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Profiting From Bitcoin
Let’s just get right down to it. You want to make money from Bitcoins, right? That’s why you bought this report.
Well, let me tell you straight up that trying to deal in Bitcoins directly is going to be hard. And expensive. About a year ago one Bitcoin was worth about $21. Today (as of the time I’m writing this) one is worth $814. And as recently as November 2013, you could have bought Bitcoins at the low, low price of about $200 each. So 10 weeks later you just made 400% on your investment. Can you see why they have become so popular?
In addition to Bitcoins, there are dozens of other cryptocurrencies on the market. Bitcoin is the first and most popular, but the other most popular ones (in order of market capitalization) are Ripple, Litecoin, Peercoin, DogeCoin, Nxt, MasterCoin, Namecoin, Quark, and ProtoShares. And that just rounds out the top 10.
Go to coinmarketcap.com and you can see the full list of 86 that they have information for. The total market cap for all of these cryptocurrencies combined is a whopping $13,182,548,476. Yeah, over $13 billion.
So how do you make money with cryptocoins? In general, there are two basic ways to make money. You can mine them or you can invest/speculate. There are other ways to earn as well, which is what I’m doing and how you can get in the game. But first I’ll go over the basics of mining and investing.
Mining
First, you can mine coins. I won’t go into explicit detail, but mining is basically using your own computing resources (called a rig) to attempt to solve a complex algorithm which helps to verify and approve any transactions with that particular currency.
Here is the description of Bitcoin mining from https://en.bitcoin.it/wiki/Mining:
Mining is the process of adding transaction records to Bitcoin's public ledger of past transactions. This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place. Bitcoin nodes use the block chain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
Mining is intentionally designed to be resource-intensive and difficult so that the number of blocks found each day by miners remains steady. Individual blocks must contain a proof of work to be considered valid. This proof of work is verified by other Bitcoin nodes each time they receive a block. Bitcoin uses the hashcash proof-of-work function.
The primary purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus. Mining is also the mechanism used to introduce Bitcoins into the system: Miners are paid any transaction fees as well as a "subsidy" of newly created coins. This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system.
Bitcoin mining is so called because it resembles the mining of other commodities: it requires exertion and it slowly makes new currency available at a rate that resembles the rate at which commodities like gold are mined from the ground.
Investing
Plain and simple, you can buy cryptocoins now and hold on to them, hoping their value will rise when you can sell them for a profit.
It’s the same as investing in gold, silver, stocks, bonds, etc. Buy low, sell high.
On the technical side, this is a much easier way to get into cryptocurrencies. But you still have to jump through a few loops.
First of all, you need a way to pay for the cryptocoins. You do this by signing up with a bitcoin wallet and platform site where you can use USD (and possibly other currencies, but since I’m in the US I’ll only talk about doing this with USD) to buy and sell Bitcoins.
I use Coinbase. You sign up with Coinbase and connect your bank account so you can fund your account. Once you have money in your Coinbase account, you can use this to buy Bitcoins.
Now, they only deal in Bitcoins, but that is fine. I know I talked about other cryptocurrencies earlier, like Litecoin, but the grand-daddy of them all is Bitcoin and honestly if you’re going to use any cryptocoin like currency, it will probably be Bitcoin anyway. You may buy/sell/earn other cryptos, but you will eventually trade them into Bitcoins so you can use them.
Once you buy Bitcoins, you can then use them in one of the many exchanges to buy other cryptocoins. BTC is like the USD of the world. You can trade almost any currency to/from Bitcoins.
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