What is Bitcoin? How Bitcoin works? Everything in simple words!

What is Bitcoin and how does it work? where does Bitcoin come from? is it worth to invest in it or not? is buying Bitcoin the right thing to do or not? all these, are questions that will arise for many newcomers to the field of digital currencies regarding Bitcoin.

Bitcoin is a cryptocurrency or digital currency that is obtained through a process called mining. in this article, we will try to explain the concept of Bitcoin in simple, using video and infographics. you can find any topics and information relating to bitcoin from a to z.

By reading this article, you will get complete and comprehensive information about Bitcoin without needing any other sources. this article is very useful, so that all people from beginners to advanced can use it to fully understand Bitcoin and everything about it.

Simply put, Bitcoin is a new type of digital currency. you can transmit it to another person just like your bank transactions; with the difference that centralized banks and financial institutions or even governments won’t get to know about your deals.

There are numerous descriptions of this coin, not all of which are by definition correct or complete. Bitcoin is a alternative currency for fiat cuurency, an equal fiscal system, and a new way of life and bussiness. all these delineations are correct but could be more complete. in this article, you can find everything you need to know about bitcoin or how to buy and sell it at the legit exchanges.

Bitcoin is a cryptocurrency that was created in January 2009 after the collapse of the real estate market, which itself was the cause of the economic recession. the idea of this currency were created by an anonymous person with the alias” Satoshi Nakamoto”. the identity of this person has remained a secret until this moment.

What was Satoshi’s goal in creating Bitcoin?; Reviewing the world’s first digital currency from a different perspective

You may be a professional cryptocurrency investor or you may be a newcomer looking to learn the skills needed to enter the market. no matter at what level of knowledge you are, studying Bitcoin and the world’s first blockchain technology always helps to understand this area more deeply; that’s why we try to approach this topic with a completely different perspective.

We all know that the founder of Bitcoin is an unknown person with the alias “SATOSHI NAKAMATO” who introduced his invention called Bitcoin to the world, in 2009. but what was Satoshi’s goal in creating Bitcoin? was his goal to create one of the largest investment markets in the world? or was his goal to make everyone rich by buying a computer file called Bitcoin and holding it? the answer to all these questions, is NO!

If we look at the white paper (we shall talk about it later) of Bitcoin, we realize that Satoshi’s intention of creating Bitcoin was a very simple thing:

• A way to transfer money, electronically between two real people without an intermediary system between them.

According to Satoshi himself, he intended to simulate the physical exchange of money between two people in real world, inside the virtual world.

For example, you get into a taxi and when you arrive, you take out your wallet and pay the fare to the driver. this is one of the oldest and easiest way to exchange currency between two people. is there anyone other than you and the taxi driver in this transfer? Does a system like a bank, monitor your fare payment right away? the answer is No.

What has happened here, is that there is no third-party, monitoring the operation.

But in the digital world, removing surveillance systems, especially in the area of trade and money transfer, is not only difficult but it’s also very dangerous. At this moment, despite the monitoring systems in the payment gateways, there are still many internet frauds taking place all over the world.

Satoshi Nakamoto’s goal was to find a safe way to eliminate central monitoring systems, thereby increasing people’s mastery and control over their own property. Satoshi created blockchain technology on the way to achieve this goal.

What is a blockchain in simple words? How does blockchain work?

If you’ve been following digital currency or cryptocurrency news for the past few years, you’ve probably heard of blockchain technology. the concept of blockchain was first introduced by Stuart Haber and W. Scott Stornetta in 1991 as a chain of cryptographically secure blocks, and over time it becomes popular among databases around the world. digital business owners thought of using this technology to improve their business, and eventually the need to use this technology was felt all over the world.

 

Blockchain technology uses encryption to increase security in buying and selling digital currency and even exchanges. in contrary to banking systems that operate in a specific and so-called centralized location, the data center where blockchain networks are located is completely decentralized and distributed around the world.

The place where blockchain information is kept is called “distributed ledger”. The distributed ledger is accessible to all members in the network and in full detail. even the smallest changes in transactions can be transparently viewed and reviewed by all. in fact, this network is a chain of computers that check and confirm the correctness of the transactions between the first user and the second user, and when it is confirmed, the transaction information is added to the blockchain.

In simple words, blockchain is a kind of information recording/reporting system. Its difference is that the information stored on this type of system is shared among all members of a network by using encryption and data distribution, the possibility of hacking, deleting and manipulating of the recorded information is nearly excluded. the concept of blockchain first appeared with the emergence of Bitcoin.

What are the most important features of the blockchain network?

Two features of the blockchain that made it possible to transfer money without an intermediary is decentralization and transparency.

1. Decentralization

The registration of financial transactions in this system is chained and no central monitoring system supervises it. the network automatically guarantees the security of successful transactions.

2. Transparency

Any normal person can monitor transactions with a computer and get rewarded for finding successful transactions and recording them. this feature also prevents the network from being hacked. because, according to Satoshi himself: “Helping to record successful transactions in the blockchain is not only easier but is also more profitable than hacking the entire network.”

After the introduction of Bitcoin to the world and its remarkable success, the activity in the world of blockchain and decentralized business intensified and alternative currencies (ALT COINS) entered the market. altcoins entered the cryptocurrency market with a different purpose than Bitcoin and offered their own blockchain network for companies and organizations. litecoin currencies were among the first alternative currencies that were created with the Bitcoin code, but over time they were upgraded and became independent.

