Make Millions (or Lose Your Money) With Bitcoin: A How-to Guide – My Curiosity Laboratorium

Spil of last week, I have sold all my cryptocurrency positions (Bitcoin and Ethereum).

If you live on the planet Earth, you have very likely seen Bitcoin te the news overheen the past few months. Here is a chart of the price of Bitcoin this year. I purchased it during the month of July, for reference.

My initial plans outlined below had mij purchasing a total of $Ten,000 of cryptocurrency, but because of a Bitcoin fork at that time (there have bot several more since then spil well), I only bought a total of $7500.

The sale of cryptocurrency entailed the precies switch sides steps from its purchase and storage: transfer the currency from my Trezor hardware wallet to a Coinbase wallet, and then sell that currency on the Coinbase exchange.

When all wasgoed said and done, I deposited a total of $26,874 into my checking account, for a build up of $Nineteen,364—a 258% terugwedstrijd on investment since July. Not too shabby.

Why did I sell? I considered “letting it rail,” indefinitely—or at least until next July, at which point the gains would be long-term rather than short-term—but the volatility and bubbly price were making mij jumpy. Knowing myself, I would be much more angry if I had held onto it and it dropped precipitously, rather than if I sold and it continued to rise.

The only decision left is determine what to do with this reserve contant. Any ideas?

Spil I ready to purchase my very first Bitcoin—a poster child of modern technology—I sat ironically with a lump of paper and schrijfstift te forearm, like Ralphie ter A Christmas Story decoding the secret message from Little Orphan Annie. Rather than Ralphie’s crummy Ovaltine commercial, my message consisted of a sequence of unrelated words (called a recovery seed) that wasgoed the key to access my Bitcoin. Next on my to do list: hide this code te a secret place, and use Bitcoin to buy something from the Czech Republic.

The purchase of Bitcoin and Ethereum (another cryptocurrency) has bot, without a doubt, the strangest financial transaction of my adult life.

A bit of coin

If you had asked mij a few months ago about Bitcoin, I would have told you very little: it wasgoed electronic currency that wasgoed independent of country, and maybe on the borders of legality. I pretty much disregarded it.

Bitcoin wasgoed invented ter 2008 by a mysterious anonymous individual by the name of Satoshi Nakamoto. Its utility and meteoric rise wasgoed made possible by the underlying ingewikkeld coding mechanism known spil the blockchain.

But before wij proceed, a duo of key definitions are ter order.

  • Cryptocurrency: Currency? Got it. Crypto? This refers to the digital encryption that permits cryptocurrency to function spil a medium of exchange. Bitcoin and Ethereum are types of cryptocurrency, but there are hundreds more collectively known spil “Altcoins.”
  • Blockchain: The blockchain is simply a digital ledger of electronic transactions. It is a database that keeps track of the purchase and exchange of cryptocurrency. Spil an analogy, the blockchain is like the internet, and Bitcoin is like email, the blockchain is the underlying technology which cryptocurrency uses to function.

Back on the blockchain tempo

So the blockchain is a digital ledger/database. But how does it actually work and why is it called a blockchain?

Each digital Bitcoin transaction becomes part of a cryptographically-protected “block,” grouped with other transactions that have occurred ter the past Ten minutes. Each fresh block is then sent to the digital ledger of the blockchain, and is added to the chain of existing blocks (blockchain, get it?). Thus, the blockchain contains all prior transactions ter the entire history of the blockchain. More, the accomplish blockchain database is duplicated on thousands of computers around the world, which reconcile their databases with each other every Ten minutes to ensure consistency.

An outstanding eggchain.

Sweet Mary Jane, what if someone hacks the blockchain? They could switch its entire history!

Relieve. To omkoopbaar the blockchain, a hacker would need to at the same time alter gegevens on each of the thousands of encrypted computers all overheen the world. By distributing and duplicating the ledger, the blockchain makes this type of corruption virtually unlikely.

Why is cryptocurrency useful?

Essentially all financial transactions inbetween individuals are mediated by a third-party: a government, a bankgebouw, a credit card company, etc. Why?

Without verification of a transaction through some third-party, wij would all have to trust each other to be fair. Until the hippies take overheen, this ain’t happening ter the real world.

Think about it: without the government, how would a grocery story know your money is not counterfeit? Without credit card companies, who would verify that you are cleared to buy those sweet Reebok Pumps from Foot Locker (you know you had a pair)? Without banks, how do I ensure my retirement money isn’t being directed to an offshore account te Estonia?

The blockchain and cryptocurrency are revolutionary te that they eliminate the middleman. They facilitate rechtstreeks exchange inbetween individuals via technology and cryptography rather than a trusted third-party.

Te the United States, most non-conspiracy-theorists trust our government and banks. Wij have governmental mechanisms ter place to ensure transparency and weed out corruption. But this is not the case ter many less savory corners of the world (hint: one of them rhymes with Prussia). Individuals who live te such places are poised to benefit the most from blockchain technology.

Buyer beware

Purchasing Bitcoin or other cryptocurrency is not sound investment strategy. I hesitate to even call it an investment, a gamble would be more suitable. Putting it all on black might yield a similar outcome to what I describe here.

