Bitcoin, Ethereum and NEO cryptocurrency seem to be the new gold at the moment, many people invest in it and big profits are being made. But how exactly does the whole event around Cryptocurrency work? And what are the advantages, disadvantages, and risks? And where can you buy Bitcoin cheaply? In this article, I will go further into this. I do not go too deep into technical details so that some examples do not necessarily have to be 100% fully correct, it is purely for illustration and as an example. The approach is that everyone who wants to understand how the system works in general gains additional knowledge and can also quickly make the step to act.
What is cryptocurrency?
Everyone knows about the existence of stock trading in listed companies or the exchange rate difference between, for example, the Dollar and Euro. Trading in these shares or coins is always or directly via an arbitrary bank. When trading in shares of a company there is actually a company that has physical assets and/or that makes an annual profit. You assign a value to a share on the basis of these assets. There are also companies, such as Twitter, that do not make a profit. But due to the reach and the potential that such a company has, we now have a certain value to it. You may or may not agree on that, but the same thing is happening with money. It is always indicated that the value of, for example, the Gulden was covered by a pile of gold bars that had been stored at the Dutch Bank. Each coin or note represented part of this gold.
In practice, however, this is different nowadays. The Euro is based on trust and is supplemented if necessary. A country like Greece can also have a big shortage, in fact, there is a negative number of gold bars and yet a country can still exist …
Since the crisis in 2008, banks have been in a bad light for many people. In addition, you used to get a nice interest on your savings and a bill per year did not cost anything. Nowadays you can already be happy with 0.1% interest and less than 25 $ per year in costs for the use of PIN cards.
Because we all depend on banks, but we get less trust in bankers, you see that alternatives are being looked at. How can we become independent of the banks with all the computing power that we have at home and in data centers? And how do we ensure that the government can not force us to keep the rules for national banks? Very simple: Create a new currency and do not transfer it to one bank or country, but make sure that you have the payment system handled by thousands of computers and servers worldwide that all check each other. Only when a transaction has been approved by multiple computers is the money actually yours, or someone else. Bitcoin is the first major example of this, so it is a digital currency that can exist because people make computing power available to keep the network up and running, invest money in it and because you have Bitcoins in a local wallet at home (so-called Wallet). can save to manage them safely.
It is not that there were “suddenly” 10,000 Bitcoins, for example, a start was made with 0. By using computational power on computers, certain areas are examined by means of calculations. This is what they call “mines”, so you are actually digging a corridor through a mountain consisting of numbers, and sometimes you come across a certain sum that gives a Bitcoin. This is then added to the available number. Anyone who participates in the mines does not actually have to find a Bitcoin, for example, you receive 0.000000001 Bitcoin per day in exchange for the calculation power. This value is often equal to the cost of the hardware (usually video cards) and the power consumption that it took to mining the Bitcoin you get. The first Bitcoins were easy to mining, but because the algorithm gets harder and harder, you need more and more powerful video cards and more power. Because the value of the Bitcoin is getting higher and higher, the mines are also worth the effort and so the network is also maintained by that computing power.
What is blockchain?
The network described above is technically ingenious. The software ensures that everything can be calculated since the 0-position, just like the bank does. A bank will never store your balance as the truth, but they will store all transactions since opening your account. The sum of all individual numbers is your balance. For example, if I transfer 0.1 Bitcoin to someone else, that information will be received and checked by the other computers in the network. This is not done per separate transaction, but in blocks of a certain size, for example, 1 MB. There are many transactions in that 1 MB. Because all computers on the network distribute these blocks and check the content, the minimum required a number of checks are met at one time, for example, 20. After a considerable number of the computers on the network agree that the transaction is valid the transaction becomes final. It is therefore no longer the bank that approves a transaction, but this is done jointly. In fact, it is a chain of all computers and transactions that create a digital environment based on blocks with information in which a cryptocurrency can exist. Through this blockchain, people can transfer cryptocurrency and manage a digital wallet.
What is the difference between digital currency?
The red thread and operation of the different currencies are about the same. But every digital coin has its own reason to exist. So you have the Filecoin that was developed to be a competitor of Amazon, Google, and Dropbox. The blockchain is then used to store files, not on a server, but to distribute them over 10,000 computers. You can, therefore, use the storage of your local computer in exchange for a fee (dividend). The NEO is a currency from China because China wants its own version, but, if you have 1 NEO, it generates “GAS”, and GAS, in turn, is worth something. You can see this as a dividend and as an encouragement to keep NEO for a longer period of time. Every coin has a story and there are many people who choose a certain currency because they have faith in it and appreciate the story behind it. However, most people will opt for the currency that will yield the most return. And then you will soon end up with coins that might receive a lot of attention in the future. Bitcoin was the first to grow, Ethereum is seen as a good second and NEO is tipped by many as a good third. But, for how long? And actually, you are already too late to be able to make big profits here. So it is best to look for the next coin with a lot of potentials. Which is? Nobody knows that and is a matter of gambling and trying.
How do I mine Bitcoin, Ethereum or NEO?
