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Bitcoin is a digital asset designed by its inventor, Satoshi Nakamoto, to work as a store of value and as a currency. It is commonly referred to with terms like digital currency, digital cash, virtual currency, electronic currency, or cryptocurrency.
Bitcoins current standing as a currency has limitations due to the high volatility of Bitcoin's rising price and is therefore more attractive to investors to hold Bitcoin.
It is predicted as the market capitalization of Bitcoin grows and the supporting technology is developed, price stability will eventuate in making Bitcoin viable for transactions.
What is Bitcoin
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Bitcoin market capitalization is the total dollar value of bitcoin supply in circulation, as calculated by the daily average market price across major exchanges.
Market Cap Jan 1st 2107: $16,061,617,453 USD
Market Cap Current: $176,097,870,738 USD
Increase: +996.39%
Due to the fixed supply of Bitcoin and projected increase in demand, some price predictions for one Bitcoin are in the millions of dollars.
The current Bitcoin prices: $10,430.50 USD $13,304.10 AUD
This short video explains how market capitalization is calculated in reference to listed companies. The same theory is applicable to calculatiing Bitcoin's market cap.
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I recommend purchasing bitcoin safely through a reputable exchange and whilst there are many online exchanges around the world, in Australia, I recommend CoinJar:
When you buy Bitcoin you will need a Bitcoin wallet to store your Bitcoin, Coinjar provide free wallets.
Unfortunately, online wallets are not the safest place to store Bitcoin purely because they are hosted on the Internet so could be hacked. Therefore, I only use online wallets to facilitate purchasing Bitcoin
Once you have purchased Bitcoin, I recommend you transfer your Bitcoin immediately from the online wallet to a hardware wallet, the hardware wallet I use and recommend Trezor
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A "wallet" is basically the Bitcoin equivalent of a bank account. It allows you to receive bitcoins, store them, and then send them to others.
There are three main types of wallets.- A software wallet is one that you install on your own computer or mobile device. You are in complete control over the security of your coins, but they can sometimes be tricky to install and maintain and if your device is connected to the Internet be open to security issues.
- A web wallet or hosted wallet is one that is hosted by a third party. They are often much easier to use, but you have to trust the provider to maintain high levels of security to protect your coins. Web Wallets should be considered for storing small amounts of bitcoin or (spending money)
- A hardware wallet which is a special type of bitcoin wallet that stores the user's private keys in a secure hardware device. They have major advantages over standard software wallets: private keys are often stored in a protected area of a microcontroller, and cannot be transferred out of the device in plaintext.
Wallets connected to the Internet are referred to as "Hot Wallets"
Wallets disconnected to the Internet are referred to as "Cold Wallets"
For long term holdings of Bitcoin I recommend cold storage and use Trezor
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Trezor Hardware Wallet
How is TREZOR different from ... an ordinary Web Wallet?
When you store your Bitcoins in a traditional web wallet you put your Bitcoins at risk of being stolen, lost, or confiscated. Here is a list of ways people have lost their Bitcoins through use of a traditional web wallet:
- User's computer is hacked and web wallet password is stolen
- Web wallet server gets hacked and bitcoins are stolen
- Web wallet company goes bankrupt
- FBI or other enforcement agency confiscates coins
- Web wallet provider accuses you of a Terms Of Service violation and takes your coins
- Owners of web wallet company run away with coins
- Bug in web wallet software leads to loss of coins
- Your computer or cell phone is stolen while you are logged in and thieves then steal your coins
- If you keep your Bitcoins in a TREZOR, none of these things can happen.
Recovery Seed, PIN and Encryption Passphrase
- Recovery seed is a mnemonic code made of 12, 18 or 24 words depending on your choice. This seed is generated the first time you run TREZOR and will help you recovering it's contents (private keys, bitcoin balance, and transaction history) into a new device if you lose your TREZOR.
- PIN is a number that you set when you first run TREZOR. It protects TREZOR against being used by unauthorized persons. We have invented a secure way of entering the PIN so it can't be keylogged and misused.
- Encryption passphrase can be set on top of the PIN. This protects the device in case of a seizure. It's using military-grade encryption of the seed on TREZOR storage, so even torturing the device in a laboratory won't leak your private keys.
- A combination of these security mechanisms makes your bitcoin ownership with TREZOR absolutely safe.
Protecting Your Recovery Seed
During the setup of your TREZOR, you will create a list of twenty four words which becomes your recovery seed. It is crucial you do not lose this list. My advice is you save them in a safety deposit box at your bank. If you lose these words, you lose your Bitcoin. If someone steals your words, you lose your Bitcoin.
If you were investing in Gold, you wouldn't leave your Gold lying around, treat your words as you would Gold. Right now Bitcoin is more valuable than Gold.
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One of the wonderful features of a Coinjar wallet is it allows users to easily transfer Bitcoin to the users linked bank account. The steps are simple:- Select the "Everyday Bitcoin Account."
- Select the "Nominated Bank Account."
- Enter the amount in dollars or Bitcoin to transfer and click "Done"
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A blockchain is a decentralized and distributed digital ledger and is used to record transactions across many computers so that the record in the ledger cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network.
Having read the previous paragraph you are probably non the wiser and especially how blockchain relates to Bitcoin. I know I certainly wasn't. So rather than write a "Blockchain For Dummies" which would be beyond my skill set anyway, I'll recommend you listen to the podcast published by Patrick O'Shaughnessy. It's a brilliant explanation of what is blockchain and why might it significantly affect our world?