I am a fully-insured, three-index-fund-portfolio type of boy. The money I invested ter Bitcoin represents a fraction of a procent of my portfolio, if I lost it all, it might delay my retirement by a month. I would certainly not recommend a speculative investment such spil Bitcoin until all of your financial ducks are te a row.

The price of Bitcoin overheen the past year. Not the greatest time to buy, but might this be the beginning of an upward trend? Again, it’s all speculation.

Why am I purchasing Bitcoin? Very first, I find the technology fascinating and potentially paradigm-shifting for the world economy. I’m also currency speculating, unspoiled and ordinary. I don’t project to use it spil an exchange medium, rather, I project to buy and hold it spil a commodity.

A step-by-step guide to buying and storing cryptocurrency

Objective: Purchase $5000 each of Bitcoin and Ethereum (a newer, up-and-coming cryptocurrency), and hold indefinitely.

  1. Open a Coinbase account: Bitcoin ain’t available (yet) at the currency exchange toonbank ter the airport. How do you buy it? Coinbase is an online cryptocurrency exchange headquartered te San Francisco that permits you to exchange US dollars for Bitcoin or Ethereum. Just come in some individual information, do a two-step verification via text message, and you are on your way.
  2. Listig your canap account (or credit card): I chose the former due to the lower associated currency conversion fees of 1.49% (versus Trio.99% for credit cards). Following initiation of the transfer, it takes 5-7 business days for the funds to kasstuk your Coinbase account.
  3. Buy cryptocurrency: Once deposited, your funds are available to purchase cryptocurrency!
  4. A note on volatility. The price of cryptocurrency can fluctuate insanely. The Bitcoin-USD exchange rate ranged from $1800 to $2400 just this week! Thus, I determined to dollar cost average by purchasing $125 each of Bitcoin and Ethereum once vanaf day overheen a 40 day period (which can be set up to occur automatically te Coinbase).

Bitcoin weekly price fluctuation

Storing is a bit of a misnomer here. Cryptocurrency is not actually stored anywhere, rather, a record of your money and transactions is maintained on the blockchain, out te the open for all to see.

This record is linked to you via your public key—akin to your canap account number. Anyone who sends you Bitcoin needs to know your public key.

However, only you can access and spend that money with your private key. A private key is a long, random alphanumeric sequence, analogous to an ATM card and speld number to access your handelsbank account. It is known only to you, and critical to protect from prying eyes. If someone has your private key, they have your money.

Your private key is stored ter a digital wallet.

  1. Choose a “wallet”: Cryptocurrency wallets come ter a few different forms.
    • Online wallet. Bitcoin purchased on the Coinbase exchange will originally be held ter a wallet of this type, ter which your private keys are stored on the cloud. A private key is generally more vulnerable to hacking with online wallets.
    • Mobile wallet. Slightly more secure than an online wallet, a mobile wallet is an app with your private key stored on your phone. I originally transferred Bitcoin from Coinbase to a mobile wallet called Jaxx. Mycelium is another mobile wallet recommended to mij by a friend te cybersecurity.
    • Hardware wallet. A hardware wallet is widely considered the most secure storage option, I presently use a Trezor wallet—fresh from the manufacturer te the Czech Republic—to store my Bitcoin and Ethereum. The private key of a hardware wallet is generated and stored offline on the puny device, which you connect via USB to a laptop ter order to access your money and make transactions.

    The adorable little Trezor hardware wallet

  2. Record your recovery seed. Muy muy importante. Before a mobile or hardware wallet is ready to use, you need to set it up with a recovery seed—the sequence of random words that I wasgoed writing down on paper at the beginning of this postbode. A recovery seed generates both your public and private keys, and ter many ways is your wallet. Someone with your recovery seed will have access to all your money!
  3. Transfer money to your wallet of choice. The Jaxx mobile wallet and Trezor hardware wallet are accessed with self-selected speld numbers (different from a private key). To send cryptocurrency, you simply input the public key of the destination wallet, choose the amount you want to send, and click “send.” Originally I sent Bitcoin and Ethereum from the Coinbase exchange to my Jaxx wallet, and eventually sent it all to my Trezor wallet for more voortdurend, secure storage.
  4. Don’t lose your effin’ recovery seed! If your wallet is lost or stolen, do not despair! Spil long spil you know the recovery seed, you can regenerate your public and private keys, and save your money. If you lose your recovery seed, however, you are up sh$t creek.
  5. Dangers of Bitcoin

    Bijzonder from wild volatility, potential collapse te value, and vulnerability to hackers, cryptocurrency is ideally safe.

    Another concern unique to cryptocurrency is related to traceability. Recall that the entire history of currency transactions on the blockchain is public skill. What if the man you bought that vintage Ultimate Warrior poster from turns out to be a convicted meth dealer? Would you want a voortdurend record that you sent $100 of Bitcoin to Walter White?

    Wasgoed my purchase of cryptocurrency a solid investment? Very likely not. Wasgoed it reckless? Perhaps a little. But I learned a good overeenkomst and discovered an entire economy previously unknown to mij, and for that reason alone I deem it worthwhile.

    Have any of you dabbled ter the shady sphere of cryptocurrency?

    Related movie: Bitcoin Mining What Are Shares – How To Join Mining Pool

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