HOW BITCOIN IS MAKING ORDINARY PEOPLE ACCIDENTAL MILLIONAIRES
Have you discovered Bitcoin yet?
The word Bitcoin may not be familiar to many people; however in the not too distant future we may be using Bitcoin to pay for all manner of items, especially for Internet transactions.
Early adapters of Bitcoin have made an absolute killing in just a few years with Bitcoin trading at more than $120 and as of November 2013, the prices jumped as high as US$1200. Some analysts have predicted it could rise to as much as $100,000 per Bitcoin.
A few short years ago Bitcoin was 5 cents, just $10,000 invested then is now a $150 million fortune.
By April 2013 there were around 250 e-wallets with more than $1million worth of Bitcoins, which means there were over 250 Bitcoin millionaires, that has now jumped to thousands and we just saw our first Bitcoin billionaire.
The WSJ talks about Bitcoin
Watch this now to find out what WSJ’s Jason Bellini has to say about Bitcoin.
Source: WJS Live
Will Bitcoin completely replace our current systems of currency?
The history of currency is fraught with countless tales of boom and bust as wars, politics and events such as the Global Financial Crisis impact. Many don’t trust the current world monetary system controlled by the Central Banks and want to see a new honest transparent monetary system. This is why Bitcoin was created. Will it succeed before our current system implodes like it nearly did in the Global Financial Crisis?
Keep ahead of the latest trends
Did you buy your Bitcoins when we reccommended investors to start buying Bitcoin at $120? If you did, you are one of the early adapters of Bitcoin who have made an absolute killing in just a few years with Bitcoin trading at more than $120 at the time the book went to press. As of November 2013, the prices jumped as high as $1200.
A few short years ago Bitcoin was 5 cents, just $10,000 invested then is now a $150 million fortune.
Some analysts have predicted it could rise to as much as $100,000 per Bitcoin It was only $140 a month ago and hit $1200 recently.
If you have not yet joined this currency revolution, it is not too late. The window of opportunity is still open, so don’t miss out!
What Are Bitcoins?
Bitcoin is a peer-to-peer digital currency that functions without the intermediation of a central authority. The concept was introduced in a 2008 paper by a pseudonymous developer known as “Satoshi Nakamoto”. Bitcoin has been called a cryptocurrency because it is decentralized and uses cryptography to control transactions and prevent double-spending, a problem for digital currencies. Once validated, every individual transaction is permanently recorded in a public ledger known as the blockchain. Payment processing is done by a network of private computers often specially tailored to this task. The operators of these computers, known as “miners”, are rewarded with transaction fees and newly minted Bitcoins.
21st Century is bullish on the future of Bitcoin.
|The word Bitcoin may not be familiar to many people; however in the not too distant future we may be using Bitcoin to pay for all manner of items, especially for Internet transactions.Early adapters of Bitcoin have made an absolute killing in just a few years with Bitcoin trading at more than $120 and as of November 2013, the prices jumped as high as US$1200. Some analysts have predicted it could rise to as much as $100,000 per Bitcoin.A few short years ago Bitcoin was 5 cents, just $10,000 invested then is now a $150 million fortune.By April 2013 there were around 250 e-wallets with more than $1million worth of Bitcoins, which means there were over 250 Bitcoin millionaires, that has now jumped to thousands and we will soon see the first Bitcoin billionaire. Will Bitcoin completely replace our current systems of currency? The history of currency is fraught with countless tales of boom and bust as wars, politics and events such as the Global Financial Crisis impact. Many don’t trust the current world monetary system controlled by the Central Banks and want to see a new honest transparent monetary system. This is why Bitcoin was created. Will it succeed before our current system implodes like it nearly did in the Global Financial Crisis?|
I cover a range of Bitcoin related topics in this book including:
- The Origin Of Currency
- Our Debt Based Monetary System
- Virtual Currency
- Bitcoins, Speculative or Alternate Currency?
- How People Are Becoming Bitcoin Millionaires
- Mining Bitcoins
- Why Mine for Bitcoin?
