Bitcoin Ireland - the ultimate guide to Bitcoin. We review some of the best crypto hardware wallets and exchanges!
What is Bitcoin? First and foremost, a Bitcoin is a virtual reality currency. Unlike the cash you withdraw from a bank’s ATM, there is nothing physical about this new digital currency. Despite it’s rather intangible nature, some believe it may be the currency of the future. In fact, it has become so popular there are now over a thousand different cryptocurrencies available worldwide. The current value of the cryptocurrency market is around 300 billion euro. Bitcoin the world’s most popular cryptocurrency, is now being traded on the Chicago Board Options Exchange futures market, the first ‘Wall Street’ exchange to do so.
How does cryptocurrency work?
A cryptocurrency is generated by individuals called ‘miners’ who work online with extremely complicated algorithms to create and authenticated transactions that can be recorded in online ledgers. Cryptocurrencies are no way connected with financial institutions or government bodies and are generally decentralised in nature. A cryptocurrency is heavily encrypted, which means transactions can be safeguarded and monitored closely. The result is that a cryptocurrency ‘coin’ can never be used in more than one transaction at the same time by an individual, thus protecting it from becoming debased or devalued.
Where did cryptocurrency come from?
The ‘father’ of Cryptocurrency is Bitcoin, developed in 2009. This was the first main, decentralised attempt at developing an electronic currency. The originator of Bitcoin used the name Satoshi Nakamoto, however, the true identity of this individual or group of individuals was never definitively established. Whoever he, she or they are, their current Bitcoin ‘wealth’ is valued in billions.
The most popular cryptocurrency.
Although there are hundreds upon hundreds of cryptocurrencies, the main player remains Bitcoin. Bitcoin started out with a value of only .0025 American cent, (when it was used to purchase a pizza in 2010 in one of the first recognised transactions) but now currently commands a value of over €5,000 per coin (This value changes daily) Similar to stocks and shares and government backed legal tender currencies like the euro and dollar, their value can fluctuate hourly. Cryptocurrencies are very volatile and can be traded 24/7.
Other popular cryptocurrencies or altcoins.
All non-Bitcoin cryptocurrencies are known as Altcoins, many of which claim to have investment/transactional benefits over and above their predecessor. Some of the more well-known or up-and-coming cryptocurrencies are Ethereum, Litecoin, Stellar, Cardano and Ripple. Although with over 1,000 currently available, there are plenty to choose from!
How to purchase cryptocurrency?
The first thing that we would suggest you purchase is a crypto wallet. This wallet is a safe online or offline storage area where you will be able to store your digital investment securely. When you purchase cryptocurrency you receive an encrypted digital key.
This key unlocks your currency, allowing you to place it inside your very own ‘wallet’. Cryptocurrency can be purchased from a number of specialist exchanges, or through ‘mining, a process that will be explained later. Bitcoin Ireland and cryptocurrencies can be purchased through online exchanges.
The cryptocurrency marketplace.
The buying and selling of cryptocurrency is a little more complicated than purchasing shares in a company. There are various online marketplaces or exchanges where you can purchase this digital currency, through an agent or dealing directly with the cryptocurrency seller. Typically, trading fees can vary from zero to 4% of the transaction value. Credit Cards, Visa debit, Bank Transfers and even PayPal can be used to pay for your cryptocurrency purchase.
The claimed benefits of investing in cryptocurrency.
• You keep your investment under your own lock and key in your online digital ‘wallet’, not in the hands of a financial institution…some of whom have had their own liquidity issues over the past number of years.
• Transaction fees are typically low…or non-existent.
• Confidentiality is assured, as you do not need to supply your personal details when purchasing or selling.
• There is a growing acceptance among the world’s commercial sector that this new currency is here to stay. Companies like Paypal, Dell and Microsoft are now taking this digital currency as payment for their goods and services.
The possible downside of investing in cryptocurrency.
• It is believed that this new currency has attracted investments from criminal elements, due to the confidential nature of transactions.
• Due to the incredible amount of online algorithm coding required developing (mining) the currency, the software/hardware used consumes enough electricity to run a country the size of Holland!
• Because cryptocurrencies are traded, like stocks and shares, they can fluctuate in value, sometimes dramatically.
• The acceptance levels among the commercial world for this new currency, although growing remains lower than for standard forms of payment.
Decentralised cryptocurrencies are fully dependent on ‘miners’ who are tasked with updating a digital currency’s transaction database on a blockchain distributed ledger. Miners are located all over the world. They are the backbone of cryptocurrencies security…and success, solving incredibly complex cryptology/algorithms to validate each cryptocurrency transaction or block.
How to mine?
Miners need to invest heavily in expensive ‘rig’s or PC hardware that consume huge quantities of electricity in order to mine. The set-up costs for mining Altcoin (all non Bitcoin cryptocurrencies) can be cheaper than Bitcoin, as Altcoin typically use less complex algorithms, thus requiring a less powerful PC for mining. A miner’s main task is to be able to confirm and update a cryptocurrency transactional blocks using digital coding (a hash) and then merge it with its previous block to form an unalterable record of the new transaction. Basically, miners are the ultimate database keepers. There are a growing number of Bitcoin Ireland miners, for move information contact us and we will be happy to help.