The first alternative currency that introduced the concept of decentralized business in the form of a project was called Ethereum which will be introduced later in a separate article.

How does Blockchain works?

All data in the blockchain network is entered into the database in a structure consisting of “Blocks”. each block is formed as a continuation of the previous block and contains information that connects it to the previous block. due to the fact that these blocks are connected to each other with the help of information, so it can be said that they form a “chain” in which the blocks are placed together in order of construction. the first network block before which there is no other block is called “Genesis Block“.

Blockchain technology uses cryptography to increase security in buying and selling digital currency; contrary to banking systems that operate in a specific and so-called centralized location, the data center where blockchain networks are located is completely decentralized and distributed around the world.

The place where blockchain information is kept is called “distributed ledger“. the distributed ledger is accessible to all members in the network and in full detail; even the smallest changes in transactions can be transparently viewed and reviewed by all. in fact, this network is a chain of computers that check and confirm the correctness of the transactions between the first user and the second user, and after it is confirmed, the transaction information is added to the blockchain.

To better understand how blockchain works, let’s take a look at Bitcoin transactions. the blockchain stores all the data and details of each transactions made with this cryptocurrency and prevents a user from trading the same Bitcoin more than twice (in a way, intending to commit fraud).

In a block, when it stores new information, it is added to the blockchain. and in this way, with a chain of several interconnected blocks, the overall structure of the blockchain is formed. in order for a block to be added to the blockchain, the following four events must happen:

1. In the first step, a transaction must be made.
2. After purchase, your transaction must be reviewed and approved. this is done by a network of thousands of computers distributed around the world. this network checks through computers that the transaction is done according to your order.
3. Each transaction must be stored inside a block. after checking and confirming the authenticity of your transaction, the information is recorded and stored in a dedicated block. there, your transaction data sits alongside countless similar transactions.
4. Each block must be given a hash (code): after all transactions in a block have been verified, that block must be given a unique identification code called a hash. after obtaining a specific hash, that block is added to the blockchain network.

What’s Blockchain Hash function?

Each of blocks in a blockchain has a feature called a Hash. a string hash is a textbook generated from a special mathematical function and its part is to help prevent fraud in the system. the Hash of a data or input is always fixed. using the Hash result, prevents fraud and changing the information recorded on the blockchain. In blockchain blocks, besides having a Hash themselves, they also contain the Hash of the former block. the fewest change in the information of a block, changes its Hash entirely and makes the blockchain invalid.

BUT what if someone changes the content of one block and updates the Hash of posterior blocks? this is possible, but the blockchain distribution solves this problem. Blockchain data isn’t stored on a specific computer or server. every computer or system which has connected to the network receives a copy of the information.

Any computer that connects to the network and receives a copy of the blockchain is called a node.

When you connect to a blockchain as a node, you get a copy of its entire data. nodes are algorithmically programmed to execute transactions based on a majority consensus. in fact, no changes in information is possible unless the majority agrees.

Bitcoin and decentralized digital currencies are the most important and successful application of blockchain technology. For example, when using bitcoin for your transaction, the possibility of fraud, double spending of money and reversal of transactions is eliminated. but this technology can have many other applications besides digital currencies, and it can be used wherever there is a need for a safe space to store data.

For example, electronic and fraud-free elections can be held on blockchain. by using this innovation, the risk of election fraud and the need for direct human intervention can be greatly reduced.

Another example, is that blockchain can be used in the supply chain and transportation. factories and manufacturing companies can record their goods and transportation information on the database from the beginning until reaching the customer. therefore, the authenticity of the goods and the quality of raw materials will be guaranteed for the customer.

Through blockchain technology, it is possible to create a kind of governance in a system, just like a society or an organization, where everyone can contribute to the advancement of that system according to their shares and the powers they have.

What is a token in crypto?

A token is a type of digital asset that can be transferred to others and store value in itself. before entering the world of digital currencies, tokens existed in computer systems as a type of cryptographic license. tokens are created by various companies on the basis of blockchain technology. each token has its own application.

In cryptocurrencies world, tokens are those digital currencies that do not have their own blockchain and use so-called platform blockchains to record their transactions. f course, on a larger scale, any type of asset in the world of cryptocurrencies can also be called a token. platform blockchains such as Ethereum, Binance, and Cardano allow the creation of decentralized applications through smart contracts.

Using these facilities, people create and use the tokens they need without having to design a blockchain network. In order to better understand the answer to the question of what a token is, it is better to get to know smart contracts a little more.

What is a smart contract?

Blockchain technology was introduced to the world by Satoshi. by using blockchain, it is possible to transfer assets between people in a decentralized network. although this event was considered revolutionary in the financial industry, it did not have enough possibilities to engage in other daily issues such as file transfer, creation of decentralized exchange and Internet of Thing.

The development of smart contracts in the Ethereum blockchain network brought the use of blockchain technology into other areas of life.