- Genesis of the Bitcoin
- Overcoming Problems and Pitfalls
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BITCON QUESTIONS ANSWERED
What is Bitcoin?
Bitcoin is a protocol and software platform that enables a new digital currency called bitcoins (BTC) that can be exchanged from person to person without using banks.
How does one acquire bitcoins?
- Accept bitcoins as payment for goods or services.
- Buy bitcoins at one of the Bitcoin Exchanges.
- Trade traditional currency for bitcoins using one of several services.
- Trade traditional currency for bitcoins face to face using a local directory.
- Earn bitcoins through competitive mining.
How does Bitcoin work?
Bitcoin is a triple entry bookkeeping system where a public ledger of every Bitcoin transaction is validated and distributed in real-time through the peer-to-peer Bitcoin network. The whole network is secured and regulated through cryptography. Anyone can process transactions using computer processing power, often with specialized hardware, and potentially earn a reward in bitcoins for this service which is often called ‘bitcoin mining’.
How difficult is it to make a Bitcoin payment?
Bitcoin payments are easier to make than any existing banking orcredit card process. Payments are made from a wallet application, either from your computer or smartphone by entering the recipients address either by scanning a QR code, touching two phones together with NFC technology or copying and pasting, entering the amount, and pressing send.
What are some advantages of Bitcoin?
- Unrestrained payments – It is possible to send and receive any amount of money anywhere in the world at any time. No bank holidays. No borders. No imposed limits.
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- Low or zero fees - Bitcoin payments currently process with either no fees or extremely small fees. Users may include fees with transactions to receive priority processing which results in faster validating and authenticating of transactions by the network. Additionally, merchant processors exist to assist merchants in processing transactions, converting bitcoins to fiat currencies with daily direct deposits to bank accounts and provide these services for much lower fees and less risk than
with Paypal or credit card networks.
- Less fees and risks for merchants - Bitcoin transactions are secure, irreversible and do not contain customer’s sensitive or personal information. This protects merchants from losses caused by fraud or fraudulent chargebacks and there is no need for PCI compliance. This allows merchants to easily expand to new markets where either credit cards are not available or fraud rates are unacceptably high. The net results are lower fees, larger markets and less administrative costs.
- More protection for consumers – Bitcoin payments are made without needing personal information tied to the transaction. This offers strong protections against identity theft. Users are in full control of their transactions therefore it is impossible for merchants to force unwanted or unnoticed charges which can happen with either ACH debits, debit cards, Paypal or credit cards.
- Transparency – All information concerning the Bitcoin money supply is readily available on the blockchain for anybody to see,
verify, measure, and use in real-time.
- Distributed – The Bitcoin ledger, commonly called the blockchain, is distributed throughout the world and stored by Bitcoin miners. This adds a level of resiliency and redundancy that is unmatched in the payments space and a payment processing network. For example, the Federal Reserve does all
their payment processing at 100 Orchard Street, East Rutherford, New Jersey and have back-up systems that can be brought online within 60-90 minutes at the Federal Reserve
Banks of Richmond and Dallas. If those three centers were compromised or destroyed then the entire monetary system of the Federal Reserve would be greatly impaired and probably completely nonfunctional.
What are some disadvantages of Bitcoin?
- Not widely accepted – Many people are still unaware of Bitcoin. Everyday more businesses accept bitcoins because they have advantages of doing so, but the list remains small and still needs to grow in order to gain improved usefulness through networking effects.
- Volatile - The total value of bitcoins in circulation and the number of businesses using Bitcoin is still very small compared to what it can be. Therefore relatively small movements in the market can significantly affect the price. In theory, volatility will persist as the market scrambles to determine a bitcoin’s price as this nascent currency matures. Never before has the world seen a startup currency, so it is truly difficult (and exciting) to imagine how it will play out.
- For geeks – Many user tools are still not ready for everyone and users still need to protect their money by themselves, or trust young online wallet services that still don’t offer any insurance against theft or other bad events. New tools and services are constantly being developed to make Bitcoin more accessible to the masses. But from now, Bitcoin is a bright new invention that starts to meet the real world.
Is Bitcoin secure?
