bitcoin

November 3, 2021
By Bytewrthy
In Colloquy

A Bit of Bitcoin

bitcoin

The innovation headway that’s occurring on blockchain is on turbocharge, and the non-stop chatter on digital currencies, makes the cynics question if crypto — a new asset class and a highly volatile one — is nothing but a bubble waiting to be burst!

Bitcoin Curious

Crypto investors constitute a small fraction of the broader financial market and it’s unsurprisingly male dominated. The playing field for women is shifting though (thanks to investment oriented social channels); they are taking more stock investing risks today given the power of influence they have on a household. And it’ll be no time before more women become a formidable force behind crypto-investing and bitcoin (BTC) spend.

Women make up 53% of the “crypto curious” reporting interest about investing in the asset class. A quarter of these crypto-curious women surveyed are under the age of 35, and 25% are 55 or older, said Carolyn Vadino, a spokesperson for the crypto exchange Gemini.

In other words – The poetic language of crypto is hitting mainstream. Utter Crypto or Bitcoin and you’ll easily find yourself thrown into a whirl of crypto talk on Tik-Tok, Reddit or Twitter… Folks boasting outsize returns making those not in the game feeling plain sour (FOMO – a common phenomenon – has been written about countless times in WSJ & NYT) and for those in the game, the constant upkeep with price swings to ensure one’s not losing their shirt – not to mention keeping emotions in check especially with the head rush that occurs with BTC at its all-time high!

Back in the day, Bitcoin’s founding father Satoshi Nakamoto might have unveiled the project via a Cryptography mailing list and online forum but since then social platforms together with the crypto community have made Bitcoin and Ethereum household names. Twitter is one of the crypto community’s most frequented social media platforms – scammers, bot and parody accounts abound!

Investing influenced by Memes or hype on Social Channels is legit but the confusion or chaos these platforms/channels create makes it impossible to distinguish cacophony from sound advice. For those starting out, it’s critical to know what information to weed out as some tidbits on crypto investing are truly legit but all too often the claptrap takes over.

With such high stakes – In the world of crypto one at minimum needs to be blessed with a stellar risk-taking mindset, quick thinking, and enough cash stash to catch wild down swings! In the current environment, when an asset with a meme fetches a $20 billion valuation – logic or valuation isn’t at play – It’s Vegas time! So, investing needs to be approached with caution not hearsay!

As we unravel the world of Bitcoin & Crypto– we’ll be asking some critical questions…. Be sure to bookmark Bytewrthy and check back on articles…

Crypto Basics

So, let’s cover some Crypto basics! Unlike traditional currencies (aka fiat), Bitcoin isn’t issued by a governing authority – hence the common term DeFi (decentralized finance or decentralized digital currency); Bitcoin is based on blockchain technology, which is a distributed digital ledger.

Blockchain includes data on each transaction within a block ⛓️ Entries are connected in chronological sequence, a digital chain that acts as a record of cryptocurrency transactions ⛓️ The chain being distributed means that everyone in the network has the same access to the transaction records (the ledger). The ledger is overwhelmingly tamper-proof not because it is kept private but because it is strongly encrypted and because tampering with any part of the ledger would require altering its distributed copies. [More below]

Bitcoin Mining: Gigantic Corp. Computing Farms!

“Bitcoin miners” encrypt new transactions into the bitcoin blockchain, for which they receive newly created bitcoins. At the present time, validating a new block attracts a 6.25 BTC reward – Multiply this by bitcoin’s price! That is a lot of money, but mining is a highly competitive and very costly endeavor.

By design, bitcoin miners race to be the first to generate an encryption key which falls within an exceedingly small numeric range (a process known as Proof of Work). The difficulty of the exercise is self-adjusted by the network so that a block is successfully encrypted every 10 minutes or so – globally! The more computing power is in the network (the higher its “hash rate”), the more difficult the task becomes.

In other words, the reward for success is high, but success frequency is extremely low, and it is very costly to perform the trillions of computations necessary to achieve success (the cost mostly stems from electricity consumption).

₿TC was the first peer to peer cryptocurrency but now 12,000 have followed suit; Ethereum – ETH, Binance – BNB, Cardano – ADA are a few – BTC represents about 40% of the crypto market at the moment.

What about the security of BTC? Modifying the BTC blockchain requires unraveling each solved block in the confirmed chain and that is almost impossible!

Bitcoin is Byzantine Fault Tolerant because every node can verify every transaction and block independently and in an objective way. If a node broadcasts invalid blocks or transactions, all other nodes will recognize and reject them, preventing invalid transactions from entering the blockchain.

₿ Mining, Environment, Crypto Wallets

Keep in mind, the power to unlock new bitcoin has limits – 18.5 of the 21 million bitcoins have been mined. As more miners seek out the remaining coins the more energy intensive the process becomes – hence the concern over tremendous electricity consumption. Tesla’s CEO Musk cited sustainability concerns as the reason for quickly reversing the decision to accept BTC payments for Tesla’s EVs!

Recent data estimates that globally, mining consumes over 100 Terawatt (100 TWh) hours of electricity annually (more than the country of Finland). One study estimates emissions from bitcoin mining alone could push up global warming above 2 degrees Celsius by 2040.

Not surprisingly, crypto miners seek lower-cost energy. When El Salvador made bitcoin a legal tender, it also put PR efforts to offer “#Bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emissions energy from volcanos”… Moving along, developed nations are looking into renewable sources of energy from nuclear power and hydropower facilities but they can if not implemented with care still impact ecosystems and biodiversity. So, can we use clean sources of energy and where should the source of energy come from?

All right, so you’re in a rush to put in some cash into BTC – you’ve got FOMO but you’re in denial – We get it… First things first an ambitious BTC investor needs:

  • A cryptocurrency exchange account (Coinbase, Gemini, Binance),
  • A secure connection to the Internet, method of payment,
  • A personal wallet (hot–online or cold-offline/secure); Wallets to consider: Trezor, Exodus, Mycelium, Ledger Nano X,
  • A healthy dose of Paranoia – Security is ultra-important so Private keys should be secret!

Know that on the Bitcoin blockchain, a user’s public key appears next to a transaction – making transactions confidential but not anonymous. Bitcoin transactions are considered more transparent and traceable than cash, but Bitcoin transactions also have an element of anonymity built into their design – It is difficult to trace the transacting parties on the cryptocurrency’s blockchain!

 

Did You Know…

⛓️The 1st official purchase using Bitcoin was for pizza in May 2010 from Papa John’s.

⛓️ Nearly half of millennial millionaires have at least 25% of their wealth in cryptocurrencies, according to the CNBC Millionaire Survey.

⛓️ Mining rewards are cut in half every time 210,000 blocks have been mined, or roughly every four years. At the next halving the BTC incentive will be 3.125 BTC – Now, one might want to think about how this halving could affect mining?

Coming Up Soon…Crypto Wallets

 

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