Ketowk Crypto: October 2024

Tuesday, October 15, 2024

What Is a Crypto Faucet? By ketowk

KEY TAKEAWAYS:

— A crypto faucet is a platform that gives users small amounts of cryptocurrency as a reward for completing simple tasks.

— It’s vital to exercise caution before signing up to use a crypto faucet, as scammers frequently look to take advantage of interest in free crypto to set up fraudulent platforms.

— As long as users stick to reputable, established platforms, crypto faucets can be a great way for beginners to dip their feet into crypto, or for crypto holders to explore new token ecosystems.

Ever wondered how many hours you’ve spent online watching those annoying ads that pop up at the most inconvenient times? What if you could turn that time into a rewarding opportunity? Enter crypto faucets — platforms that dispense small amounts of cryptocurrency to users at regular intervals.

But don’t go thinking a crypto faucet can make you a millionaire. Yes, you can collect some money, but realistically, it won’t make you rich. Rather, the original idea behind crypto faucets was to generate your interest in a cryptocurrency so you eventually start interacting with it more by trading or investing. This is still the case today, though many crypto faucets have expanded into standalone businesses at this point. There are even some web2 platforms that have crypto faucets attached to give users rewards.

In this article, you’ll learn what a crypto faucet is, how they work, popular crypto faucets, and the benefits of using them. Let’s dive in.

What Is a Crypto Faucet?

A crypto faucet is a website or application that rewards you with cryptocurrency for completing simple tasks. These tasks could involve watching an ad, participating in a survey, or completing a quiz. Some faucets don’t even need you to complete tasks, you just need to prove you are a human by completing a captcha.

But remember, crypto faucets are called ‘faucets’ because the rewards you earn are teeny-tiny, just like the drops from the leaky kitchen faucet you’ve been meaning to fix for a week.

If you’ve ever played an online game, you’ve probably come across the concept behind crypto faucets, except the rewards may not have been crypto. For example, when you run out of energy, life, gems, or other in-game resources on an online game, you often get the option of earning more by watching an ad or video. Crypto faucets are pretty much the same mechanism.

Some crypto faucets are for raising awareness and curiosity about a specific cryptocurrency. Others are more of a straightforward business based on ad revenue, much like mobile online gaming. Indeed, there are even non-crypto and web2 platforms that employ crypto faucets as a way to entice users (like the web browser, Brave, for example).

There are also crypto faucets specifically designed for providing gas fees to new users, such as the Optimism ETH faucet. This faucet gives users 0.002 oETH to pay gas fees on the Optimism layer 2 network. However, it does require users to first bridge 1,500 USDC onto Optimism using the faucet.

The Origin of Crypto Faucets

The first crypto faucet was created in 2010 for Bitcoin, the world’s first cryptocurrency. Bitcoin developer Gavin Andresen created a crypto faucet website where people could solve a simple captcha to earn 5 BTC every day. Yes, 5 whole Bitcoins, not Satoshis. Of course, Bitcoin was only worth 20 to 30 cents that year. And yes, you might be fairly rich if you had collected Bitcoins from Andresen’s website back then and held onto them for a few years, but we don’t have time machines (yet).

Andresen wanted to promote Bitcoin and increase its adoption — he created the website because he wanted “the Bitcoin project to succeed,” he wrote in a post on the Bitcoin forum. Andressen thought that if people could get a “handful of coins to try it out,” Bitcoin adoption would increase. Remember, the best way to get Bitcoins back then was to mine them, which required significant computing power. Similarly, buying them was not easy as neither centralized nor decentralized crypto exchanges existed. Andresen funded the faucet rewards with his own holdings at first, then had some community help later on.

Bitcoin adoption caught on pretty fast (probably faster than he anticipated), and Andresen had to shut down the website in 2012. It simply became unsustainable to keep giving out Bitcoin since the cryptocurrency’s price had risen to nearly $30 by mid-2011.

Many other cryptocurrencies followed Andresen’s lead, but these faucets faced the same sustainability issue as the prices of their cryptocurrencies rose. As a result, crypto faucets started partnering with advertising networks and used part of their revenue to fund the rewards to users.

How Does a Crypto Faucet Work?