The Bitcoin technology – the protocol and the cryptography – has a strong security track record. Bitcoin’s vulnerability is in user error. Bitcoin wallet files that store the necessary private keys can be accidentally deleted, lost, stolen or compromised. Consequently, users need to employ security practices to protect their money or use service providers that offer good levels of security and insurance. As Bitcoin has grown in adoption, more service providers have appeared to make it easier, safer, and more convenient to use and safely secure bitcoins. Bitcoins are not covered by insurance schemes or depositor insurance like the FDIC, but could be with a service provider that offered that service.
Is Bitcoin legal?
To the best of our knowledge, Bitcoin has not been made illegal by legislation in any jurisdiction.
Additionally, regulators from various jurisdictions have taken steps to provide individuals and businesses with rules on how to integrate this new technology into businesses and other activities. For example, the United States’ FinCEN has issued non-binding and non-determinative guidance on how it characterizes certain activities involving virtual currencies.
- Virtual Currency Schemes – European Central Bank
- Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies
- Bitcoin Virtual Currency: Unique Features Present Distinct Challenges for Deterring Illicit Activity
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What about Bitcoin and taxes?
Bitcoin is not a fiat currency with legal tender status in any jurisdiction. But often tax liability accrues regardless of the medium used. There is a wide variety of legislation in many different jurisdictions which could cause income, sales, payroll, capital gains or some other form of tax liability to arise with Bitcoin. Since all transactions are public record and stored permanently, it is a bad idea to attempt to use Bitcoin to evade taxes.
Does Bitcoin encourage illegal activities like money laundering? Bitcoin is a censorship-resistant technology. However, it is not anonymous and the use of Bitcoin leaves extensive and permanent public records.
The Federal Bureau of Investigation concluded on page two of the report Bitcoin Virtual Currency: Unique Features Present Distinct Challenges for Deterring Illicit Activity that ‘The FBI assesses with low confidence, based on current user and vendor acceptance, that malicious actors will exploit Bitcoin to launder money.’
Bitcoin prevents many criminals from being able to engage in illegal behavior. Because of the way Bitcoin works customers do not need to reveal personal information to merchants. This decreases the amount of data available to illegal actors and acts as significant protection against identity theft, credit card fraud and several other attack vectors. Bitcoin transactions are irreversible which prevents chargebacks or frauds and transaction traceability means it is impossible to counterfeit bitcoins.
Additionally, law enforcement authorities have already begun using sophisticated techniques to analyze Bitcoin transactions in their criminal investigations. So it may be that the Bitcoin software is not very attractive for criminal enterprises.
Is Bitcoin a bubble?
Choices based on individual human action by hundreds of thousands of market participants is the cause for bitcoin’s price to fluctuate as the market seeks price discovery. Some reasons for this change in sentiment may be a loss of confidence in the currency, a large difference between value and price not based on the fundamentals of the Bitcoin economy, excessive press coverage stimulating speculative demand, fear of uncertainty and just old-fashioned irrational exuberance and greed.
Why did Bitcoin’s price crash in June 2011?
Choices based on individual human action by hundreds of thousands of market participants is the cause for bitcoin’s price crash in June 2011. Some reasons for this change in sentiment may be a loss of confidence in the currency, the largest exchange, MtGox, having a security incident, a large difference between value and price from the large amount of press coverage which stimulated speculative demand which was not based on fundamentals of the Bitcoin economy and just old fashioned irrational exuberance and greed.
How might a surge in bitcoin’s price be explained?
The price of bitcoins is determined by supply and demand and the supply is fixed at 21 million because of the rules of the Bitcoin protocol. There are two main types of demand: speculative and transactional. As more people use bitcoins to transact economic activities this increases demand and the price of bitcoins. So likewise as more people speculate on the future of Bitcoin by saving or hoarding bitcoins then this increases demand for bitcoins and the price. The result is an increase of network effects and increased adoption.
Is Bitcoin a Ponzi Scheme?
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors instead of from profit earned by the individual or organization running the operation.
