Mastering Bitcoin For Absolute Beginners

The Ultimate Guide To Bitcoin And The Future

Raymond Kazuya

• Publisher: PublishDrive
• eBook ISBN: 9781977685858
• Topic: Computer Science
• Subtopic: Monetary Policy
• Index: Computer Science

???The Ultimate Guide To The World of Bitcoin Technology is here! ???

This book will teach you the history, fundamentals, and real world applications of bitcoin cryptocurrency

Tired of being cheated by the current system of central banking? They are like rouge intermediaries with absolute control and hold all the power and can print money on a whim. How much longer can we allow this dysfunctional system of currency exchange to exist?

This is the digital age and this new wave of currency will impact the lives of millions and even billions worldwide!

Meaning no more scandals from third party intermediaries who can print money out of thin air! No more centralized banks! But a unified and decentralized system that is transparent, distributed, and validated among EVERYONE.

If you are wondering how can all this be possible? Than it is strongly recommended you grab your copy now and learn everything you need to know about bitcoin, whether you want to invest or understand the convoluted concepts of cyptocurrency in the most easy to read and detailed step by step guide in plain English!

What You'll Learn

Benefits of Bitcoin

History of Bitcoin

Real World Application

Blockchain technology

How mining works

Estimating Trends

Worldwide Influence On Laws, Policies and Regulations For Bitcoin

And, much,much more!

Not enough? Ok, well there's more... This book also includes bonus chapters and diagrams!

Over 200+ pages of valuable content!

How Does This Book Differ From The Rest?

This book is truly set apart from the rest and is vastly superior. There's an entire section dedicated to blockchain technology as understanding the fundamental technology behind bitcoin is as equally as important itself.

Unlike other books this book does not skim over any details, but gives you the reader an enhanced experience of in depth information, so you can have a greater understanding of both bitcoin and blockchain technology.

What are you waiting for? Grab your copy now and join the next big wave of change and see the future!

Imagine a world with no more physical currency or central authority figures that control the supply of money.

Table of Contents

Introduction

Chapter 1: Cryptography

Basic Principles of Cryptography

Different Cryptography Types

Chapter 2: Autonomy

Bitcoin Distributed Consensus

Chapter 3: Practical UsesBusiness Case Studies

The Pros and Cons of the Blockchain Technology

Risks of the Blockchain

Chapter 4: Blockchain Security Measures

The Hyperledger Project

Chapter 5: Bitcoin

Chapter 6: How the Blockchain is Changing the World

Conclusion

Introduction

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The world of digital currency and how to trade and earn bitcoins can be confusing. This book is written in a way that will educate the reader and give them the information to make educated choices. It does not profess to make you a fortune in the new crypto currencies but, quite the opposite, it will arm you with the tools to enter the digital arena safely and knowledgeably.

The field of mining for bitcoin is explained in simple to follow terms, all the equipment you will need, the fees involved and the actual chances that you will be successful are laid out ready to be weighed up.

We will examine the means we have for analyzing the markets and the trends that are so important to spot if you are considering trading in digital currency. The volatility of the currency is explained and also the positive influences that can affect the price of bitcoin are considered carefully.

By understanding blockchain and the technological complexity of the protocol behind cryptocurrency, you can begin to appreciate the alternative uses for this revolutionary hardware and the way it is set to change society forever!

Does this worry the powers that be?? You bet it does. We look at the ways the currency terrifies government and shows us a future where the fate of our money will be in our hands only and not those of a third party.

Chapter 1: Blockchain, Bitcoin and Cryptocurrency Defined

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2008 was a troubled time. The Occupy Wall Street movement was at its strongest. Accusations of misusing clients’ money, misleading customers and charging hefty fees to do so were being leveled at major banks and other financial institutions. Pioneers of the new age of crypto currency saw a chance to put the seller in charge of his own money. By cutting out the middleman, they saw a way to make all transactions more transparent and eliminate interest fees and create a corruption free environment for all sellers.

By creating decentralized system two entities can trade directly with each other and know exactly what is happening with their funds.

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By examining the properties of bitcoin, we can begin to understand how innovative this new currency really is. Prior to 2008, the idea of an alternative currency was unheard of, since its original concept, bitcoin has progressed at a pace that is impressive to say the least.