To earn rewards from a crypto faucet, you must first become a registered user. You have to provide some basic information, like your name, email, or wallet address, to sign up. You will also need a micro wallet for your rewards, though most crypto faucets create one for you automatically upon signing up. To explain, a micro wallet is just like a regular crypto wallet, but for managing very small amounts of crypto.

Once you are a registered user, you can begin completing tasks for crypto. What’s more, crypto faucets usually set rules and timelocks around the tasks. For example, you might only be allowed to claim rewards once every hour or day.

When you complete the tasks, your rewards are automatically added to your micro wallet. It is important to note that on some crypto faucet platforms, you may have to pay a fee to withdraw rewards to your main wallet. Furthermore, many crypto faucets have a minimum amount of crypto that you need in your account before you can make a withdrawal. For example, you might have to amass $5 worth of tokens before you can withdraw them to your main wallet.

Benefits of Using a Crypto Faucet

Now that you know what is a crypto faucet and how it works, let’s take a minute to see how a crypto faucet can benefit you.

Earning Crypto With Minimal Effort

Crypto faucets are a great way of acquiring cryptocurrency without spending money. In addition, they often require less effort than strategies like airdrops. Plus, airdrops are often restricted to users who check all the boxes on a criteria list, and crypto faucet rewards get dished out much more frequently.

Crypto faucets do not require any technical knowledge, which makes them great for beginners. They are accessible to everyone, and all it takes to earn crypto is a bit of time and minimal effort.

Risks of Using a Crypto Faucet

While crypto faucets are usually built by people with good intentions, there are still some risks to interacting with them. Common risks include data farming or possible scams. Let’s deep dive into the potential risks of using a crypto faucet.

Possible Scams

There are plenty of legitimate crypto faucet platforms that help you earn crypto such as the ones listed above. But hackers and scammers can easily use the allure of free crypto to trap unsuspecting victims. Malicious crypto faucets can be used for an array of nefarious things. For example, some may seek to infect your device with malware, while others may be phishing attempts to steal your credentials. Alternatively, if it’s an Ethereum-based crypto faucet managed by smart contracts, you could be fooled into signing a malicious smart contract approval.

Therefore, it is important to research a crypto faucet platform properly before you connect your wallet. If you learned about the platform from an unsolicited email, it may have come from a scammer. If the platform is offering unusually high rewards, it’s probably too good to be true. Be cautious about which crypto faucets you use, and also consider using a different wallet than your main crypto wallet to be safer when withdrawing rewards.

Data Farming

Remember how Andresen’s crypto faucet had to be shut down because of unsustainability? Well, most crypto faucets now have better business models than funding rewards from their pocket. Crypto faucets now sell ad space to make money, part of which is doled out as rewards.

But sometimes, crypto faucets might also sell whatever data you provide them to generate revenue. This could include things like your email and wallet address or even device information.

Low Rewards

It is worth repeating that crypto faucets dish out very low rewards. For instance, completing one task might get you just one Satoshi, which is equal to one-hundred-millionth of a BTC. In US dollars, that’s a tiny fraction of one cent at current BTC prices. So, crypto faucets are not going to make you much money.

Besides, you might find the tasks monotonous and tiresome after a while. How many ads can you willingly watch anyway?

Top Crypto Faucets

Bitcoin Crypto Faucets

The oldest and most popular Bitcoin faucets include Freebitcoin, Cointiply, and Firefaucet.

Freebitcoin claims to have over 50 million registered users who can win up to $200 worth of Bitcoin every hour by playing games. It also advertises prizes such as a jackpot of up to 1 BTC, a weekly lottery, and even Lamborghinis. Similarly, Cointiply offers daily login bonuses and games that let you earn Bitcoin. And on Firefaucet, you can earn Bitcoin and other cryptocurrencies by filling out surveys, watching videos, and more.

Ethereum Crypto Faucets

Some popular Ethereum faucets include Freeethereum, Firefaucet, and Allcoins. On Freeethereum, you can earn ETH by playing simple games, and win up to $300 worth of Ethereum every hour. Meanwhile, Firefaucet goes beyond just payouts, featuring daily bonuses and rank rewards along with games. All of these features make earning free ETH a dynamic experience.

Other crypto faucets like Allcoins allow you to earn not just Ethereum but also several other cryptocurrencies through mining and games. Some of the games on Allcoins might require you to pay a fee, however.