Bitcoin is an open source software project with no central authority and consequently no one is in a position to make fraudulent representations about investment returns. Like other major currencies like gold, United States dollars, Euros, Yen, etc. there is no guaranteed purchasing power and the exchange rate freely floats which can lead to volatility where owners of bitcoins can make or lose value.
Bitcoin is an innovative currency and payment system and not a Ponzi Scheme. However, since Bitcoin transactions are irreversible it can be attractive for a Ponzi scam operator and there have been several notable Ponzi scams which have failed and did use Bitcoin.
Who is Satoshi Nakamoto, the creator of Bitcoin?
The creator of Bitcoin never revealed his real identity and simply left his invention to the world. Satoshi created the first Bitcoin implementation and remained active in the development for a few years before choosing to leave the project. Meanwhile, a strong community of developers, miners, users and supporters have spontaneously emerged to continue the project.
Can bitcoins become worthless?
Yes. There are thousands of currencies in the fiat currency graveyard as a result of hyperinflation such as the German Mark, United States gold and silver certificates, Argentine Peso and more recently the Zimbabwe Dollar. Unlike a physical currency like gold Bitcoin is a completely virtual currency. While Bitcoin was designed to be censorship-resistant to enable it to continue existing if there were to be some type of technological problem of significant severity then it is possible Bitcoin could be destroyed and then all bitcoins would cease to exist and become worthless.
Being an open-source project allows anyone to contribute software code so those with value stored in bitcoins have a strong financial incentive in making sure Bitcoin continues to exist. For example, there has been only one major security incident and it was fixed in August 2010. While there have been no major security incidents since that does not preclude the possibility that there could be others. There was an unanticipated ‘hard fork’ on 12 March 2013 which was quickly resolved with minimal impact on Bitcoin users. But the longer Bitcoin exists without a major security incident or other unanticipated software bugs then the more likely market participants will gain greater confidence in Bitcoin.
Being a completely virtual currency Bitcoin is particularly well suited for use on the Internet or with mobile devices and unlike other fiat currencies and payment systems like Paypal or credit cards. As a payment tool, bitcoins are like gold because bitcoins are no-one’s liability and Bitcoin transactions are not subject to counterparty risk like traditional banks engaged in fractional reserve banking.
Thus, using Bitcoin protects merchants and users from bank failures, Cyprus-style problems, empowers Bitcoin users to have exclusive control of their funds and because Bitcoin balances are stored in an extremely large decentralized distributed computer network they cannot be fraudulently altered by anybody.
Why do people trust Bitcoin?
Bitcoin is open-source software which means that everyone has access to all of the source code all of the time. The rules of the system are embedded into the source code and the participants all impose those rules on each other simultaneously. To change the system would require everyone to switch to a new version of the software that used different rules, and because Bitcoin users are spread across the world it is outside the power of any single jurisdictional authority to mandate such a change.
Cryptography is well established and a fundamental technology used in online banking. But unlike fiat currency with central banks and online banking with heavily peer reviewed cryptographic ciphers Bitcoin has been able to construct a currency and payment network that removes the need to trust a central authority.
Consequently, many people trust Bitcoin because it requires absolutely no trust at all.
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Bitcoin is an anonymous currency?
Bitcoin is a censorship-resistant technology. However, it is not anonymous but pseudo-anonymous. The use of Bitcoin leaves extensive and permanent public records for each transaction. All transactions can be traced since their origin and IP addresses are permanently logged by organizations listening on the network. All of these informations can easily be accessed by competitors, law enforcement or anyone else.
However, there are a few technically difficult and costly methods that enable users to interact with Bitcoin in very private ways. The Federal Bureau of Investigation concluded on page two of the report Bitcoin Virtual Currency: Unique Features Present Distinct Challenges for Deterring Illicit Activity that ‘The FBI assesses with low confidence, based on current user and vendor acceptance, that malicious actors will exploit Bitcoin to launder money’.
Transactions are difficult to conceal from best practices in network data analysis, data mining and forensic accounting techniques. In most transaction, personal information must be revealed to receive the goods or services from an order. This makes keeping full anonymity with Bitcoin transactions very difficult or impossible.
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