A smart contract acts as a deterministic program; in the sense that when certain conditions are met, a specific activity on the network is automatically performed. a smart contract is a piece of code in a distributed system that works using “if…then…” rules. with these explanations, the main features of a smart contract are as follows:

• The activity is done on decentralized systems.
• The terms and conditions are final and unchangeable.
• Programs run automatically.
• Its codes cannot be manipulated.
• Customization is available to build a variety of decentralized applications before execution.
• People do not need to know each other or trust each other in the activity using smart contracts.
• All transactions in contracts are transparent and available to everyone.

Making smart contracts with the above features, made it possible for companies and individuals to create their application using smart contracts without building a blockchain and use their tokens to manage activities in the network.

Due to the fact that Ethereum made it possible to create smart contracts and tokens for the first time, most of the tokens have been created on the platform of the Ethereum network. today, it is possible to create tokens in other blockchains such as Solana, Avalanche and Cardano digital currency, and many new currencies have been created on the basis of these networks. earlier cryptocurrencies such as Bitcoin and Lite coin do not support token creation.

Can bitcoin be hacked? What would it take to hack Bitcoin?

Bitcoin network security is one of the main concerns of digital currency users. although this network is highly secure, it is always attacked by hackers. the first and last successful attack in this case is known as the “Value overflow incident ” that occurred in 2010. except for this case and over the past decade, Bitcoin has proven its security against cyber-attacks well.

Bitcoin is a digital currency that is implemented on the platform of blockchain technology in a completely “decentralized” way. in fact, there is no centralized computer or server to break into in the Bitcoin network. security and resistance to hacking is one of the advantages of Bitcoin and other digital currencies compared to fiat currencies.

Due to millions of miners, hackers have to hack a “decentralized network” instead of hacking a server to break into the Bitcoin mechanism. So how to hack Bitcoin? Is such a thing possible? How successful can an attack on a decentralized network be?

Bitcoin wallets and exchanges have been repeatedly attacked by hackers and some of these attacks have been successful. but this is not a sign of the vulnerability of the Bitcoin network and its blockchain, but rather the weakness of Bitcoin-related platforms. these attacks are not considered hacking technically, but they can cast doubt on the speed and reliability of the network. in the following, some of the most important attacks on the Bitcoin network are mentioned.

• Zero-day attack

One of the most important cyberattacks that may be carried out by hackers with the intention of destroying or weakening the Bitcoin network is the so-called “Zero-day attack“. a zero-day attack exploits a potentially serious security weakness in software that even the developer is not aware of. one of the most common targets for zero-day attacks is the Internet of Things (IoT).

A zero-day attack is, not only a potential threat, but an actual threat to Bitcoin. this has really happened to Bitcoin, and in the history of digital currencies, it is referred to as the “Value Overflow Incident”.

• The value overflow incident; the person who was able to generate 184 billion Bitcoins

On August 15, 2010, one of the users of “Bitcoin Talk” with the username “jgarzik (Jeff Garzik)” noticed a strange thing in the Bitcoin network. in block number 74,638, two transactions were registered, in each of which more than 92 billion bitcoins were exchanged! he immediately reported this on the Bitcoin talk forum.

After further investigations, it became clear that an anonymous hacker had managed to almost destroy Bitcoin! This hacker was able to generate more than 184 billion Bitcoins from nothing in a few moments. while in the main code, it is stipulated that only 21 million Bitcoins will be mined. this means that the hacker was able to put 8,784 times as many fake coins into circulation as the total Bitcoins.

The only thing that saved Bitcoin from early destruction, was the quick reaction of Satoshi Nakamoto, the anonymous creator of Bitcoin. three hours after this report, Nakamoto was able to eliminate this bug in collaboration with Gavin Andresen, who was one of the developers of Bitcoin. he quickly created a hard fork (in a massive update) and in the new chain he destroyed all the coins created by the hacker.

In the hours after the incident, two Bitcoin networks were up and running due to Nakamoto’s update, and many miners were mining the faulty chain. but according to Nakamoto, 19 hours after the hack, all the miners left the faulty chain and entered the new chain.

This attack was one of the biggest boons for Bitcoin in its early days. if this software flaw weren’t noticed by anyone, and this attack happened a few years later when the price of Bitcoin had reached several thousand dollars and its market value reached tens of billions of dollars, probably the price of Bitcoin would reach close to zero in a few moments.

There are other ways to damage Bitcoin network. although these attacks cannot technically be considered as “hacking”, but they can cause damages such as reducing network speed or result in the loss of Bitcoin credibility. in this case we can mention spam attacks, 51% attack and hacking platforms relating to bitcoin.

• Spam attacks

“Spam” refers to the misuse of internet tools such as e-mail, social networks, messengers, etc., to send countless messages to those who mostly have no interest in receiving those messages. spammers, try to slow down the network by creating a very large volume of transactions. Bitcoin code provides a solution for this issue, and zero-fee transactions are rejected by the network. therefore, the only way for spammers to attack Bitcoin, is to register many transactions with reasonable fees that do not make economic sense.

As the network speed decreases, transactions are confirmed later than usual, which discourages users. those who benefit the most from spamming the Bitcoin network, are fans of some Altcoins and Bitcoin forks. the goal of some of these spams is to dissuade users from Bitcoin, and drive them to other coins.

If a spam attack occurs at the same time as the demand for transactions in the network increases (such as on days when large price changes occur), it will have a large and destructive effect on the network’s efficiency, and is very likely that the speed of transactions will drop drastically.