Monero Crypto Faucets

You can earn XMR tokens through Monero faucets like Allcoins and Firefaucet. On Allcoins, you can earn Monero by simply filling in a captcha. The website also has an Exchange Tool that allows you to convert your rewards tokens to any token of your choice.

Firefaucet, on the other hand, presents a diverse array of options to earn XMR. With a built-in referral system and a claim of the highest reward rates, Firefaucet introduces a unique leveling system. In this system, your level increases through task completions, which in turn increases the rewards you can earn.

Other Crypto Faucets

Various other crypto faucets offer easy ways to earn cryptocurrencies like Dogecoin, Litecoin, Tron, Polygon, Solana, and more. This includes Faucet Crypto, where you can earn crypto by clicking on links to ads, completing surveys, and downloading games and apps. The platform also allows you to claim free crypto every 20 minutes.

Final Thoughts on Crypto Faucets

Crypto faucets are designed to get those new to the crypto realm acquainted with cryptocurrencies and increase awareness and adoption. Beginners get to learn about crypto without having to put any skin in the game. However, crypto faucets are not some magical shortcut to achieving your dream of becoming a millionaire. The faucet rewards are usually minuscule. That said, who doesn’t like free stuff?

While dealing with crypto faucets, however, you must be vigilant and exercise caution to avoid scams and other malicious attempts to steal your assets. As much fun as it can be to earn crypto by playing games, security should always remain your priority. If you enjoy your first forays into crypto and decide to get seriously involved, don’t hesitate to get yourself a Ledger device.

Ledger devices give you the power of self-custody, helping you to keep your private keys safe from any bad actors. Not to mention that Ledger Live’s user-friendly platform makes it easier than ever to navigate all that blockchain has to offer – even for beginners.

Whether you’re a novice or a veteran, step into the Ledger ecosystem so you can explore the wide world of web3 with the ultimate confidence.

What Is a Crypto Whale? by ketowk

A crypto whale is an entity that holds large amounts of cryptocurrency. These whales own enough cryptocurrency to influence liquidity and prices, and their actions are closely watched.

Key Takeaways

A crypto whale is a user that holds a significant amount of cryptocurrency.
The community and investors watch crypto whales because they can significantly influence price movements.
Whales can also create price volatility increases.
Many whale accounts lie dormant for long periods and cause huge stirs in the crypto community when they become active.

Understanding Crypto Whales

Large cryptocurrency holders are called whales because their accounts are much larger than the smaller fish (accounts) in the cryptocurrency ocean. Four bitcoin wallets owned 3.56% of all the bitcoin in circulation in August 2024 according to BitInfoCharts. The top 113 wallets held more than 15.4% of all bitcoin. There are thousands of accounts that hold less than 10,000 BTC that can be considered whales.1

These large accounts are closely monitored by the crypto community and investors. It's publicly announced on the Whale Alert website and its X (formerly Twitter) account if any whales make transactions.2

Another term that has emerged is "crypto minnow." These are wallet addresses that hold very little cryptocurrency compared to their whale counterparts.

A Whale's Effect on Liquidity

Whales can be a problem for cryptocurrency because they're high-profile wallets that concentrate wealth, particularly if it sits unmoved in an account. This lowers a specific cryptocurrency's liquidity when coins sit in an account rather than being used because there are fewer coins available.

Many of the Bitcoin top whale addresses have been identified by the community—there are exchange cold wallets or reserve accounts, accounts that hold bitcoins recovered from thefts in the top accounts, and some unidentified. The top 113 accounts ( more than 10,000 Bitcoin) held more than 15% (about 3 million BTC) of the circulating bitcoin, with some going months to years without transferring any out. However, these accounts (of which many are exchanges) are less likely to affect liquidity at a large scale than those that hold between 100 and 10,000 bitcoins. These accounts hold 44.49% of all circulating bitcoin, or about 8.8 million.

These are the accounts that affect liquidity the most because they do not transact very often. For example, account 198a-g3Hi holds 8,000 BTC (about $476 million at Aug. 30, 2024 prices). It first began acquiring bitcoin on Feb. 22, 2009, and has had no outgoing transactions since.3

A Whale's Effect on Price

Whales can also increase price volatility, especially when they move a large quantity of cryptocurrency in one transaction. For example, the lack of liquidity and large transaction size can create downward pressure on Bitcoin's price if an owner tries to sell their bitcoin for fiat currency because other market participants see the transaction. Other investors go on high alert when whales sell, watching for indicators that they're "dumping" their holdings.