In accounting, the use of ‘ledgers’ to record transactions go back to a time when they were carved out of stone or inked onto papyrus. A cryptocurrency transactional ledger used by miners has much the same purpose as a modern day accountancy ledger, although it is vastly more complex in construction and use. Cryptocurrency ledgers record individual transactions independently through the use of ‘nodes’ and are uniquely constructed and confirmed so that they offer maximum security.
The rewards from mining can be substantial. Some miners are now joining forces to share this very intensive work…and share the rewards. When miners create a new block they receive payment in cryptocurrency, like Bitcoin. Typically, the amount of Bitcoin rewarded halves after every twenty-one thousand blocks are mined. This reward system will continue to operate until all twenty-one million Bitcoins (the absolute limit set for Bitcoin) are introduced to the online marketplace. Once this happens, it is believed miners will be paid fees to simply maintain the blocks.
Types of mining.
Miners can either join a ‘Pool’ of miners or mine on a solo basis. The main benefit of mining on a solo basis is that the reward for solving/developing a block or blockchain of transactions will not need to be shared with anyone else. However, the chances of getting a reward are diminished when working solo due to the fact that solving/developing a block can be extremely difficult if working alone. When you join a mining pool, it is akin to joining a syndicate, where all rewards are divided among the pool members. Here however, rewards are much easier to accumulate due to the fact that ‘many hands make light work!’
In order to mine, you need to have a powerful ‘Rig’ of computer hardware. To create a mining rig, there are three essential items to possess:
• A graphic card (GPU): This is THE most important element in a cryptocurrency mining rig. The better your GPU, the easier it is to mine. Most popular graphic cards include those from Nvidia Corporation and AMD.
• An adequate power supply: To run your rig you will need a major source of electricity. The recommendation here is to have a supply unit of 1,000w plus.
• A motherboard: Ideally, purchase a motherboard that can accommodate 3 or more video/graphic cards.
Secondary mining hardware.
Other essential hardware required in putting together a mining rig, although of less critical importance than the 3 above, are:
• RAM: Surprisingly, mining does not require a lot of RAM.
• CPU (Processor) and Hard Drive: Required so your operating system can run effectively.
• A computer case: Less is more here, as the rigs that are more ‘open’ are cooler and run more effectively.
Mining hardware costs.
The components required to set up a basic rig can be purchased for less than €1,000. Typically, the most expensive (and important) element will be the graphic or video card (GPU). Ideally purchase two, which can set you back approx €250 each or €500 for the pair. The next two most expensive items are the Power Supply (typically €180) and the motherboard (€135). The RAM, CPU and hard drive should cost typically €50 each. There is no real need to purchase a computer case. This rig is a basic, which could take you up to three tears to mine a Bitcoin block. Obviously the more you invest, the quicker your mining times, or simply join a mining pool and share the work…and rewards.
Once you have all the components mentioned above…and connected them to your motherboard to form your rig, you can borrow the keyboard, CPU and mouse from your own PC and connect them to the rig for configuration or set-up. You will also need to install an operating system (for example Windows) by using a USB key or uploading it from a disc through a CD Rom Drive.
Once you have your mining rig set up, the next step is to upload the necessary software. The basic requirements here are mining software, drivers for the graphics card/cards, update software…and an internet connection. There are many mining software options to choose from and downloading is free; currently the most widely used is CG Miner. The only other requirement before you start mining is to download your cryptocurrency digital wallet so that you have a secure address to use for your mining activities, principally to store your well-earned cryptocurrency coins. Happy Mining!
Cryptocurrencies rely on an independent system to capture and record individual transactions called a ‘Blockchain’. The blockchain acts like a public ledger keeping a record of all transactions. Only miners can confirm cryptocurrency transactions and once a transaction is confirmed, it is added to the historical record of transactions called a blockchain.
A blockchain is made up of a series of blocks, each one representing a confirmed valid transaction. All miners need to agree on the rules of what constitutes a valid transaction and can in turn add a new block to the chain. When miners disagree on the fundamental rules that make a transaction valid, then a fork in the blockchain can occur.
At its most basic level, a fork is when the path of the blockchain or record of transactions diverges to create two different coins, such as Bitcoin and Bitcoin Cash. Forks occur deliberately when developers introduce changes to the blockchain rules. There are two different types of fork, a hard fork and a soft fork.
What is a hard fork?
A hard fork is where new software is introduced which is incompatible with the previous version creating a fork. Computers still running the older version of software will not be able to continue to mine valid blocks on the new blockchain. Because Bitcoin has no central authority, there is always the potential for the Bitcoin community to disagree and split. Where some miners and developers decide not to adopt the changes and stick to the old rules then a hard fork is created. Bitcoin has had two recent hard forks where Bitcoin has split to create two further currencies; Bitcoin Cash and Bitcoin Gold.
What is a soft fork?
A soft fork is where a change has been introduced but it is compatible with the previous version of software. A soft fork is a temporary split in the blockchain, which occurs when new rules are implemented.
The original blockchain contains blocks from computers that have not been updated, however it can also accept blocks from computers updated with the new software. The new chain contains blocks only from upgraded computers, which have chosen to support the new rules. Once the new chain reaches the majority it will become the valid chain.
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