The expansion of solutions such as Segwit and Lightning networks, which improve the scalability of the network, can eventually protect Bitcoin from spams. because the improvement of scalability will increase the cost of spam and therefore the motivation of attackers to attack the network will be less.

• SegWit network: the goal of this soft fork, is to provide conditions to protect the malleability of transactions and in the next step to increase the block capacity in the Bitcoin blockchain network.
• Lightning network: the goal of this network is make fast and fee-free transactions in Bitcoin.

But spammers can also have a solution to increase the cost of spam. in this way, if a large number of miners work for the benefit of spammers, they can spend the profit from mining for spam expenses. but why is this not happening:

During a spam attack, the network speed decreases drastically and the cost of confirming transactions increases. these two factors can cause a sharp drop in the price of Bitcoin. as the price of Bitcoin falls, the mining reward will decrease to the point where mining is practically unprofitable. in this way, if the miner who cooperates with the spammer cannot finance the spam, the attack will fail.

• 51% attack

The 51% attack, represents a situation in which some miners or mining pools try to obtain the majority of the hash rate of the Bitcoin network. organizing this massive attack, requires a lot of energy and processing power, this energy should be more than the total energy consumed by all the miners currently mining Bitcoin.

In other words, someone who wants to organize a 51% attack must have a hash rate equivalent to the current hash rate of the network. currently, the number of Bitcoin miners in the world has increased and the mining machines are becoming more powerful day by day. as a result, the hash rate of the Bitcoin network has increased significantly.

Although a 51% attack on Bitcoin is hypothetically possible, but with the current power of the network, such an attack will not be possible in real. trying to achieve this attack requires unimaginable energy and money. however, someone who can take over 51% of the network can:

1. Use the same coin twice
2. Prevent transactions

But the success of a 51% attack does not mean the complete destruction of the network. Someone who owns 51% of the network’s hash rate cannot:

1. Returns previously confirmed transactions.
2. Create bogus transactions (that didn’t exist before).
3. Steal assets from a specific address.
4. Generate new coins.

As mentioned, hacking Bitcoin and its blockchain is practically impossible. but the platforms like wallets and exchanges, can be hacked and have been hacked many times before. among the biggest exchanges that have been attacked by hackers, we can mention Cryptopia, Bitfinex, MTGax, Coincheck, Upbit and Binance.

As mentioned, Bitcoin wallets are also a good target for hackers too. if someone can gain access to your wallet’s public and private keys at the same time, through any means (including phishing), they will have access to virtually all of the wallet’s assets. of course, this is limited to online wallets and especially web wallets and not hardware wallets such as Ledger, Trezor and KeepKey which are highly secure.

Hacking a wallet or exchange is not uncommon and news about these attacks can be seen daily in cryptocurrency news outlets. but remember that hacking exchanges and wallets, in no way means Bitcoin and the blockchain network is being hacked,  just as hacking a website does not mean hacking the whole Internet.

How to mine Bitcoin? The complete guide to mine BTC

As mentioned, Bitcoin is a decentralized currency and network, which is not affiliated with any specific country, institution or company. The decentralization of Bitcoin means that no one owns the Bitcoin network or control it; therefore, anyone, anywhere in the world can be a part of the Bitcoin network by connecting to it.

In general, it can be said that the control of Bitcoin is in the hands of its users; not one or more specific people. Bitcoin mining is the process of creating new Bitcoins with a computational solution. mining is done by computers with very high computing power. The remarkable thing is that these issues are so complex that they cannot be solved manually by humans.

Bitcoin network security

As mentioned, Bitcoin is a decentralized network, so the question is when you send someone Bitcoin, who supports your transaction to make the transfer? who validates or maintains the security of Bitcoin transactions? here is the answer: volunteers called “miners”. in fact, they provide their devices and hardware to the Bitcoin network so that the Bitcoin network pays them a reward in exchange for maintaining the security of the network. this reward is the Bitcoin generated from the mining process.

Bitcoin extraction, which is also called mining, actually includes a series of very difficult calculations to solve a series of complex mathematical equations based on the SHA256 cryptographic algorithm. in other words, with their hardware, miners help keep the Bitcoin network safe and the transactions of this network reach their destination; almost like what the bank’s computers or servers do to confirm your bank transaction.

The scientific name of mining is actually “Proof of Work” (POW). during mining operations, miners must compete with each other to solve mathematical equations in a complex process. as soon as the miner gets the answer, Bitcoins are generated and awarded to the winning miner as a reward (a little bit of a Bitcoin).

What is a proof of work algorithm in Bitcoin mining?

Proof Of Work (PoW) is a mechanism, in which new blocks of transactions will be added to a cryptocurrency’s blockchain. these process, is generating a hash (a long string of characters, which we talked about it above) that corresponds the target hash for the current block. the miner who does this, wins the right to add that block to the blockchain and receive rewards.

In simple words, the Bitcoin network requires miners to prove their loyalty to the network by devoting their processing power to solving math problems that require electricity. with the help of this process, if someone wants to attack the network, she/he has to have more processing power compared to other Bitcoin miners.

