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Everything you need to know about Bitcoins

Despite widespread warnings, Bitcoin remains extremely popular amongtraders. e price of Bitcoin has increased sixfold in under a year, rising from$900 to $5,700 now.

Image Credit: Istockphoto

As they say, Bitcoin is not for the fainthearted. Bitcoin has witnessed volatile price swings from a low of $3,000 to a high of $6,000 in the span of a month.

Experts like Jamie Dimon, chief executive oficer of JP Morgan called Bitcoin a “fraud”, and said it’s worse than the Tulip bulbs crash of the 1600s. But there are others, who support Bitcoin. Goldman Sachs, which does not consider Bitcoin as the new gold, is flirting with the idea of setting up a Bitcoin trading shop.

1 What is a cryptocurrency? 
A cryptocurrency is a medium of exchange, created and stored eletronically in the blockchain, using encryption techniques to control the creation of monetary units and to verify the transfer of funds.
 

2 What is Bitcoin mining?
Bitcoin mining is the process of adding transactions to a blockchain. It involves trying to solve a diffcult puzzle, which authenticates transactions (a). The first participant who solves the puzzle gets to place the next block on the block chain and claim the rewards (b). The rewards incentivize mining and include both the transaction fees as well as the newly released Bitcoin(c).

3 How can you buy Bitcoins?
You can either invest, purchase goods or services online or pay friends. You can buy Bitcoins from exchanges. You can pay for them in a variety of ways, ranging from hard cash to credit and debit cards to wire transfers, or even with other cryptocurrencies, depending on who you are buying them from.

4 Which are the famous exchanges for Bitcoin?
In the US, Coinbase, and Circle offer purchases with credit cards. Bittylicious, CoinCorner and Coinbase offer this service in the UK, accepting 3D Secure-enabled credit and debit cards on the Visa and MasterCard networks.
In the UAE, Bitoasis buys and sells Bitcoins.
New users have a weekly limit of Dh5,000 per week, but can request a higher limit.

5 What are the steps in opening and operating an account?
You need to first sign up for an account with any of the aforementioned providers.

I. They will give you a secure place to store your Bitcoin, and easy payment methods to convert your local currency into or out of Bitcoin.

II. After signing-up you need to link the Bitcoin account with your bank account. The service provider will verify your account before allowing transactions.

III. After completing the above formalities, you will be able to buy, sell or pay using the cryptocurrency.

6 What is a bitcoin wallet?
A Bitcoin wallet stores the private keys that you need to access a Bitcoin address and spend your funds. It is very important to secure and back up your Bitcoin wallet.

7 What are the fees involved?

Trade fees
This is the fee to trade between currencies on the exchange. A minimum of $10 is charged for withdrawal of $1,000, with an additional 2% for value more than $1,000. if you trade euros in your account for Bitcoin, you’ll pay a fee. The Maker fee is the cost to make an offer to sell a currency on the exchange. The Taker fee is the fee to take an offer someone else has made.

Deposit / Withdrawal fees
This is the fee to deposit or withdraw funds from the exchange.
It’s usually cheaper to deposit, and not all exchanges allow credit card transactions.

8 What is Coinbase?
Coinbase is one of the biggest and most trusted Bitcoin exchanges. It’s good for buying and selling Bitcoins easily, with very low deposit and withdrawal fees.



Trading fees
Deposit / Withdrawal Fees: Low
Credit Card Deposit: 3.99%
Bank Deposit: US – 1.49%, US Wire Transfer – $10
Bank Withdrawal: US – 1.49%, EUR/UK – 0.15 euros

9 How to choose a good broker?
Consider buying Bitcoin in your home country. Otherwise know where your operator is based as rules and regulations may differ from country to country. Exchanges that are fully transparent will publish audit information on how to verify their Bitcoin reserves. Bitcoin audits are a good way for an exchange to prove to customers that they have liquidity.

Is the exchange site HTTPS or HTTP?
For it to have a secure protocol it must be HTTPS. Also consider whether the exchange offers secure logins, along with a two-factor authentication. These are just a couple things to think about before selecting an exchange.

