Do you know you can use bitcoins to purchase goods and services online worth millions of naira? Here is how you can do that!
You can buy goods and services online with bitcoins
Bitcoins are electronic currency, otherwise known as
'cryptocurrency'. Bitcoins are a form of digital public money that is
created by painstaking mathematical computations, and policed by
millions of computer users called 'miners'.
How Do Bitcoins Work?
Bitcoins are, in essence, electricity converted into long strings
of code that have money value. Bitcoins are completely virtual coins
designed to be 'self-contained' for their value, with no need for banks
to move and store the money. Once you own bitcoins, they behave like
physical gold coins: they possess value and trade just as if they were
nuggets of gold in your pocket.
You can use your bitcoins to purchase goods and services online, or
you can tuck them away and hope that their value increases over the
years.
Bitcoins are traded from one personal 'wallet' to another. A
wallet is a small personal database that you store on your computer
drive, on your smartphone, on your tablet, or somewhere in the cloud.
How Much Are Bitcoins Worth?
One bitcoin is currently worth around $450 US dollars . There are
approximately $1.9 billion USD worth of bitcoins in existence, with
approximately $2 billion more to be created.
Bitcoins will stop being created when the total number reaches 21
billion coins, which will be sometime around the year 2040. As of
2016, just over half of those bitcoins have been created.
What Is a Bitcoin Made of?
A bitcoin, at its core, is a very simple data ledger file called a
'blockchain'. A blockchain's file size is quite small, similar to the
size of a long text message on your smartphone.
Each bitcoin blockchain has three parts, two of which are very
simple: its identifying address (of approximately 34 characters), and
the history of who has bought and sold it (the ledger).
The complex part of the bitcoin is its third part: the private key
header log. This header is where a sophisticated digital signature is
captured to confirm each and every transaction for that particular
bitcoin file. Each digital signature is unique to each individual user
and his/her personal bitcoin wallet.
These signature keys are the security system of bitcoins: every
single trade of bitcoin blockchains is tracked and tagged and publicly
disclosed, with each participant's digital signature attached to the
bitcoin blockchain as a 'confirmation'. These digital signatures, when
given several seconds to confirm their transactions across the network,
prevent transactions from being duplicated and people from forging
bitcoins.
Note: while every bitcoin records the digital address of every
bitcoin wallet it touches, the bitcoin system does NOT record the names
of the individuals who own wallets. In practical terms, this means that
every bitcoin transaction is digitally confirmed but is completely
anonymous at the same time.
Your bitcoins are stored on a computer device of your choice, but
the history of each bitcoin you own or spend is publicly stored on the
bitcoin network, and every user will be able to see every bitcoin's
history.
Who Makes Bitcoins?
Bitcoins can be 'minted' by anyone in the general public who has a
strong computer. Bitcoins are made through a very interesting
self-limiting system called 'mining'. It is self-limiting, because only
21 million total bitcoins will ever be allowed to exist, with
approximately 11 million of those Bitcoins already mined and in current
circulation.
Bitcoin mining involves commanding your home computer to work
around the clock to solve 'proof-of-work' problems
(computationally-intensive math problems). Each bitcoin math problem
has a set of possible 64-digit solutions. Your desktop computer, if it
works nonstop, might be able to solve one bitcoin problem in two to
three days, likely longer.
For a single personal computer mining bitcoins, you may earn
perhaps 50 cents to 75 cents USD per day, minus your electricity costs.
For a very large-scale miner who runs 36 powerful computers
simultaneously, that person can earn up to $500 USD per day, after
costs.
Indeed, if you are a small-scale miner with a single consumer-grade
computer, you will likely spend more in electricity that you will earn
mining bitcoins. Bitcoin mining is only really profitable if you run
multiple computers, and join a group of miners to combine your hardware
power. This very prohibitive hardware requirement is one of the biggest
security measures that deters people from trying to manipulate the
Bitcoin system.
How Secure Are Bitcoins?
They are as secure as possessing physical precious metal. Just
like holding a bag of gold coins, a person who takes reasonable
precautions will be safe from having their personal cache stolen by
hackers.
Your bitcoin wallet can be stored online (i.e. a cloud service) or
offline (a hard drive or USB stick). The offline method is more
hacker-resistant, and absolutely recommended for anyone who owns more
than 1 or 2 bitcoins.
More than hacker intrusion, the real loss risk with bitcoins
revolves around not backing up your wallet with a failsafe copy. There
is an important .dat file that is updated every time you receive or send
bitcoins, so this .dat file should be copied and stored as a duplicate
backup every day you do bitcoin transactions.
Security note: the collapse of the Mt.Gox bitcoin exchange service
is not due to any weakness in the Bitcoin system. Rather, that
organization collapsed because of mismanagement and their unwillingness
to invest any money in security measures. Mt.Gox, for all intents, had a
large bank with no security guards, and they paid the price of their
human error.
- LifeWire
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