1. Secure: All funds are locked securely in a cryptography system that can only be accessed by a public key. The length of this number coupled with strong cryptography means that the chance of hacking or duplication is nonexistent. Your bitcoin address is as secure as Area 51!
2. Irreversible: Nobody, and I mean nobody, can reverse a transaction. Once confirmed there is no way back. If you send money and confirm the transaction, then it has been paid and there is no reversing the process. Unfortunately, if you have sent funds to a source that is not completely legitimate, there is no safety net. As with other purchases, it is recommended that all transactions are examined thoroughly.
3. Global and speedy: Due to the nature of the processing of bitcoins your actual physical location and that of the recipient are irrelevant. All trades are carried out by a network of computers and are therefore confirmed in minutes.
4. Anonymous: Bitcoins are connected to accounts and addresses not people. Trades are conducted between accounts that are symbolized purely by chains of characters that are up to 30 symbols long. No identities are attached to these chains so while it is possible to follow the flow of the transaction, it is completely free from attachment to details of the parties involved.
5. Restriction free: Who do you need to ask for permission to use bitcoin? No one at all! It is software that can be used for free by anyone anywhere. The lack of restriction and hierarchy is one of the properties of the new crypto currencies that appeals the most. By creating a new currency that is available to a set of people who may not have been allowed access to standard methods of banking and trading, it is paving the way for huge changes in society.

Bitcoin is free from government interference and is completely transparent. International trades can take place without involving exchange rates and the charges that accompanies them. The mathematical framework that supports the crypto currency system is unaffected by political pressure and human error. It is hard to see how the future cannot be changed by the emergence of this

new era of banking and trading and it has been said that bitcoin is to banks what email was to the postal industry.

Blockchain is the technology behind bitcoin and is being hailed as one of the greatest innovations of modern times. The technology allows both parties in a transaction to connect directly and removes the need for a third party.

The customer wishes to send money to the supplier, this is the transaction and details of the trade are now represented online in the form of a block.

1. The block is now broadcast to all parties in the network. Once approved the transaction is deemed valid.
2. The block that was created to represent this trade is now added to the chain and is used to record a permanent and transparent record.
3. The money agreed upon now moves from customer to supplier.

Blockchain is not only the technology that can allow the march forward of crypto currency, but it is also holds the potential to transform business, government and society as a whole. Intrigued?? Let’s examine how this new technological genie can affect human affairs for the better.

We are all aware of the Internet and how it has improved communication and collaboration. However it has done little to change how we conduct business. Intermediaries are needed to govern how we conduct transactions and exchanges of value. This generates fees, a fact we have all accepted in the past and paid, albeit grudgingly. However, the emergence of blockchain that allows data trading between billions of devices without a third-party involvement.

The Internet of everything is a term that is being used more freely as the digital age marches on but the emergence of blockchain means that we can create a ledger of everything! Imagine every smart device in use connecting and sharing information and trading freely with each other.

Every transaction and exchange of data will be recorded, indelibly and transparently. By acting as a ledger of all accounts it becomes the worlds database, societies notary and clearing house. The protocol of blockchain is what establishes the rules. Trust is hard coded into the platform that governs blockchain and ensues the integrity of all the data that is traded amongst the billions of devices that will use it.

Chapter 2: How Value is Traded and the Risks Involved

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Bitcoin trading is a new and highly exciting opportunity for both professionals and beginners. It is a new market, prone to highly fragmented and massive spreads. Cryptocurrency is appealing to new investors because its short history is littered with peaks and troughs.

Every time bitcoin has a “bubble “and increases in value, the media attention is such that interest is spiked and the value increases even more. Trading bitcoin is simple and global and provides an opportunity for investing to a whole new class of investors and speculators.

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Before we explore how to trade bitcoin we must first understand why it appeals to people. Below are a few points about crypto currency trading that make it exciting and unique.

● Bitcoin trades 24/7

Standard stock markets open and close based on geographical location but as BTC is global and uses exchanges instead of markets it can be traded at any time. There is no official bitcoin exchange, which means there is no official price attached to the currency. Generally, most exchanges stay within the same range of value and this can lead to arbitrage opportunities which appeals to some traders.