10 What can you buy with Bitcoin? 
There are many things that you can buy with Bitcoin. 
Brokerage firm fäm Properties said that from October 1 some of the landlords whose properties are managed by it were willing to accept Bitcoin rental payments. The Knox Group of Companies plans to launch a residential and commercial property development in Dubai with residences that can be purchased via the digital currency.

Globally, you can buy an airline ticket through CheapAir.com or book hotels via Expedia.com, even buy a newspaper subscription to The Chicago Sun-Times.

 The risks of trading in digital currencies have clearly appeared when the prices of digital currency fell sharply after some countries announced a ban on using initial coin offerings”

 - Mubarak Rashid Al Mansouri, Governor of the Central Bank 


The UAE Central Bank on Monday warned about the risks of using digital currencies as a medium of exchange for now, amid mounting risks including massive volatility, speculation and money laundering.

Speaking on the sidelines of the Islamic Financial Services Board’s Summit last week, Mubarak Rashid Al Mansouri, Governor of the Central Bank, said digital currencies do not go through official channels and cannot be monitored and controlled, thereby posing risks in case it is used to launder money or fund terrorist activities.

WHAT’S THE SPLIT ABOUT?

Creating versions of Bitcoin by using technology.

What is Bitcoin cash?
BCC is a new cyrptocurrency, almost identical to Bitcoin, started by a group who were not satisfied with the original currency.

Why do Bitcoins have value?
Bitcoins do not have value like gold and are not widely accepted like dollars. Rather, Bitcoin has value as it is popular. People accept and trade in Bitcoin because other people accept and trade in Bitcoin.

Can I own BCC and BTC at the same time?
Yes, you can, but it depends if the exchange operator accepts BCC.

What is Bitcoin gold?
On October 25, Bitcoin saw another split that resulted in a new cryptocurrency named Bitcoin Gold (BTG). As we saw with Bitcoin Cash in the summer, existing private keys holding Bitcoin balances will receive the same amount in Bitcoin Gold on November 1, though as things stand, it may be a number of weeks before Bitcoin Gold will be tradable. Some exchanges will not take Bitcoin Gold.

What’s the November fork about?
Another split is anticipated in November, which is called as SegWit2x fork, which could result in 3 versions of Bitcoin.

Interesting facts about Bitcoins

• Satoshi Nakamoto is the name used by the person, or group of people, who invented Bitcoin, and the underlying Blockchain technology. The true identity of Satoshi Nakamoto has never been revealed, and Bitcoin’s creator has not been seen online since 2010.

• Nakamoto has a wallet of Bitcoin, clearly available for all to see, of over 1 million Bitcoins, equivalent to approximately $5.8 billion. This money has remained completely untouched since January 2009.

• The largest transaction of Bitcoin ever recorded took place in 2013, over 194,993 BTC were transferred from one account to another. The value of these Bitcoin at the time of the transaction was over $150 million.

• Bitcoins are limited in number. Only 21 million BTC can ever be produced, after which production will stop. Currently, over 16 million Bitcoins are in circulation, meaning over 78% the total amount is already in existence.

• To achieve this, every four years, the amount of Bitcoin produced halves.
This last halving took place in 2016. The next halving is expected in June 2020, whilst the last Bitcoin is expected to be mined in 2140.

• In 2012, James Howells, a computer engineer based in the UK, was tidying his apartment and accidentally threw away a hard drive containing his Bitcoin wallet. If not properly backed up, when a Bitcoin wallet is lost, the Bitcoin are gone forever. As a result, in today’s value, Howells lost around $32.5 million.

• The Bitcoin network, combining millions of computers around the world, by some estimates has computing power of almost 10,000 times that of all the most powerful supercomputers in existence.

• The first real thing ever purchased in Bitcoin was a pizza, on May 22, 2010. The transaction took place on an online forum, when Laszlo Hanyecz offered 10,000 Bitcoins to someone who could order him a pizza with real money and have it delivered to his house. The transaction was successful, and after receiving his pizzas, Hanyecz transferred across the Bitcoin to the sender. In today’s value, Hanyecz paid around $58 million for two pizzas.

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