Every computer, laptop or server has one or more processors (CPU). In practice, however, a CPU is far less suited to limit digital currency than a video card. The operations that a video card makes to be able to display images on the screen are much more in line with the algorithms needed to minimize cryptocurrency than the operations that a CPU performs. In addition, recent video cards are equipped with extremely many small individual cores and a lot of fast memory, which makes them very efficient. An additional advantage is that you can now easily combine multiple video cards. For example, 2-4 video cards can be placed in a PC. But there are also so-called “mining rigs” (see image) available, so you can combine 8-512 video cards for example! Realize that this is a gigantic investment that also consumes huge amounts of electricity every day. 1 to 20 $ per hour are no foreign quantities, so you realize well what additional costs are at all.
To be able to minute you download a program that is focused on the specific coin you want to focus on. The miner for NEO can be different than for Bitcoin. Google on the coin in combination with the term “mines” and you find the right programs and supported forums. In addition to the program, you also need to select a so-called “pool”, which provides the blocks that you will calculate. Payment of currency is done within the pool and it can transfer the currency to an address, for example, your local wallet or an address on an Exchange that you have created yourself.
The mining of many well-known coins is no longer worth the effort? Realize that with 1 or 2 good video cards you sometimes spend many months trying to mince a Bitcoin. On the other side of the world, someone has 1,000 solar panels on the roof and 4 mining rigs of 256 video cards each, you can not be disappointed with regard to costs and revenues. So choose, for example, a new coin and hope that it will be big in the future.
How do I buy Bitcoin, Ethereum or NEO?
Very nice and nice, but I do not want to buy high power bills and expensive hardware to mines, I just want to buy them! Which can. Do know that there is always an intermediary who charges a fee for this, one more than the other. Take a good look around.
There are several ways to buy cryptocurrency, but in the base, it amounts to:
Buy with “real” money, such as the Euro or Dollar Buy with other cryptocurrencies, or “trade” through so-called markets (“markets”). You can purchase Bitcoin, Litecoin or Ethereum, for example on Anycoindirect.eu (iDeal, SEPA) or via Coinbase.com (credit card, bank transfer, SEPA). Trading and buying other cryptocurrencies can be done via exchanges such as Binance.com (for example if you want to buy Ripple (XRP), Cardano (ADA), Lumen (XLM)).
If you want to buy NEO, you can do so Anycoindirect or Coinbase. Please note, Bittrex does not support the option whereby NEO GAS does not produce a dividend, but Binance does support the NEO dividend called GAS. Also, note that NEO can only be traded in whole numbers! For example, if you transfer 1.9 NEO, only 1 NEO will remain after the deduction of the treatment costs. So every coin has something, so you have to study the matter well before you act and always try this first with small amounts!
How do I save Bitcoin, Ethereum or NEO?
You can leave your digital currency on a Market, but in the past, a number of these markets have been hacked. You do not have your own money in your own hands and depend on others. You can also install a Wallet locally on your own PC. Search on Google for eg NEO Wallet download and find the official and alternative wallets. The advantage of saving locally is that you have a private key that only you know. So someone else can not just get access to your wallet. The disadvantage is that if, for example, your hard drive crashes, and you do not have a back-up of that key, you have lost all your money. Every way of saving has advantages and disadvantages.
In general, you can say that if you experiment with a small amount of money you can easily use an Exchange or Market. Even if you trade a lot between different currencies, that is handy. Are you talking about large amounts or do you trade little and do you focus on the long term? Then a local Wallet is a good solution, provided you secure the computer in question and back up the private key on a different medium or location.
If you have purchased digital currency, you can transfer it to another address. Every wallet offers options to create such an address. Transfer the amount, wait until there are enough “confirms” and the amount will be visible in your local wallet. Sometimes a few minutes to a few hours can pass over this. Do not worry too quickly, but deal with the complicated addresses of these accounts, they consist of many small and big letters interspersed with numbers. To forget a character, exchange it or type it incorrectly may mean that you have lost all your money!
Risks in working with cryptocurrency
There are a lot of risks involved in trading or investing in cryptocurrencies. There is no regulatory authority or bank behind the technology. A Bitcoin of 4,000 $ can be worth 0 $ tomorrow, but also 6,000 $. An Exchange of Market can be hacked, just like your local Wallet. So invest only money that you can miss. In addition, each coin has a number of phases, you are very aware of this. At the start a coin is worth nothing, then suddenly it can grow quickly, many people step in just a little too late. The currency suddenly falls hard, for fear you sell all coins, then suddenly they rise again, you are afraid to miss the boat and you buy them again at the wrong time. See also the graph alongside. There are many losers for every winner on this market!
It is a very nice matter to delve into you. I also expect that digital currencies will have the future and banks will start doing less and less. You can now pay with Bitcoin at webshops and physical stores. And at the moment the world is often seen as a criminal environment, giving it a bad name. But the possibilities are great and the developments are fast. The early adopters make a lot of profit if the large mass connects then this will be less and there will also be many losers. But I know for sure that there is a future for blockchain and digital currency.
Be careful, know what you are doing, then it is a very nice hobby or can even grow into a nice additional source of income.