A common sign crypto investors watch for is the exchange inflow mean, or the average amount of a specific cryptocurrency being deposited into exchanges.4 If the mean amount of coins per transaction rises above 2.0, it is believed to mean that whales are likely to begin dumping if it correlates to a large number using the exchange.5

The price is influenced not only by the inflow mean, but also by the publicity given to a particular whale's transaction. Bitcoin prices appear to respond to transactions involving large amounts of cryptocurrency when they're publicly announced on X by Whale Alert or communicated by news outlets.

Crypto Whales Can Affect Governance

Some blockchains give governance voting rights to cryptocurrency holders. If a whale holds enough cryptocurrency, they could influence the direction blockchain development takes because in most cases, votes are weighted by how much a voter holds.

It is possible for crypto whales to influence changes in a blockchain that create more benefits for themselves or cause the blockchain to become less decentralized. This can affect that specific cryptocurrency's market because it can make it more or less attractive to investors and users, thus influencing its price.

What Crypto Whales Mean to Investors

There are many circumstances in which someone with a large amount of cryptocurrency could move their holdings. It should be noted that movement doesn't always mean a whale is selling off their holdings. They could be changing wallets or exchanges or making a large purchase.

Sometimes, whales may try to sell their assets in smaller amounts over an extended period to avoid drawing attention to themselves. They can produce market distortions, sending the price up or down unexpectedly. This is why investors watch the known whale addresses to look for the number of transactions along with their value.

What Does It Mean to Be a Crypto Whale?

A crypto whale holds enough of a cryptocurrency that it can affect the market.

How Many Bitcoins to Be Considered a Whale?

It depends on the market value at the time of the transaction. On Aug. 30, 2024, 1 BTC was worth $59,080.73. Some might consider an account holding 17 BTC a whale, as its total value that day was about $1 million. However, others might not consider that account a whale, preferring to use the term for accounts with much more value.

How Much Crypto Makes You a Crypto Whale?

The definition is subjective, and it varies depending on the cryptocurrency. Whales generally hold an amount of coins whose value could influence market prices and liquidity.

The Bottom Line

It's a good idea to pay attention to what the whales are doing if you're a crypto investor, but movement doesn't necessarily mean you should panic. Many whales are businesses who have invested heavily in cryptocurrency. These might be the ones worth observing if you're going to whale watch. Keep an eye on the known whale addresses to track their transactions and values. They're publicly announced on the Whale Alert website and X (formerly Twitter) account.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author does not own cryptocurrency.

What Is a Satoshi? by ketowk

The satoshi is the smallest denomination of the cryptocurrency bitcoin. It is named after Satoshi Nakamoto, the Bitcoin creator(s). The satoshi to bitcoin ratio is 100 million satoshis to one bitcoin.

Key Takeaways

Bitcoins can be split into smaller units to facilitate smaller transactions.
A satoshi is the smallest denomination of bitcoin, equivalent to 100 millionth of a bitcoin.
The satoshi was named after the bitcoin founder(s) known as Satoshi Nakamoto.

History of the Satoshi

The satoshi represents one hundred millionths of a bitcoin. Because bitcoin has increased in value exponentially, smaller denominations are needed for smaller transactions. Small denominations make bitcoin transactions easier to conduct while making them readable by people.

For example, if you bought a $100 item with one bitcoin, your charge might ring up as .0219757 BTC (if 1 BTC equaled $21,975.70). At this price, 1 satoshi is worth $0.000219757. If you spent $100, you could convert the amount to satoshis (100/0.000219757) and get 455,048 satoshis, which is easier to communicate.

The result of this conversion has several decimal places, but because a satoshi is the smallest unit and cannot be divided, the decimal places are not used.

Where Did the Name Satoshi Come From?

The satoshi is named after Satoshi Nakamoto, the anonymous person (or persons) that published the white paper in 2008 that jumpstarted the development of Bitcoin and popularized crypto. The whitepaper “Bitcoin: A Peer-to-Peer Electronic Cash System” described a peer-to-peer network as a solution to the double-spending problem found in previous cryptocurrency concepts.1

What Is Double Spending?