Bitcoin is volatile

News events, statements by governments and other geopolitical factors can affect the value of cryptocurrencies. When the bankruptcy of Mt. Gox was reported in 2014 it appeared in headlines worldwide and drove the value of the currency down rapidly.

Similarly, the association with Silk Road and the negative press that followed impacted upon the value and saw huge drops in price.

It was subsequently argued by crypto friendly investors that this was a sign that the market was maturing and saw the price recover in the weeks that followed both news events.

● Bitcoin is not a fiat currency

While the value of bitcoin is affected by world events, it has the benefit of existing outside the influence of any single country or economy. Standard currencies are directly related to the country or economy that governs it. However, cryptocurrencies are unique in their global pricing.

Now we have established the reasons for trading in bitcoin we need to explore how we choose an exchange as there is no official bitcoin exchange. A number of factors have to be taken into account when selecting which exchange is the best for your personal experience.

1. Location: If your first deposit is going to be in a fiat currency you must ensure that the exchange you choose accepts the currency you will be using.
2. Charges: Examine the fees that will be generated by your trade and compare with other exchanges. As this is relatively new field major differences in rates can be found across the board.
3. Liquidity: Depending on the volume of your trade you may need to explore the market depth of your chosen exchange. Large traders will need to ensure the liquidity of their chosen partner.

Taking into account these factors we can examine the exchanges that are currently dominating the market.

● Coinbase

The first regulated exchange in the US Coinbase is a digital asset exchange, located in San Francisco it trades in bitcoin, Ethereum and lite coin and accepts fiat currencies from 32 different countries.

● Bitstamp

Founded in 2011 it is one of the oldest exchanges dealing with bitcoin. Based in Luxembourg it trades USD for cryptocurrency and allows USD, EUR and bitcoin withdrawals and deposits.

● Kraken

Currently the #1 exchange in EUR trading it is also a top 15 exchange when looking at USD volume. It has also considered to be the most secure exchange as its system has never been breached by hackers.

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Now we will use one of the exchanges above to explain how to trade bitcoin for the first time. We will use Kraken as the example, but the process is generally governed by the same principles across all exchanges.

Firstly, create an account by tapping the black box in the corner that indicates the sign-up process. You will receive an email that will allow you to confirm your account, once this is done you are required to log in and confirm all your personal information.

All bitcoin exchanges require differing levels of verification by law. The standard level of information means that you will have to supply your full name, date of birth, country of residence and phone number. Some exchanges may require further verification of your address.

Once you have followed these steps you will need to navigate to the “funding” tab. A screen will appear that will contain a selection of funding methods. Kraken offers many different options for your deposit including:

● EUR Bank wire deposit: minimum $5 and only available in EEA countries

● USD Bank wire deposit: $5 fee and only available in the US

● JPY Bank deposit: no fees but there is a minimum of 5.000-yen deposit and available in Japan only

● GBP SEPA and swift deposit: 10 pounds minimum and 19% fee

Deposits made involving the traditional banking methods will take up to three days to clear where as BTC requires six different confirmations and will be cleared in around an hour.

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Now navigate to the trade tab and by utilizing the black bar across the top of the page you can switch pairs for trading. Block A will display the amount of money in your account.

Block B will display the fee you will pay for the exchange.

Block C is where you can select the amount of coins you would like to purchase or how much money you wish to spend on your transaction.

Block D is the preferred price, default settings means the price available is set by the last deal.

Once you press the “submit” button your order will be processed and the coins will appear in your account literally minutes after you have pressed the tab.

We now know how to trade in bitcoin and use the exchanges to obtain cryptocurrency by exchanging our traditional monies for bitcoins.

We also need to be aware of the ever-growing ways we can obtain cryptocurrencies for, as demand increases, so do opportunities to purchase. E-Bay currently offer chances to buy the different currencies and other auction sites are cottoning on to the idea. By checking out local bitcoin opportunities in your area via Google or another search engine you can discover local bitcoin sellers and buyers and arrange to meet and trade coins.