Decentralized distribution of money

Other than verifying transactions, mining, causes Bitcoin units to be produced in a unique way and according to a predetermined schedule. unlike traditional currencies(fiat) that are issued by central banks, in Bitcoin everyone can participate in issuing money (Bitcoin units).

Bitcoin network difficulty

In order to maintain the stability of the network and not to extract all the Bitcoin units too quickly, there is a measure called “Difficulty” in Bitcoin network. Bitcoin blocks (packets containing transactions) are generated every ten minutes.

• The difficulty of the Bitcoin network, shows how difficult it is to solve an encrypted problem.
• The difficulty of extracting new blocks increases or decreases over time according to the number of miners in the network.
• Increasing the difficulty of the Bitcoin network is necessary to maintain the target block time.

If the processing power of Bitcoin miners becomes too high, miners may be able to produce blocks and mine bitcoins earlier than ten minutes. such an issue causes all Bitcoin units to be mined very quickly.

Due to the difficulty mechanism, when the processing power of the miners is such that the time to reach the answer of the mathematical equation is reduced, the difficulty of mining increases to reach the answer at the same 10 minutes.

On the other hand, if the miner’s processing power decreases, and the time to create a block exceeds ten minutes, the difficulty will decrease until it reaches the same 10 minutes again. as you probably know, the total number of Bitcoins that can be mined is limited to 21 million units, after that, no more Bitcoins will be produced.

Bitcoin scarcity; what is Bitcoin halving and what is it used for?

Every 4 years (every 200,000 blocks) during an event called “Halving”, the rate of production of new Bitcoins is suddenly halved. this mechanism increases the scarcity of Bitcoin. the most recent halving was in 2020 which result in producing 6.25 Bitcoins every ten minutes. it will decrease to 3.125 after the next halving in May 2024. at the time of updating this article, more than 19 million Bitcoin units have been mined.

Due to the halving of the production rate of new bitcoins after every 4 years, it is predicted that it will take until 2140 to mine all the Bitcoin units. the number of halving that have happened since 2012 are as below:

• 2012: 25.00 BTC
• 2016: 12.50 BTC
• 2020: 6.25 BTC

Technically, the Bitcoin network and mining process is very complex and what was said was just a simplified summary for basic understanding.

What equipment is required to start mining Bitcoin?

Mining is a process that leads to the creation of new Bitcoins. At the same time, mining means confirming new transactions that take place in the blockchain network. this process will also result in developing the distributed ledger.

After creating a new block, the process continues in the same way. keep in mind that this process (Mining) is difficult and expensive. but, if it is done permanently, it will have a good profit. Bitcoin mining is attractive to most investors in this market; because they receive a good reward after mining each new Bitcoin.

The type and number of mining equipment can be different according to the size of the bitcoin farm. For example, it is obvious that the equipment required for a large farm is different from the equipment required for a small farm; but apart from these, you definitely need the following things to do Bitcoin mining:

1. Mining device or ASIC
2. Bitcoin wallet
3. Internet access
4. Electricity, cable and suitable electrical equipment
5. Ventilation equipment (fan)

1. Mining device or ASIC

In the early days and months of Bitcoin, mining was done with CPU or normal processors; So that in 2010 and early 2011, if you dedicated your personal computer to Bitcoin mining, you could probably mine more than fifty Bitcoin per day.

Today, with the expansion of the Bitcoin network and the increase in the power of its miners, mining Bitcoin with a home computer is nothing more than an illusion, and economical mining of this digital currency is only possible with special devices. Bitcoin mining with normal computers or mobile phones only causes damage to the hardware and is not cost-effective at all.

To mine Bitcoin cost-effectively, you need a specialized device known as an ASIC. Bitcoin mining devices, like cell-phones, come in different brands, designs and models. each device may differ from another in the following aspects:

• Brand and model: The manufacturer of the device and its model. example: Bitmain Antminer S9.
• Processing power: The processing power of the mining device, which is displayed in terms of (TH/S). example: 14TH/S – means this device has 14 terahertz of power.
• Power consumption: the amount of power consumed by the device in watts. example: 1400W.

2. Bitcoin wallet

As a miner, you need a Bitcoin wallet to receive and store your earnings. since Bitcoin is the top digital currency in the market, there are a lot of suitable wallets for it. Bitcoin wallet is divided into two types of software and hardware. Bitcoin wallet software are completely free and you can install one on your PC or smartphone the best Bitcoin wallet is one that is foremost safe and reliable, and the user feels comfortable working with it.

Due to the decentralized nature of digital currencies, where everyone is responsible for their own assets, the main factor in choosing a wallet should be its validity and security. Although there are more than a hundred wallets with different names for Bitcoin, in this article we will introduce 9 wallets that are the best options for storing Bitcoin in 2023:

• Trust Wallet (phone): the best option for beginners
• Ledger wallet (hardware): the most secure option
• Trezor wallet (hardware)
• Mycelium wallet (phone)
• BlueWallet (phone)
• Electrum wallet (desktop and phone): the best option for professionals
• Exodus wallet (desktop and phone)
• Blockchain.com Wallet (Web-based)

3. Internet access

Without internet access it is not possible to mine Bitcoin. For mining bitcoin you need to connect to other nodes. Otherwise receiving and confirming new transactions is impossible.