A physical bill or coin can only exist in one place; therefore, you cannot use it for two transactions. One person receives a physical item, and the other loses it. Cryptocurrency is a representation of ownership recorded in a database—without specific measures taken to prevent it, one user can transfer ownership of one asset more than once. This is called double-spending.

When you can double spend, you can give an item to someone in exchange for goods or services and use it again for another transaction. The peer-to-peer ledger and transaction verification system, or consensus mechanism, solved the problem of transferring the ownership of a digital currency so that a user cannot spend the same asset twice.

Consensus mechanisms verifying a database change weren't brand new when Bitcoin was conceived. However, they made the idea of decentralized currency verification and control achievable.

Using Satoshi

While not officially part of a major currency pair, bitcoins and satoshis can be converted to and from other currencies. Cryptocurrency exchanges allow you to convert between fiat and cryptocurrencies or conduct other transactions.

Generally, transactions involve depositing dollars, pounds, or other currencies into an account in one of the exchanges. The money is converted to satoshis or bitcoins, which you can use at merchants that accept them as payment. Not all online merchants accept all or any forms of cryptocurrency—make sure you research the merchants where you want to use your satoshi and bitcoin and make sure they accept them.

How Is Satoshi Different From Other Digital Denominations?

Many cryptocurrencies use denominations specific to their designer's preferences. For example, Bitcoin uses only the satoshi as a denomination, while Ethereum uses several.23 Both versions make it easier to conduct transactions in amounts that are not equal to the currency's market value, but their difference in denominations can be confusing if you're new to cryptocurrency.

To get the satoshi to U.S. dollar rate, divide the current market price by 100 million. To get the number of satoshi per dollar amount, divide the dollar amount you want by the satoshi to the dollar rate.

Satoshis can be referred to using the metric system to make it easier to understand:

Millibitcoin (mBTC) = 100,000 satoshi
Microbitcoin (µBTC) = 100 satoshi

Ethereum uses different conventions for its equivalent values, with wei being the smallest unit of ether:

1 wei = 1 quintillionth of 1 ether
1 Gwei = 1 billion wei4

Ether has more denominations, but these are used the most. Both bitcoin and ether have different market values, so one satoshi has a different monetary value than one ether. Additionally, they will both have different market values throughout a day because prices fluctuate rapidly.

How Mush Is 1 Satoshi?

Satoshi value changes with bitcoin's market value. For example, if Bitcoin had a market spot price of $21,970.70, one satoshi would be worth $.000219707.

How Many Bitcoins Is 1 Satoshi?

There are 100 million satoshis in one bitcoin, so one satoshi is 0.00000001 BTC.

How Much Bitcoin Does Satoshi Own?

Satoshi Nakamoto is rumored to own 1.1 million bitcoin in several accounts, but no one is 100% sure these account belong to Bitcoin's creator.

The Bottom Line

The satoshi is the lowest denomination of bitcoin—there is 100 million satoshi per bitcoin. The denomination was named after Satoshi Nakamoto, the person or group who invented Bitcoin. It is easier to discuss increments of bitcoin in satoshi because they are numbers that people, in general, understand better.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

Correction—Sept. 5, 2024: This article has been corrected to properly convert USD to satoshis.

What Is Bitcoin? By ketowk

Bitcoin (BTC) is a cryptocurrency (a virtual currency) designed to act as money and a form of payment outside the control of any one person, group, or entity. This removes the need for trusted third-party involvement (e.g., a mint or bank) in financial transactions.

Bitcoin was introduced to the public in 2009 by an anonymous developer or group of developers using the name Satoshi Nakamoto. It has since become the most well-known and largest cryptocurrency in the world. Its popularity has inspired the development of many other cryptocurrencies.

Read on to learn more about the cryptocurrency that started it all—the history behind it, how to buy it, mine it, and what it can be used for.