Extra caution must be observed when dealing offline, only meet during daytime hours and make sure you are accompanied by a friend. Common sense precautions need to prevail when you are not shielded by the anonymity of the web!

As with all trading, there are a number of risks that need to be addressed and considered. Cryptocurrency is different from other currencies as it is regarded as a commodity. This has never been the case with traditional money and means that digital coinage are subject to market fluctuations as with any other commodity or stock.

Considering the age of this young and active commodity it can mean that the markets will dip and rise wildly. When investing in bitcoin it is generally a rule of thumb to take a “big picture” stance and refuse to be panicked by a drop in value.

Digital currency is encrypted to make them secure and here we can discover a potential failing with the commodity. The coding is designed to identify the actual currency but not the owner, hence the anonymity we have already covered. Nothing within the specifics identify the currency as yours, meaning that if it is taken fraudulently then it is gone! You have no recourse to reclaim what is yours.

Worst case scenario, cryptocurrency could, in theory, become worthless. Visit the bitcoin site and in amongst the FAQ there is an admission that should the investors interest wane to such an extent that overall effect on world economy could affect the value of the digital currency so severely that it loses all value! As in other situations we encounter no matter how effective safeguards are extreme factors can lead to extreme reactions.

These comments are not meant to put you off your foray into cryptocurrency just arm you with facts that will enable you to view the experience with a level of knowledge you did not have formerly.

Chapter 3: How Values Fluctuate and How the Currency Attains Value

Bitcoin presents opportunities that were unheard of prior to its development. Never before has a currency had the same properties as a commodity. Given the relative newness and the unique status of the currency it is only to be expected that a great deal of uncertainty will accompany all aspects of the usage and trading that accompany it.

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Normally stock and its level of volatility are measured on traditional markets using a volatility index or VIX. Crypto currency is classed as an asset class and as it is still in a fledgling stage and as such bitcoin is yet to have a generally accepted index and therefore there is no clear indication of the levels of inconstancy achieved by bitcoin.

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There are many factors that impact this volatility and below we will address a few of these factors.

The media effect: The majority of people will remember their first encounter with the world of cryptocurrency most probably occurred around the same time as they heard about the dark web and, more importantly, Silk Road and the nefarious activities that were reportedly occurring. Hailed as the currency that allowed drug dealers, arms merchants and even "hitman to play their wares anonymously it was not a good time for bitcoin.

The arrest and trial of Ross Ulbricht made sure that Silk Road received a massive amount of media coverage. He was indicted on charges of conspiring to traffic narcotics, hacking, laundering funds and even attempting to have six people killed.

The trial was big news from 13^th of January 2013 until the 4^th of February 2013 when Ulbricht was convicted.

During the closure of Silk Road, it is reported that the FBI seized a huge amount of bitcoins and plans were made to liquidate the assets after the trial. The 27^th of June 2014 saw the US Marshal Service sell a large number of bitcoins in an online auction.

The whole Silk Road experience did nothing to improve the image of bitcoin as an alternative to traditional currency but what it did do was to increase public awareness. So, the period following the closure of the online market saw a sharp drop in value, however the accompanying level of awareness meant that a whole new class of buyers that could look past the negative media coverage. This then lead to a sharp increase in price a short time later.

Option value: There is very little option value to investors who hold a whole load of currency. Due to the nature of the market investors who hold over $10 million do not have a clear indication what would happen if they decided to liquidate their stock. By moving their cryptocurrency into the fiat market, they would severely affect the market. This fact means that bitcoin is viewed as a small cap stock and as such cannot achieve the levels of stability that other options on the market are able to.

Security: Investors react to news of security breaches and in order to produce a more stable source, it is imperative that the community behind bitcoin exposes all security vulnerabilities in order to achieve solutions.

This approach to security is a great way to produce the best outcomes, but by putting their concerns in the public domain they can panic the market and cause massive drops in price. The whole fundamental premise that allows full and frank examination of all aspects of the software and encourages user input regarding the developments of source code is part of the reason the levels of price are so robust for BTC. The downside of this protocol design is that there will be security breaches and they will be widely reported and cause volatility in price.