4. Electricity and suitable electrical equipment

The most important thing to consider for Bitcoin mining is electricity. Mining devices use a lot of electricity and you must have the right power and electrical equipment to be able to operate safely.

5. Ventilation equipment

During the process of mining, the mining devices produce a lot of noise and heat. This issue must be solved with some cooling equipment and fans.

Tips before buying a mining machine

Buying a mining device must be done with complete research and considering some conditions. In short, the most important factors to consider when buying devices are:

• Device power: How many hashes does your Bitcoin mining machine generate per second? More hash equals more power.
• Power consumption: The power consumption of the device is very important and directly affects profitability; The lower the power consumption and the higher the power of the device, the more profitable the device is.
• The price of the extraction device: This factor should also be considered in relation to your budget. The payback time is directly tied to the price of the device.

Introducing the best bitcoin mining device

From 2014 to now on, more than a hundred Bitcoin mining devices have been released to the market. Of course, most of these devices have lost their efficiency and profitability today. Mining device manufacturers are different in terms of reputation and popularity. Currently, the top five miner manufacturers are:

• Bitmain – manufacturer of Antminer devices
• MicroBT – manufacturer of Whatsminer devices
• Cannan – manufacturer of Avalon devices
• Innosilicon – manufacturer of Terminator devices
• Ebang – manufacturer of Ebit devices

Some miners may still use older models such as Antminer S9j. The most important thing is the profitability, the life of the device and the return-on-investment time, and not necessarily the newness of the device.

Is it possible to mine other digital currencies with the Bitcoin mining device?

The answer is almost negative. In fact, most mining devices only support one specific encryption algorithm. For example, the Bitcoin mining algorithm is SHA-256. So you can only mine digital currencies that use the same algorithm with Bitcoin mining devices. These currencies include Bitcoin, Bitcoin Cash, Bitcoin SV and some digital currencies.

Of course, models may be released in the future that support other algorithms other than SHA-256, in which case, the range of digital currencies that can be mined with one device will increase. Also remember that one mining device cannot mine two or more cryptocurrencies at the same time.

BTC mining profitability

To calculate the profitability of mining Bitcoin and other digital currencies, the best thing is using mining calculator. You can calculate your profit in the mining calculator according to the power of your device, the amount of electricity consumed by the device and the electricity price you pay.

To better defining “mining profitability”, the miner’s income is directly tied to the investment return time. In fact, what matters most is the investment return time and not the amount of bitcoins the device can earn. In other words, a device with a 6-month return on investment is more valuable than a device with a 10-month return on investment; Even if the second device has a higher hash rate.

The payback period is the period of time when the invested money (for the purchase of equipment and devices) returns, and after that what remains at last is net profit. Many factors can be involved in the profitability of mining or more precisely in the time of investment return; But the following are the most important factors:

• Mining difficulty

As we explained above, mining difficulty is a parameter that is built into the Bitcoin network so that Bitcoin blocks are created approximately every ten minutes, neither earlier nor later. In other words, in order for miners to not be able to produce new blocks and Bitcoins all at once through the high power of their hardware, the more the miners’ processing power increases, the more difficult it is to mine.

Therefore, if the price of Bitcoin is low, the mining difficulty can greatly reduce profitability. Increasing the difficulty of mining means that you need more processing power to maintain your profitability, which you need to use more powerful mining machines to achieve.

• Electricity prices and cost

The electricity consumption of the device and the electricity price directly affect the profitability of mining. For this reason, you must calculate the electricity consumption costs well so that you can measure the return of your investment. If the high price of electricity is combined with the difficulty of mining and the low price of Bitcoin, it will cause an irreparable loss to miners.

• Bitcoin price

The current price of Bitcoin is another very important factor in the profitability of mining. For example, in 2018, when the price of Bitcoin reached $3,200, many miners turned off their devices; because the mining profit did not even cover the electricity costs.

What are bitcoin mining pool?

After preparing the device and choosing the Bitcoin wallet, the most important part of the process is joining the mining pool and starting to work. Due to the rapid growth of the mining industry, you probably need to join a mining pool to mine Bitcoin or any other currency.

A mining pool, is a virtual location (like a website) where miners gather their processing power to mine a block. In this method, each miner benefits based on their processing power. It can be said that miners around the world provide the processing power of their hardware to a mining pool, and the mining pool competes with other pools on behalf of all miners in finding the equation of blocks.

The truth is, with the strengthening of Bitcoin miners and the influx of heavy capital to buy mining hardware, small miners can no longer make a profit without joining the mining pool; and only some large mining farms with several tens of thousands of machines can cope with direct mining (solo mining). The general process of connecting to a mining pool is very simple:

• After researching, you sign up on a mining pool’s website.
• You give your wallet address to the mining pool.
• You get the settings for your devices from the mining pool and activate your devices with it.

Miner devices, especially new models, have a simple user interface that anyone can connect it to the mining pool very quickly.

How to mine Bitcoin without hardware and other equipment?

If you don’t have the right place, the right electricity or enough equipment to mine Bitcoin and you are still determined to mine Bitcoin, you can go for “cloud mining”.

• What is cloud mining?

Cloud mining refers to those services and companies that sell you the processing power of their hardware and do the work related to mining and equipment maintenance. In fact, with cloud mining, you can rent mining equipment from cloud mining companies or buy processing power (hash rate) from them without buying expensive hardware equipment or providing electricity and a suitable location.