Key Takeaways

Bitcoin is the end product of the work of many people, but it is generally accepted that Satoshi Nakamoto created it and introduced it in 2008.
Bitcoin is the public blockchain used to create and manage the cryptocurrency of the same name.
Bitcoin mining is the race between miners to hash specific values and other block information to find the solution to a hashing problem and add a block to the blockchain. The winning miner is rewarded with bitcoins.
Bitcoin can be used by speculators, investors for investing purposes, and consumers for purchases or value exchange.
There are many risks involved with investing in and using bitcoins, including volatility, fraud, and theft.

Bitcoin (BTC): A cryptocurrency, a virtual currency designed to act as money and a form of payment outside the control of any one person, group, or entity, and thus removing the need for third-party involvement in financial transactions. — Investopedia / Julie Bang

Understanding Bitcoin

In August 2008, the domain name Bitcoin.org was registered. It was created by Satoshi Nakamoto and Martti Malmi, who worked with the anonymous Nakamoto to develop Bitcoin.1

How Bitcoin Started

In October 2008, Nakamoto announced to the cryptography mailing list at metzdowd.com: "I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party." The now-famous white paper published on Bitcoin.org, entitled "Bitcoin: A Peer-to-Peer Electronic Cash System," would become the Magna Carta for how Bitcoin operates today.23

First Block

On Jan. 3, 2009, the first Bitcoin block was mined. Called Block 0, it is also known as the genesis block and contains the text: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks," perhaps proof that the block was mined on or after that date.4

Rewards

Bitcoin rewards are halved every 210,000 blocks. For example, the block reward was 50 new bitcoins in 2009. On May 11, 2020, the third halving occurred, bringing the reward for each block down to 6.25 bitcoins. The fourth halving occurred in April 2024 and lowered the reward to 3.125 bitcoins. The next halving should happen in mid-2028 and reduce the reward to 1.5625 BTC.

Denominations

One bitcoin is divisible to eight decimal places (100 millionths of one bitcoin), and this smallest unit is referred to as a satoshi.

On Jan. 8, 2009, the first version of the Bitcoin software was announced to the Cryptography Mailing List, and on Jan. 9, 2009, Block 1 was mined, and bitcoin mining began.5

Bitcoin's Blockchain Technology

Bitcoin as a form of digital currency isn't hard to understand. For example, if you own a bitcoin, you can use your cryptocurrency wallet to send smaller portions of that bitcoin as payment for goods or services. By contrast, the way Bitcoin actually works is very complex.

Blockchain

A blockchain is a distributed ledger, a shared database of information that is chained together via cryptographic techniques. "Distributed" means that it is stored on many computers rather than on a centralized server, as is typical of data storage.

A network of automated programs installed on these computers maintains the blockchain and performs the functions necessary for it to operate.

A block on a blockchain is a file that contains a block header, transaction counter, and the transactions recorded in the block. The transaction counter lists how many transactions are in the block, while the block header is made up of several elements:

Software version: Which version the blockchain is running (sometimes called the magic number)
Previous block hash: The encrypted information from the previous block
Merkle root: A single hash (encrypted information) that contains all the hashed information from previous transactions
Timestamp: The date and time the block was opened
Difficulty target: The current network difficulty problem miners are attempting to solve for
Nonce: Short for "number used once," which is used to solve the mining problem and open the block.

As noted, each block contains the hashed information of the previous block. This creates a chain of encrypted blocks (files) that contain information from all previous blocks, going back to the first block of the blockchain.

Encryption

Bitcoin uses the SHA-256 hashing algorithm to encrypt (hash) the data stored in the blocks on the blockchain. Simply put, transaction data stored in a block is encrypted into a 256-bit (64-digit) hexadecimal number. That number contains all the transaction data and information linked to the blocks before that block.

While the data in a block is encrypted and used in the next block, the block is not inaccessible or non-readable. The hash is used in the next block, then its hash is used in the next, and so on, but all blocks can be read. This makes it so blocks cannot be changed without changing all other blocks and ensures anyone can audit the blockchain.

How To Buy Bitcoin

If you don't want to mine bitcoin, you can buy it using a cryptocurrency exchange. Most people will be unable to purchase an entire BTC because of its price, but you can buy portions of one BTC on these exchanges in fiat currency, such as U.S. dollars.

For example, you can buy bitcoin on Coinbase by creating and funding an account using your bank account, credit card, or debit card. The following video explains more about buying bitcoin.