Tax: When the IRS announced a statement that it now regards BTC as an asset for tax purposes it had a mixed effect on the price of the currency. The downside to the new status of the cryptocurrency meant that there was a new level of complexity when using BTC for purchases.

However small the transaction the market value of the currency would have to be recorded. Understandably this has slowed rates of adoption as the new tax laws make it a lot more difficult to use the currency and it can be seen as too much bother. Another downside of this statement from the IRS is the indication that more regulations are bound to follow. To achieve the level of adoption that is required to confirm its overall utilization in society the currency will need to be free of strong regulations. This pointer from the IRS could mean a slowing of adoption that could be incredibly damaging for the BTC.

There is however an upside to the new tax treatment. Recognition of the currency, in any form, tends to boost the market and increase valuation.

Next, we will address the different factors that lead to the currency attaining value.

Media interest: As in volatility the media plays a huge part in bringing virtual currency to the attention of the masses. Social media has played a massive part in increasing the value of the crypto currency. Intrinsically the value of bitcoin derives from our vision of how it will emerge from the depths of the internet and impact on our lives.

Social media provided an early breeding ground for bitcoin in the early days, often discussed on forums and mailing lists the online meetings were often people’s first inkling that digital money was a concept that was coming. The people who were hearing about BTC and getting excited about its potential future were the people who were conducting online transactions and therefore establishing value.

Today the effect of social media on the market value of the digital currency cannot be ignored. Positive stories about new technology or breakthrough innovations are spread like wildfire and even lead to endorsements from high profile figures in the media.

Many times, such endorsements can strengthen the public’s perception and increase activity on the exchanges that will lead to an increase in value. Coupled with blockchain based platforms that are actually using BTC to reward their users for spreading information about the currency and drumming up new interest it would seem that the crypto currency is well aware of the attention economy and how it can impact on value.

Global adoption: Currently bitcoin is seen to reside and thrive in developed, wealthy and tech savvy countries but with the problems of inflation, fraud, accessibility and exchange growing daily it would be foolish to ignore the possibilities that global adoption of the currency could bring. China and Japan have already impacted heavily on the value of bitcoin and with Japan seemingly ready to make moves that will see a rise in use within its own economy it can only lead to further rises in value.

Japan seems to have a completely different attitude to digital currency than some other countries. It seems to be displaying an amount of trust and interest in the currency that it cannot fail to impact the price. Confidence is high in Japan and the rest of the countries that are currently not involved with BTC are watching closely.

It does not necessarily follow that other developed countries will follow in suit soon, it is a massive boost to the status of the digital currency.

Considering the checkered past that Japan has with the cryptocurrency it is seen as a huge endorsement for the currency to allow bitcoin as a valid currency and also the passing of a law that states bitcoin users will not be taxed directly. Since the Mt. Gox incident occurred in Tokyo and has affected Japan and its relationship with BTC in a positive way, regulations are in place that will protect customers and prevent another disaster. Rather than letting Mt Gox cloud the perception of digital currencies it has been used positively and lessons have been learnt.

● Retail: Without people using bitcoin on a day to day basis it has no worth as a currency. The very nature of currency means that it has to be used regularly. With each major retail company that accepts digital currency the appeal of the crypto coin is growing,

Some of the biggest companies in the world accept bitcoin and we can take a look at how they have incorporated the coin in their business practices,

● Virgin Galactic: It is well documented that Richard Branson is one of the leading advocates of blockchain, the technology behind bit coin. In the past, he has been very vocal about the differences that blockchain can make to society overall. By accepting bitcoin as payment for his much-publicized space exploration program he has put the weight of the Virgin name behind the coin. This can only lead to further confidence in the currency and this will reflect in the market.

● WordPress: This popular blogging platform at first sight may not seem a major player but when it is taken into consideration for its users a different picture appears. CNN, NBC, The New York Times and Reuters are amongst the biggest media companies in the world and they all use WordPress. By accepting BTC WordPress has endorsed the currency and so, it would seem, have some of its powerful users.

● Tesla: Proving that regular bricks and mortar businesses are also accepting digital currency it was reported that a Lamborghini showroom located in California ...

Table of contents

• Table of Contents
• Introduction