and the fact that there is a hard cap in bitcoin supply.

Currently, there are just over 16,7M bitcoins in supply but this number keeps on changing as more bitcoins mined every day.

Notably, the hard cap is set at 21,000,000 bitcoins and this number is expected to be reached in the year 2140.

To avoid the excessive addition of bitcoin in the market supply at any one point and to ensure there is some semblance of equality in rewards among the miners, the mining process is regulated by what is called difficulty. Basically, bitcoin mining difficulty is the measure of how difficult it is to find a new block in comparison to the easiest way it can ever be. In the years 2011-2014, the mining difficulty was quite low and the corresponding reward was quite attractive. The rationale behind this was the minimal adoption of bitcoin at the time, a small number of miners and the supply was way below the current 16 million.

Bitcoin keeps adjusting the difficulty to keep block generation at 600 seconds. As the max supply is approached, the difficulty continues to increase and so does the cost of mining. It is for this reason that most people currently are more inclined to invest in bitcoin than engaging in mining.

In relation to the blockchain, hard fork refers to a radical change in a blockchain protocol that validates previously invalidated blocks consequently requiring that all nodes connected to the network upgrade to the newer version of the protocol software.

In other words, a hard fork results in the creation of a new blockchain from an existing blockchain such that the nodes operating on the older version of the blockchain cannot operate in the new version.

Thus, the fork makes it such that there are two paths, one following the old blockchain path and another following the new blockchain path. Eventually, those using the older version are prompted to upgrade to the newer version systematically minimizing support for the older Blockchain.

The bitcoin blockchain had two successful hard forks and one that was canceled. The first hard fork happened in August 2017 resulting in the creation of Bitcoin Cash and this was followed by another hard fork in October which resulted in the creation of Bitcoin Gold. Notably, another hard fork coined Segwit2x was scheduled to happen on November 15 but ended up getting canceled since it did not receive the support threshold from the bitcoin community.

Hard forks are often intended to increase the capacity of the original blockchain which is essential. However, the creation of new block chains in the process tends to reduce the credibility of the original blockchain and thus the value of bitcoin in this case.

After purchasing or mining bitcoins, you might be wondering where to store your digital coins since you cannot open a bank account like you do with fiat currencies. Bitcoin wallet is a software where Bitcoins are stored.

To be technically correct, bitcoins are not stored literally, what is stored in the wallet is a lot of relevant information like the secured keys used to access bitcoin address. The private keys or the “secret numbers” that a bitcoin address has been saved in a bitcoin wallet of the person who owns the balance.

Sending and receiving of bitcoins is facilitated by Bitcoin Wallets and gives ownership of the Bitcoin balance to the user.

There are different forms of bitcoin wallets: Desktop Wallets where one can download the software to an individual computer, Online Wallets which can be accessible through apps on phones, and Hardware Wallet that stores private keys on a secure hardware device.

The success of bitcoin as the first peer-to-peer digital currency aroused the need to invent more digital coins. Altcoin is a combination of two words, “Alt” for “Alternative” and “coin” signifies currency. Altcoins are the alternative cryptocurrencies that were established after the success of bitcoin. The coins were launched with an attempt to imitate bitcoin hence the use of basic framework provided by bitcoins to create them. With most of the Altcoins being peer-to-peer, they involve the process of mining and provide a cheap and efficient way to carry out transactions on the internet. Examples of these Altcoins include Zetacoin, Peercoin, Dogecoin, Feathercoin, Litecoin, Ethereum and many more. Ethereum is believed to be the second competitor after bitcoin.

Bitcoin is currently the most popular cryptocurrency on the market today, making it difficult and expensive for other cryptocoins to penetrate the market. Since other coins are less popular, less competitive and less expensive, it is easy for beginners to mine them with CPUs. Looking on the bright side, this makes Altcoins a fun and profitable investment since you can invest in small amounts of money in a wide-reaching portfolio. This is made possible by choosing the coins that portrays the best chance of long-term success. For instance, if you had invested in bitcoin back then when it cost only a few dollars and held until 2017 when it reached as high as $13000 you would be smiling all the way to the bank. However, cryptocurrency market is volatile so be aware of the risks - not every coin makes it in a long term.

Bitcoin mining is a peer-to-peer computer process that is used to secure and verify bitcoin transactions and payments from one user to another. Basically, bitcoin mining involves adding bitcoin transaction data to bitcoins global public ledger of previous transactions. Mining keeps transactions safe and reliable and people who mine bitcoins are called miners.

You can decide whether to mine on your own or join a mining pool. Mining alone is difficult since getting new bitcoins is highly competitive. A pool allows one to share resources and split the rewards.

The bitcoin mining reward started at 50 BTC per block but this is reduced systematically through a phenomenon referred to as halving. Essentially halving refers to the reduction of the block reward by half, a process that happens after every 210,000 blocks. Notably, one block forms after 10 minutes thus about 144 blocks are mined per day.

Another disadvantage of bitcoin mining is the gradual increase in difficulty. The difficulty is technical the measure of how hard it is to in a hash below a specific target. The problem is that the increase in difficulty requires that more powerful equipment be sued for mining which in turn consume a lot of electric power. Notably, one bitcoin transaction consumes an estimated 252KWh of electricity. Moreover, the level of electricity consuming through bitcoin mining contributes about 123.31kg of CO2 to the carbon footprint annually. Needless to say, this has devastating effects on the environment.

Mining pools refer to joint efforts by miners in which case they agree to share block rewards by the ratio of their contribution to the mining hashing power. This is quite an economic model in the sense that miners get to share the cost of mining, hence no single miner is overburdened. Some existing mining pools are discussed below.

  • BTCC. This mining pool is ranked number three in China as far as bitcoin exchange business is concerned. It is estimated that this pool mines 7% of the total blocks.
  • AntPool. Probably the largest mining pool there is and it is based in China. It is maintained by mining hardware producer BitMain.
  • ViaBtc. A relatively new mining pool seeing that it has been in existence for only a year or so. It mostly targets Chinese miners.
  • F2Pool. This mining pool is based in China and it is estimated that this pool is responsible for mining 12% of all blocks.