0 seconds of 4 minutes, 24 secondsVolume 75%

How to Buy Bitcoin

How To Mine Bitcoin

A variety of hardware and software can be used to mine bitcoin. When the Bitcoin blockchain was first released, it was possible to mine it competitively on a personal computer. However, as it became more popular, more miners joined the network, which lowered the chances of being the one to solve the hash.

You can still use your personal computer as a miner if it has newer hardware, but the chances of solving a hash individually using a home computer are minuscule.

This is because you're competing with a network of miners that generate around 600 quintillion hashes (as of May 15, 2024) per second. Machines—called Application Specific Integrated Circuits (ASICs) built specifically for mining—can generate more than 400 trillion hashes per second. In contrast, a computer with the latest hardware hashes around 100 megahashes per second (100 million).6

Options for Successful Mining

There are two hardware options available for Bitcoin mining and several software options.

1. You can use your existing computer and mining software compatible with Bitcoin software and join a mining pool. Mining pools are groups of miners that combine their computational power to compete with large ASIC mining farms.

There are many mining programs to choose from and pools you can join. Two of the most well-known programs are CGMiner and BFGMiner. Some of the most popular pools are Foundry Digital, Antpool, F2Pool, ViaBTC, and Binance.com.

2. If you have the financial means, you could purchase an ASIC miner. You can generally find a new one for around $10,000, but used ones are also sold by miners as they upgrade their systems. There are some significant costs, such as electricity and cooling, to consider if you purchase one or more ASICs. Keep in mind using one or two ASICs is still no guarantee of rewards as you're competing with businesses with large mining farms of tens, if not hundreds, of thousands of ASICs. For example, bitcoin mining firm CleanSpark ordered 100,000 ASICs from Bitmain in April 2024.7

You can increase your chances of being rewarded bitcoins by joining a pool, but rewards are significantly decreased because they are shared. When choosing a pool, it's important to make sure to find out how it pays out rewards, what any fees might be, and to read some mining pool reviews.

How To Use Bitcoin

Bitcoin was initially designed and released as a peer-to-peer payment method. However, its use cases are growing due to its increasing value, competition from other blockchains and cryptocurrencies, and developments on blockchains that process information for the Bitcoin blockchain.

Payment

Bitcoin is accepted as a means of payment for goods and services at many merchants, retailers, and stores.

Brick-and-mortar stores that accept cryptocurrencies will generally display a sign that says "Bitcoin Accepted Here." The transactions can be handled with the requisite hardware terminal or wallet address through QR codes and touchscreen apps. An online business can easily accept bitcoin by adding this payment option to its other online payment options: credit cards, PayPal, etc.

To use your bitcoin, you need to have a cryptocurrency wallet. Wallets are your blockchain interface and can hold the private keys to the bitcoins that you own. These keys must be entered when you're conducting a transaction.

Investing and Speculating

Investors and speculators became interested in bitcoin as it grew in popularity. Between 2009 and 2017, cryptocurrency exchanges emerged that facilitated bitcoin sales and purchases. Prices began to rise, and demand slowly grew until 2017, when its price broke $1,000.

Many people believed bitcoin prices would keep climbing and began buying bitcoin as long-term investments. Traders began using cryptocurrency exchanges to make short-term trades, and the market took off.8

After reaching a high of about $69,000 in November 2021, bitcoin's price crashed in 2022. In March 2022, it was as high as $47,454, but by November, it was $15,731. It then recovered in 2023, seeing a price as high as $31,474 before dropping back below $30,000.

In early 2024, bitcoin's price jumped into the mid $40,000s as expectations grew for Bitcoin Spot ETFs' approval. By mid-February 2024, after the ETFs were approved, bitcoin's price climbed to more than $50,000.9

Bitcoin prices tend to follow stock market trends because bitcoin is treated the same way that investors treat other investments. However, bitcoin price movements are greatly exaggerated and sometimes are prone to movements of thousands of dollars. Many bitcoin investors tend to "trade the news," as demonstrated by the fluctuations that occur whenever there is a significant news event.

Bitcoin's all-time high price is $73,794, reached on March 14, 2024.