With this, all you need is a simple computer or mobile phone to access your account and receive your profit in your wallet. The advantages of cloud mining are:

• You don’t need a place to mine.
• You do not need to provide electricity and electrical equipment.
• You don’t need mining and other equipment.

This was just one side of the coin. In cloud mining, due to the lack of transparency of activities, the risk of fraud is very high. In most cloud mining schemes, which are actually a kind of Ponzi scheme, no mining is done with your money, but you are only slowly paid a small amount of Bitcoins, which will eventually be less than your initial investment.

Simply put, most cloud mining companies are either working on unethical business models or just looking to empty your pockets. Unethical models mean that in the end you will either lose money or your profit will be less than if you invested directly in Bitcoin. Therefore, the disadvantages of cloud mining are:

• Fraud risk
• dark pool extraction
• Lower profit – operators have to cover their costs.
• Price fluctuations that may reduce profits or stop operations.
• Lack of control and flexibility in the process

How long does it take to mine 1 Bitcoin?

Due to difficulty rate the process of discovering bitcoins takes 10 minutes and the miner who discovers a new block is rewarded with 6.25 bitcoins (currently); But it is important to know that the entire network of Bitcoin miners compete to discover a new block.

This means that eventually only one miner will successfully discover a block, and since there are probably thousands of miners trying at the same time, the chances of a single person discovering a block are very small. The more miners there are in the network, the more difficult the mining process will be. As a result, each block needs more computing power to be solved.

Can you legally mine Bitcoin?

In some countries mining bitcoin is illegal. Therefore, it is important to know the rules of Bitcoin mining. We have to admit the fact that big investors in the world will never invest in a market that does not have credit and legal license. Most importantly, the lack of control and monitoring processes on digital currencies and besides increasing fraud methods through it, have caused doubts in some governments policies against bitcoin.

However, instead of denying the reality of digital currencies such as Bitcoin, many countries have tried to define frameworks for it so that they can control the future of the market and gain benefit from it.

Can I mine Bitcoin on my phone?

Smartphones use different computing hardware. Therefore, they can be used to mine Bitcoin and other cryptocurrencies. But in the meantime, one should pay attention to a very important issue, and that is the difference between feasibility and profitability of a process. The feasibility of an event or process does not necessarily mean that it is profitable.

Mining Bitcoin with a phone is like mining gold with a spoon. Although it is possible to use a spoon to dig up the gold stones and collect them bit by bit to finally melt them into gold, this process is so long that the gain is nothing compared to the time lost. On the other hand, the mismatch between the work and the tool, causes the tool to be lost. Digging the rock with a spoon will destroy the spoon more than it will crush the rock, and the miner will have to pay more for the tools.

The mining process requires continuous and heavy calculations, during which the hardware heats up quickly. This problem leads to the damage of the hardware and finally their destruction. In the rest of this article, we will examine why the process of mining Bitcoin with a phone is not cost-effective.

How to mine Bitcoin with PC?

Yes, this is theoretically possible. Since a few years ago, many software for mining digital currencies with personal computers have been produced, which allows miners to mine bitcoins using their laptops. However, but the truth is that using laptops and ordinary computers to mine Bitcoin is 99% unlikely to be profitable and cost-effective. The remaining 1% is due to the fact that you may be able to get a small amount of bitcoin with a laptop or home computer graphic card in the long run, which is not profitable at the current price, but the value of your bitcoins will increase greatly in the future.

What Can You Buy With Bitcoin?

Bitcoin can be used to purchase a growing number of goods and services. As more merchants and businesses begin to accept Bitcoin, the list of things that can be purchased with it continues to expand. Here are a few examples of what can be bought with Bitcoin:

• Online purchases: Many online retailers accept Bitcoin as a form of payment, including Overstock.com, Newegg, and Shopify.
• Travel: Some travel booking websites, such as Expedia and CheapAir, accept Bitcoin for hotel bookings and flight tickets.
• Food and dining: Many restaurants and cafes accept Bitcoin as payment, especially in larger cities around the world.
• Gaming: Some online gaming websites and platforms allow users to purchase games, in-game items, and virtual currency using Bitcoin.
• Gift cards: Various online retailers sell gift cards that can be purchased with Bitcoin, including Amazon, iTunes, and Google Play.
• Art and collectibles: Bitcoin can also be used to buy art, collectibles, and other unique items from online marketplaces like OpenBazaar and Bitify.

It’s worth noting that the acceptance of Bitcoin as a form of payment is still not universal, and you should always check if a merchant accepts it before attempting to make a purchase.

The pros and cons of Bitcoin

Bitcoin, like everything else in this world, is not perfect, but its revolutionary innovation has made it continue its way despite all the problems. In this article, we describe the most important advantages and disadvantages of Bitcoin in simple language so that you can get a correct view of it.

Bitcoin is a decentralized peer-to-peer digital currency and there is no authority or power to supply it. Bitcoin network works based on encryption protocol and its database is completely public. No error in this network is defined and it is also resistant to corruption. There is no centralized fund or regulatory system for transactions, and these transactions take place directly between users of the Bitcoin network.

