What are some Bitcoin and Cryptocurrency basics?

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What are some Bitcoin and Cryptocurrency basics?

 

Bitcoin – Let’s Take It Back To The Basics

Bitcoin is all over the news almost everyday it seems like, usually with some edge of your seat story about some dude tossing out his old laptop for recycling with his only bitcoin wallet on the hard drive in that very discarded computer. His old wallet on his laptop now has the only available access to thousands or hundreds of thousands of dollars’ worth of bitcoin. And it’s all gone now!

Oy perhaps you, like a lot of other people, read the predictions about the bitcoin that was worth 39 cents in 2010 and $500 in 2016 and even though the price hikes seems to have cooled off a little bit, you still hear about the blockchain technology behind it being implemented more and more.

There are plenty of stories about the unregulated aspect of digital currency online on the “dark web”. This opens up such scenarios of a criminal element using this form of currency as a way to pay for many illegal transactions and often across international borders. There have actually been some pretty spectacular drug trafficking crime syndicates that were uncovered where bitcoin was preferred currency used to pay for the narcotics.

Although it may seem to you and I that a currency like bitcoin which is not regulated as a bank transaction may very well be is a great way to carry on a lot of sneaky and secret illegal activity. The actual reality is that every bitcoin transaction ever made is a matter of public record. Anytime that anyone buys, sells, sends or receives bitcoin, there is a verified transaction recorded on the blockchain.

Sure, your identity is not part of that record so that part is anonymous. The actual transaction is anonymous from that point of view but it is not private. There is a public ledger – the blockchain – that is open to the entire world. Anyone who wants to explore it can go through every transaction from day one to the last few minutes.

The FBI has made it clear that they have the technology to follow the bitcoin trail. So do other law enforcement entities. Bitcoin is not the secret that criminals like drug dealers might think it is.

When what most people see about bitcoin are stories covering the unusual or startling stories, there is a tendency to feel that bitcoin is something that regular people cannot or do not want to use.

Another thing, in spite of the bitcoin images displayed in stories about it, such as a pile of gold coins, you cannot hold a bitcoin in your hand. It’s digital. When you go to the grocery store and use a debit card, no actual money changes hands. That’s digital.

There is a difference between that kind of digital and bitcoin digital because with your debit card, the money is in your bank account because you deposited a check or cash or your employer deposited your paycheck. The bank acts as a third party, sitting between you and where your money comes from. If your employer paid you in bitcoin, the deposit would come directly from the employer to your bitcoin wallet.

There are no bank charges and there is no danger of hyperinflation. The market cannot be flooded with bitcoins so your stash will suddenly become worthless.

Until more people start using bitcoin, most of us have to go through an exchange to buy bitcoin. Here is something else that throws people off. As an example, the price of bitcoin in November of 2017 was $7,699.94 USD. The price may vary, depending on where you buy it. Some exchanges may increase their price so they can make a tiny profit on each sale. At Coinbase.com, at the same time, a bitcoin costs $7,758 USD.

What throws people off is that they think they have to buy a bitcoin and that is a lot of money to lay out if you are new to the idea of digital currency and afraid of losing your money. You do not have to buy a full bitcoin.

Here is an example. Let’s say that Coinbase is selling one bitcoin for $8,738.48 USD (the same day as the price is set at $7,699.94). You can go to Coinbase and buy $20 USD worth of bitcoin which works out to be 0.00228873 bitcoin. For twenty bucks, you can buy a fraction of a bitcoin. If the price did double in the next four months as some predictors suggest, your fraction would be worth twice what you paid for it.

 

 

 

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3 thoughts on “What are some Bitcoin and Cryptocurrency basics?

  1. Hey Dan, Yes, I know all that (you told me).

    I am still struggling with my driver’s license – I have an ink spot on it – and Coinbase doesn’t want to let me in. The faucets help a little bit.
    Do you know a business that would sell me cryptos without photo or copy of license?

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