Risks of Investing in Bitcoin

Bitcoin had a price of $7,167.52 on Dec. 31, 2019, and a year later, it had appreciated more than 300% to $28,984.98. It continued to surge in the first half of 2021, trading at a record high of $69,000 in November 2021. It then fell over the next few months to hover around $40,000.10

As a result of such price movements, many people purchase bitcoin for its investment value rather than its ability to act as a medium of exchange. However, the lack of guaranteed value and its digital nature mean its purchase and use carry several inherent risks.

In fact, many investor alerts issued by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and the Consumer Financial Protection Bureau (CFPB) concern bitcoin investing.

Here are some of the risks that you're exposed to when trading or investing in bitcoin:

Regulatory risk: The continuous battle between cryptocurrency-related projects and regulators makes longevity and liquidity an unknown. As of May 2024, bitcoin is not considered a security by the authorities, but that stance could change in the future.
Security risk: Most individuals who own and use bitcoin have not acquired their tokens through mining operations. Rather, they buy and sell bitcoin and other digital currencies on popular cryptocurrency exchanges. These exchanges are entirely digital and are at risk from hackers, malware, and operational glitches.
Insurance risk: Bitcoin and other cryptocurrencies are not insured by the Securities Investor Protection Corporation (SIPC) or the Federal Deposit Insurance Corporation (FDIC). However, some exchanges provide insurance through third parties. For instance, Gemini and Coinbase offer cryptocurrency insurance, but only for failures in their systems or cybersecurity breaches. Any cash deposits you've made at either exchange might be eligible for "pass-through" FDIC coverage.111213

Fraud risk: Even with the security measures inherent within a blockchain, there are still opportunities for fraudulent activity.
Market risk: As with any investment, bitcoin values can fluctuate. Indeed, the currency's value has seen wild price swings over its short existence. Subject to high volume buying and selling on exchanges, it is highly sensitive to any newsworthy events.

Regulating Bitcoin

As with any new technology, it has been difficult to regulate bitcoin. The U.S. administration seeks to impose regulations on bitcoin but, at the same time, walks a tightrope in trying not to throttle a growing and economically beneficial industry.14

Enforcement agencies in the U.S. continue to rely on existing securities, commodities, and tax laws, but as of May 2024, no attempts from legislators have gained much attention from the country's law-making bodies.1516

The European Commission put its long-anticipated Markets in Crypto Assets legislation into force in 2023, setting the stage for cryptocurrency regulations in the European Union.17

India banned several exchanges in December 2023 and continues to push back reviews of any legislation regarding bitcoin and other cryptocurrencies.18

How Much Is $1 Bitcoin in US Dollars?

One dollar of Bitcoin is worth one U.S. dollar. The amount of bitcoin that equals $1 will change with the cryptocurrency's market value.

Is Bitcoin Real Money?

By most definitions, money is any item that acts as a way to exchange value in an economy, stores value or is generally accepted. It is used by people globally for these purposes, so it can be considered "real money."

How Long Does It Take To Mine One Bitcoin?

It takes an average of 10 minutes for the mining network to validate a block and create the reward. The bitcoin reward is 3.125 BTC per block. The block reward halves every four years, so when the next halving occurs in mid-2028, the reward will be 1.5625 BTC every 10 minutes.

Is Bitcoin a Good Investment?

Bitcoin has a short investment history that is filled with very volatile prices. Whether it is a good investment depends on your financial profile, investing portfolio, risk tolerance, and investing goals. You should consider consulting with a financial professional before investing in cryptocurrency to ensure that it is right for your circumstances.

How Does Bitcoin Make Money?

Miners on the Bitcoin network can be rewarded by successfully opening blocks. Bitcoins are exchangeable for fiat currency via cryptocurrency exchanges. Investors and speculators can make money from trading bitcoins.

How Many Bitcoins Are Left?

The total number of bitcoins in existence was about 19.7 million on May 15, 2024. At that time, the number left to be mined was about 1.3 million.19

The Bottom Line

Bitcoin was the first cryptocurrency introduced to the public and was intended to be used as a form of payment outside of legal tender. Since its introduction in 2009, bitcoin's popularity has surged, and its blockchain uses have expanded.

Though the process of generating bitcoin is complex, investing in it is more straightforward. Investors and speculators can buy and sell bitcoin on crypto exchanges. As with any investment, particularly one as new and volatile as bitcoin, investors should carefully consider if bitcoin is the right investment for them.

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