Bitcoin is a decentralized digital currency that allows users to buy, sell or exchange it directly, without any financial intermediary. According to Bitcoin’s creator, Satoshi Nakamoto, bitcoin was created originally to serve as “an electronic payment system based on cryptographic proof instead of trust”.
How Do Bitcoin Transactions Work?
There are 3 elements in a bitcoin transaction- the transaction input, the transaction output, and the amount. The bitcoin wallet address from where the amount was sent is referred as transaction input, and the address to which the amount is sent is transaction output. When a person intends to send bitcoins to another person, the transaction input and the transaction output also change. This is because the person who is intending to send bitcoins to another person has received the bitcoins from some other sources.
Each transaction is recorded in the bitcoin blockchain, a public ledger on which the entire blockchain network works. Before they are added to the blockchain, all transactions need to be verified by the miners in exchange for a fee called the ‘miners fee’. It is a kind of a token paid to the miners as an incentive to verify the transactions and add them to the blockchain network quickly. All confirmed transactions are added in the blockchain that allows bitcoin wallets to calculate their spendable balances. New transactions can be rapidly verified, thereby ensuring that the spender actually owns them. This, in turn, helps in tracing the history of Bitcoins to prevent people from spending coins that they do not own.
Thus, as soon as a person installs a bitcoin wallet on his computer or mobile, it will generate his first Bitcoin address, and he can create even more whenever he needs one. This is called the public wallet address that can be shared with friends and family to pay or vice versa.
Sending or receiving bitcoins is relatively easy. All the user needs to do is install a bitcoin wallet first so that it becomes easier to store the bitcoin, and hence sending or receiving bitcoin becomes hassle-free. The Bitcoin wallet is used to select the type of currency (here bitcoin) a user wants to send, write the recipient’s wallet address, enter the amount he wants to send, pay the transaction fees (if any), and then click on the ‘Send’ button.
How Does Bitcoin Make Money?
The easiest way to make money with bitcoin is through a process called ‘mining’. It is a process by which new coins (in this case, bitcoins) are created, and each transaction information is verified before they are added to the bitcoin blockchain. The process is performed by high-end computers that solve complex mathematical problems before each transaction is recorded. Miners are rewarded with Bitcoin as an incentive for adding a new block of transactions to the bitcoin blockchain.
Bitcoin mining requires robust processing power and specialized equipment, and therefore a lot of money is spent on electricity. Those who cannot afford a large mining rig can join a mining pool and combine their processing power with other miners to make money from mining.
Then there are other ways to make money through bitcoin.
1) Investing and trading bitcoins– Traders can also make money by investing in bitcoin when the prices are low and then holding it till the prices spike and then selling them at higher prices, thereby banking the profits. If you want to invest then check out Bitcoin Revolution Platform. Find out Bitcoin Revolution Review to know more about this unique platform.
2) Bitcoin lending – Some websites allow bitcoin owners to lend their bitcoins at an interest rate of up to 15%.
3) Bitcoin faucets and micro-jobs– Some websites pay out small amounts of bitcoins and accomplishments of certain tasks like testing a plugin, retweeting a post, or completing a captcha.
Can Bitcoin Be Converted to Cash?
Yes, bitcoin can be converted into cash in the following ways:-
1) Through an online cryptocurrency exchange that allows users to sell Bitcoin for USD, EUR, etc. or any other local fiat currency.
2) Bitcoin ATMs have bi-directional features that allow users to purchase or sell Bitcoin for cash.
3) P2P Bitcoin exchange facilitating direct trading between potential buyers and sellers.
Whether a beginner to the cryptocurrency market or an experienced trader, bitcoin opens up numerous ways for everyone to make money, but at the same time, there are risks of varying degrees associated with every step. Therefore, it is important to assess the risk level before taking a plunge into the crypto market.