Ever since Bitcoin was invented by its anonymous creator, Satoshi Nakamoto, its value and users have been on an upward trajectory. A large number of online stores and service provider websites support Bitcoin as a payment method, and on the other hand, investing in this digital currency is considered as one of the most profitable types of investment; at the same time, due to extreme price fluctuations, the possibility of loss is also high. As the leading digital currency, Bitcoin has several advantages that we will explain below.

what are Bitcoin advantages?

Bitcoin is a digital currency and uses encryption algorithms and protocols; So it’s practically impossible to get around. In Bitcoin, no one can manipulate another person’s account. Bitcoin has several advantages over traditional forms of currency and payment systems. Here are some of the key advantages:

Decentralization

Bitcoin is not controlled by any central authority or government. Transactions are verified by a network of nodes around the world, making it a decentralized currency.

Security

Bitcoin transactions are highly secure due to the use of cryptographic algorithms. This makes it difficult for fraudsters to tamper with transactions.

Anonymity

Bitcoin transactions can be made anonymously, which is a big advantage for people who value their privacy. However, it is worth noting that transactions can still be traced back to a specific address.

Low transaction fees

Bitcoin transactions typically have lower fees compared to traditional payment methods like credit cards or bank transfers.

Accessibility

Bitcoin can be accessed from anywhere in the world with an internet connection, making it a truly global currency.

Limited supply

Bitcoin has a limited supply, which means that its value is not subject to inflation in the same way that traditional currencies are.

Transparency

All Bitcoin transactions are recorded on a public ledger called the blockchain, which makes the system transparent and tamper-proof.

Overall, Bitcoin offers a number of advantages over traditional payment methods and currencies, which is why it has become increasingly popular in recent years.

what are Bitcoin disadvantages?

Like any other technology or asset, Bitcoin has its disadvantages as well. Here are some of the commonly cited ones:

Volatility

Bitcoin’s value has been highly volatile since its inception. Its price can fluctuate rapidly in a short period of time, making it difficult for businesses and individuals to rely on it as a stable currency.

Lack of Regulation

Bitcoin operates outside of the traditional financial system and is not backed by any government or central authority. As a result, there is no regulatory framework to govern its use, which can lead to illegal activities and market manipulation.

Security Concerns

Although Bitcoin is touted as a secure way to transfer funds, there have been instances of hacks and thefts of Bitcoin exchanges and wallets. Once stolen, there is no way to recover the funds.

Limited Acceptance

Despite growing acceptance, Bitcoin is not yet widely accepted as a form of payment, which limits its usefulness in everyday transactions.

Environmental Impact

Bitcoin mining requires significant amounts of energy, which contributes to climate change. Critics argue that the environmental impact of Bitcoin mining is not sustainable in the long term.

These are just a few of the commonly cited disadvantages of Bitcoin. However, it is important to note that many of these issues are being addressed through ongoing technological advancements and regulatory efforts.

How much will I get if I invest $100 in Bitcoin?

The answer to this question depends on several factors, including the current price of Bitcoin and how long you plan to hold onto your investment. Bitcoin is a highly volatile asset, meaning its price can fluctuate rapidly and significantly over short periods of time.

Forexaple as cutoff date of September 2021, the price of Bitcoin has fluctuated wildly over the years. In 2009, when Bitcoin was first introduced, its price was essentially zero. However, in 2017, it reached an all-time high of nearly $20,000 per coin. Since then, the price has continued to fluctuate but has generally remained above $10,000.

If you were to invest $100 in Bitcoin at a price of $10,000 per coin, you would be able to purchase 0.01 BTC (Bitcoin). However, the value of your investment would depend on the price of Bitcoin at the time you decide to sell.

For example, if the price of Bitcoin were to increase to $50,000 per coin, your 0.01 BTC would be worth $500. If you were to sell your Bitcoin at this price, you would make a profit of $400 (minus any transaction fees or taxes).

On the other hand, if the price of Bitcoin were to drop to $5,000 per coin, your 0.01 BTC would be worth only $50. In this scenario, you would lose $50 on your investment.

It’s worth noting that Bitcoin, like all investments, comes with a level of risk. While some investors have made significant profits from Bitcoin, others have lost money. It’s important to thoroughly research the risks and potential rewards before making any investment decisions.

In summary, the amount you would get if you invest $100 in Bitcoin depends on the current price of Bitcoin and how long you plan to hold onto your investment. Bitcoin is a highly volatile asset, and there is no guarantee that its price will increase over time. As with any investment, it’s important to carefully consider the risks and potential rewards before making a decision.

What will Bitcoin be worth in 5 years?

Bitcoin’s value has been volatile and subject to rapid fluctuations since its inception in 2009. In recent years, it has experienced both significant highs and lows. It’s important to note that investing in cryptocurrencies, including Bitcoin, can be risky due to the unpredictable nature of the market.

Some experts believe that Bitcoin’s value may continue to rise in the next five years. They cite factors such as increased adoption, mainstream acceptance, and limited supply as reasons why the price could continue to appreciate. However, others warn that Bitcoin could experience significant declines or even become obsolete due to increased competition from other cryptocurrencies or regulatory hurdles.

Ultimately, the future value of Bitcoin is impossible to predict with certainty. It’s important for individuals to do their own research, assess their risk tolerance, and consult with financial professionals before making any investment decisions.