Bitcoin, tokens, blockchain … Everyone pretends to understand it, but I don’t! Help!

Bitcoin, tokens, blockchain … Everyone pretends to understand it, but I don’t! Help!

I still didn’t understand anything about bitcoins. On the Internet, you can pay with them as with ordinary money?

Not really. First of all, you need to understand that in many countries you will not be able to buy something for bitcoins officially — that is, no one will give you a check. And all the endless coffee shops and shopping centers that announce that they can pay with bitcoins, most likely, just lure customers — that is, you will be given coffee in exchange for transferring bitcoin to the bartender’s wallet.

Of course, bitcoins are often used in shadow markets — it’s fast, anonymous, and relatively secure. That is why many people think that buying and using bitcoins is illegal. This is not so, they are simply not described in the current legislative framework, which means that they fall into the” gray ” zone — no one knows anything here and is not ready to take responsibility for their turnover.

Then why do people buy bitcoins?

First, in some countries (for example, in Japan and in some places in Europe), you can already pay with bitcoins — for example, buy a coffee or a house. And it is very convenient. Funds arrive instantly with minimal fees, and most importantly-you do not need intermediaries in the face of banks or brokers to conduct a transaction, which facilitates the transfer and makes it anonymous (cryptocurrency wallets are not tied to the name of the owner). Secondly, many consider it a diversification of their savings. Deposit rates are now below 10%, securities markets are falling, and bitcoin is most often growing — everyone secretly expects to earn on the growth of the exchange rate.

Where do people get bitcoins?

Most often, they use Internet exchangers, special bots in messengers, Internet wallets and cryptocurrency exchanges. Due to the ease of use and rapid growth of the exchange rate, the demand for buying is growing rapidly. Someone just buys from friends or acquaintances. The right method of purchase for you depends only on your ingenuity and tolerance for extortionate commissions for transfers in wallets and frankly inflated exchange rates.

Theoretically, the easiest and cheapest way is to make a simple bank transfer to a major cryptocurrency exchange to buy at the most favorable rate. But this is still practically impossible — banks are wary of such transactions, their risk management departments do not want to deal with “gray” instruments and often block transactions. Especially conservative banks can even temporarily block your accounts to understand the nature of your interest in the world of high technology.

How much is Bitcoin worth now?
Find out the answer by following the link!

What affects the Bitcoin exchange rate?

Bitcoin is not called digital gold for nothing — its production and the appearance of new coins in the system is constantly decreasing and is limited by a mathematical formula (99% of bitcoins will be mined by 2034); as demand increases, the price should inevitably rise. On the other hand, the market is now actively trading less than 20% of the available coins in the system, so sharp jumps in the rate can be easily compensated by the influx of new bitcoins to the exchanges. It should be remembered that this is a very young market, and most of its players are trading on the stock exchange for the first time — and easily succumb to euphoria and panic. That is why we are now seeing such volatility in the exchange rate.

You say that Bitcoin is almost always growing. If I buy a couple, will I be rich in a year?

It is quite likely, but there is always a risk of a two-or three-fold fall in the exchange rate before the next wave of growth. Therefore, if you expect to earn money on New Year’s gifts-keep in mind that you may not get into the cycle.

For a patient investor, the earning potential can be very high.


So that’s good. And what is the blockchain?

“Blockchain is a distributed registry for storing data…” – surely you have heard this explanation more than once and did not understand anything. So, a blockchain is a database that is simultaneously stored on many computers connected to each other on the Internet. Why this is necessary, it is better to explain with an example.

Imagine that you sent $100 to your aunt in Brazil by bank transfer. You filled out a dozen fields in the transfer form, after which the bank employee debited money from your personal account and transferred it to the bank’s single account for international transfers. Another employee then transferred the money to the agent’s bank account, who transferred it to Brazil, where it will fall in the same chain to your aunt’s personal account. After three days, my aunt will receive $97 (minus all bank fees) – provided that no one made a mistake in the transfer. But the worst part is that during these three days, neither you nor your aunt, and certainly none of the bankers, know exactly where your money is now and who is keeping records of it. A sudden server failure, bad faith of a banker or a hacker attack will start a long investigation and search for the person responsible for returning your money. But the same thing can happen at any time with all the money in your account. This means that you rely on the system every day and trust your bank, and this is a big problem.

Currently, the blockchain is used mainly for cryptocurrency transfers, but it is increasingly being implemented in different organizations and for different purposes.

And what is the best blockchain?

Transparency, speed, cost, simplicity. If you have sent cryptocurrency or information on the blockchain, the evidence of such sending cannot be changed or forged, as it is confirmed by hundreds of thousands of computers around the world. On these same computers, many copies of this information are stored — and it is available for viewing to any user at any time. The entire transfer process takes a few minutes and is ten times cheaper than a bank transfer. If you store money and information in the blockchain, the records will never be lost or forged, and any market participant can verify your financial viability at any time. No third parties and intermediaries, only full transparency and mathematical guarantee of the accuracy of calculations.

More about cryptocurrencies. Why do you need to mine them?

So that the system works, and miners earn. Mining cryptocurrencies means confirming transactions in the blockchain and receiving a reward from the system and the parties to the transaction. To do this, you will need powerful computing equipment. For bitcoins, special chips are used, for other cryptocurrencies — video cards. That is why you can not buy yourself or your child a new gaming video card — all cards are sold out by miners before they are delivered to the store.

Can I start mining?

Yes, you can. But the age of “garage” mining is over. By entering this market now, you will be competing with industrial miners who have the newest and most optimally configured equipment and the cheapest electricity tariff. With a good ratio of the exchange rate and the number of miners in the system, you will be able to make a profit within a few months — and, most likely, you will return the cost of equipment. However, with a temporary drop in the rate, you will have to be patient. You will stop earning much earlier than large miners, so the cost curve for mining is arranged. You can, of course, switch to another — temporarily more profitable for mining — currency, but such anomalies are quickly detected by the market, and there come the rest of the poor fellows who were taken out with you. So this is a difficult way to earn money.

It seems to me, or this whole story with cryptocurrencies strongly resembles a financial pyramid?

It seems. The main goal of a pyramid scheme is to enrich its creators through investments from new participants. The assets of such pyramids are not needed by anyone in the foreign market, they do not have any advantages in use, they do not solve any problems. In the case of cryptocurrencies, the opposite is true — they solve a big problem of the financial market, their turnover is convenient and profitable for its participants, which creates a real demand for their purchase.

However, if tomorrow the market invents something more technologically advanced and convenient, then large players and investors may lose faith in bitcoin — this will lead to a fall in the exchange rate and a flow of capital into more convenient tools. But now so many talented programmers and mathematicians around the world are working on refining and improving bitcoin and other cryptocurrencies that the next technological leap is likely to happen within the existing technology.

Now all sorts of cryptocurrencies — it’s still about some marginals, isn’t it?

Not anymore. The main reason for the growth of bitcoin and other cryptocurrencies is the entry of major players into the market. Investment funds, international corporations, billionaires and even some states have already announced support and the beginning of the use of a number of currencies and blockchain technology in general-all this inspires confidence to investors and holders of cryptocurrencies. The market no longer regards bitcoin as an anecdote from the life of a sysadmin, it is a financial asset, volatile, complex, but quite real.


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7 January 2021 в 21:40