Making my usual weekly report on investments, I tried to explain my friends why making money with Bitcoin could be considered one of the newest and most prospective ways to invest savings.
Only during the first week of trading bitcoins I made $200! Taking into account that I’ve invested only $800, you can figure out that I’ve made 25% of profit only in 7 days!
If you want to learn how to make money on digital currency, you should follow some of my recommendations.
However, I have to mention that I’ve got the chance to buy digital currency during an increasing price trend (the price has been rising up to $1000!).
First of all, we should define the notion of bitcoins.
Bitcoin: what does it mean?
The term is compiled of two words: “bit” – “a unit of information” and “coin” – “a small piece of metal used as money”. In fact, “Bitcoin” (usually shortened to “BTC”) – is a system of digital payments, which does not have a single repository due to the fact that it does not have a sole owner.
As a result, coins belong only to people who use them.
Bitcoin as a system of digital cryptocurrency was created in 2009 (its development started in 2007) by a programmer or a group of programmers under the nickname Satoshi Nakamoto (as you may guess, this name has a Japanese origin). In 2009 Satoshi published the initial code of the system. This event can be considered the official launch of a new system of digital payments.
Nowadays there exist approximately 10 types of digital cryptocurrencies with a similar functioning principle (they are usually called “forks”).
I will enumerate the most prospective forks where you may invest and multiply your savings. They are:
The value and stability of all existing cryptocurrencies depend directly on bitcoins, thus I’m going to explain here how to make money with Bitcoin.
Bitcoin for dummies
In order to give you proper understanding about this type of cryptocurrency, I am going to point out the difference between digital coins and usual paper money.
- Bitcoins have no preliminary guarantees.
BTC cannot become debt issues (unlike our usual money), and they have no material guarantees.Their value depends directly on supply and demand, i.e. its necessity for people. In order to understand the matter a little bit better and learn how to make money with Bitcoin, you may draw a parallel between digital currency and gold, as the price on gold also depends on demand.
For example, imagine the situation that gold becomes useless and nobody purchases it. What is going to happen next? Its price will immediately decrease. However, it won’t become totally devalued, because people always can make something out of metal, especially of such strong material as gold. On the contrary, if there is no demand for digital money, there is no other way to use it either, and thus, its price will be totally devalued.
- There is no single repository.
All data of the payment system are stored on the carriers of system users in the form of open-source code. The system doesn’t have a single administrator, who could influence the value of the currency, the process of emission and other important factors.
- The limited amount of currency.
The initial code of the system presupposed a certain amount of coins – 21 million. Besides, the dynamics of emission (the process of issuing new coins) has been programmed as well – 25 new coins are issued every 10 minutes. They are distributed between the so-called miners (we will talk about them a little bit later). The emission is halved every 4 years.
- There is no extra fee for transactions.
Due to the fact that the program doesn’t have a single owner, there is no need to pay extra fee for transactions. However, you may pay a voluntary fee in order to speed up the process of transaction.
- Total anonymity.
Despite the fact that Bitcoin has an open-source initial code and every single person has an opportunity to trace any transaction with BTC, the system of wallets is completely anonymous. If you decide to make money with Bitcoin, you should start with creating a wallet. Any user is able to have an unlimited quantity of wallets on his/her computer, and each one of them will have its own number.
You can receive information about the owner of the wallet only from the owner him/herself.The number of the wallet consists of the set of 34 symbols, both numbers and letters. The wallet itself can be stored on the computer, portable carrier or online service. If you want to make money with Bitcoin, digital wallet is a must-have.
Main disadvantages of the program
- There is no single administrator.
Besides, there is no single repository either. Thus, there is no opportunity to cancel a transaction with BTC.
- The difficulty of the system.
Most people, who are not Internet geeks, consider Bitcoin to be a very complex system. That’s why BTC have not become very popular yet.
- The risk of becoming a forbidden currency.
Nowadays governments all over the world tend to establish total control over their citizens. It is the reason why any income from anonymous sources is doomed to prohibition. Sooner or later cryptocurrencies may also become forbidden, and you won’t be able to make money in such way anymore.
How to make money with Bitcoin?
There are two ways to make money with Bitcoin.
Making money on bitcoin mining.
Mining (the process of extracting different minerals from underground) is the process of extraction of coins with the help of computing capacity of computers.
Such process is necessary for securing the functioning of the network. Miners ensure anonymity, security and efficiency of all transactions made through the system. Miners receive salary from the freshly issued cryptocurrency: 25 coins which are produced every 10 minutes are divided between all miners.
Nowadays all calculations in the system are so complicated that using an average computer for mining will bring only expenses instead of income (the cost of electricity, amortization). Miners usually create mining pools in order to improve their computing capacity. In this case their income is divided between them proportionally according to the amount of calculations made.
Nowadays the most effective device used for mining is ASIC (application-specific integrated circuit) which has been created specifically for mining and has no other functions. Taking into account my scant knowledge of computer configurations, I won’t go into details on this matter.
Maybe, one day I’ll write an article about mining, but right now I’m going to tell you more about another way to make money on this currency. 🙂
Making money on bitcoin trading.
This way of making money with Bitcoin has two different methods: passive investment into digital currency and active speculation on their rate. The first method consists in purchasing coins and preserving them with the hope that in a few years they will cost much more than today. By the way, recently I’ve read an article written by the chief analyst of the Bank of America, who conducted his own research and came to the conclusion that the price on digital coins could rise up to $1000 (now 1 bitcoin costs $800). If you want to make money on this currency, you’d better take this information into account.
The second method how you may make money with Bitcoin presupposes active trading/speculation on the rate of coins. This principle resembles the process of trading currencies on Forex. Besides, if you check out BTC-E.com, you’ll find out that you can trade digital coins with the help of trading platform called MetaTrader4.
Trading cryptocurrency is very popular among private investors, because with its help they receive good income without sparing much effort. If you decide to make money using the abovementioned principle, you should have at least $100.
Now I’d like to explain you where you can get these coins from.
Where can I get bitcoins?
The answer to this question depends on the fact which method of making money with Bitcoin you will choose.
Lazy investors, who would like to invest their money securely and preserve them for a long time, should choose resources which exchange money.
First of all you will have to create a wallet.
You have to download MultiBit from the official website and install this program on your computer. Then launch the program and create a new wallet there.
You can purchase cryptocurrency as you usually purchase other currencies in the exchange offices. I’d recommend you to use only reliable sources, e.g. Alfacashier.com.
I guess this is all what you have to know about making money with Bitcoin. If you notice that something is missing, you may ask questions in the comments below.