How to make money on bitcoins in 2020

A decade after the launch of the first block of the Bitcoin blockchain network, an entire industry has already developed around the main cryptocurrency with many services that make it possible to earn not only from mining, but also from trading, medium and long-term investments, without special technical knowledge.

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The new industry has opened up new business opportunities, allowing you to optimize the costs of processing payments.

What is Bitcoin?

Bitcoin (Bitcoin, BTC) is the first and main cryptocurrency in terms of capitalization at the moment – that is, a digital currency created and controlled using blockchain technologies.

The first widespread use of blockchain technology to create an immutable registry of serial data (linked list) with cryptographic encryption was precisely the decentralized Bitcoin network, on which the cryptocurrency of the same name was created. In October 2008, a developer, or a group of developers, under the pseudonym Satoshi Nakamoto, published a whitepaper for the future network, and on January 9, 2009 the system code was opened to the world and the first bitcoin was released.

Bitcoin has been on the market for 10 years, but it is still not known who is behind its creation. Despite this, the market capitalization of bitcoin exceeds $ 159 billion, according to Coinmarketcap, and the rate of bitcoin as a flagship cryptocurrency determines the direction of movement of almost all other cryptocurrencies called altcoins.

Bitcoins, like other cryptocurrencies, unlike fiat money, or gold, do not have a physical embodiment. In addition, there is no central authority that would control the issue, hold the course and guarantee the execution of transactions. This was made possible thanks to the blockchain technology device itself. Hacking the system is possible only with the help of the so-called 51% attack, but now, when millions are using the network, to implement such an attack would require the computing power of hundreds of supercomputers. Therefore, hacking the Bitcoin network, even if it were possible, would not be economically feasible.

The golden rule of any Bitcoin holder is not your key, not your Bitcoin. Thus, storing bitcoins in wallets on crypto exchanges and other intermediaries does not guarantee that you have these bitcoins. The safest storage is “cold”, that is, on the device. Also, no technology can protect, for example, from social engineering methods, which hackers and scammers use.

Where do bitcoins come from?

Bitcoins are a reward for processing transactions on the network. Every time bitcoins change ownership, the transaction must be confirmed on the blockchain, which means that someone must provide the computing power of their devices. For economic motivation, miners whose devices perform these calculations receive rewards in the form of bitcoins, which guarantees the stability of the decentralized network.

With the number of transactions, the so-called mining difficulty of the network grows. When the network was just created and was popular only among a small circle of enthusiasts, bitcoins could be easily mined, or mined, at home. The rise in bitcoin value from $ 0.5 to $ 20,000 in 2017 allowed the first miners to buy expensive cars, houses and become millionaires.

At first, not everyone believed that Bitcoin would grow. So, in 2013, a resident of the city of Newport in Wales, James Howells, threw out a hard drive from a broken laptop with 7,500 bitcoins, and has since been trying to get permission from local authorities to parse a local landfill, where at the current rate more than $ 65 million is buried.

The very first widely known purchase of real goods for bitcoin was pizza. In 2010, a Florida programmer, Laszlo Hanic, acquired two pizzas for 10,000 bitcoins, which went down in history as the two most expensive pizzas. For this, such a “pizza” would cost more than $ 85 million, according to a Twitter account specially created for calculating the cost of “crypto pizza”.

The computational complexity of the network grows with the growth of transactions, and therefore much more powerful devices and more energy costs are needed. According to Alex de Vries, the total energy costs of the Bitcoin network last year were comparable to the costs of countries such as Ireland, and this figure will only grow.

In 2020, an individual miner already has to compete with huge mining farms, and not individual bitcoin enthusiasts. At the peak of the bitcoin price in 2017, many new miners entered the market, but few of them experienced a strong price correction, and therefore the market became somewhat more consolidated. This year, mining giants Bitmain and Canaan have even applied for an initial public offering (IPO) to the US regulator SEC to trade stocks on such stock exchanges as Nasdaq.

The cost of mining Bitcoin depends on many factors: mining devices, electricity prices, regulatory features in the country (taxes), as well as network indicators. For example, according to the data of bitcoin investor Alisteira Milna, the average price of mining one bitcoin is about $ 8,000.

How to make money on bitcoins

The high cost of mining bitcoin does not mean that you can not earn on the main cryptocurrency. Cryptocurrencies are very volatile, that is, the exchange rate difference can change strongly and quickly, which is what experienced traders use. They buy bitcoins at a low price and sell at their peak.

You can purchase bitcoins in exchangers and from individuals, and trading takes place on cryptocurrency exchanges. The largest cryptocurrency exchanges in terms of trading volume are now BitMEX, Bilaxy, CoinBene, according to Coinmarketcap. When choosing a site for trading, it is important to consider factors such as reputation, liquidity, and geographic orientation. For example, from global exchanges, Binance and Bithumb Global announced an active entry into the Russian market.

At the same time, it is not necessary to exchange bitcoins for fiat currencies when the market falls, creating a tax precedent, but you can “hold” it in cryptocurrencies whose value is pegged 1: 1 to the dollar. An example of such an instrument is USDT stablecoin, which, despite regular scandals, holds a capitalization of more than $ 4 billion.

Trading is not the only way to make money on bitcoins; the so-called scammers adhere to a long-term investment strategy. Since the issue of bitcoins is technically limited and a total of 21 million BTC will be issued, scammers bet on the long-term increase in the price of the asset, without taking into account market price fluctuations. At the moment, there are already more than 18 million bitcoins in circulation, that is, more than 85% of the final issue.

A medium-term investment option may be a contribution in bitcoins to ICO / IEO projects of companies, by analogy with the purchase of shares in the traditional financial market. Investors buy company tokens, betting on their development and growth and sell when the token price rises. For example, the famous TON project of Pavel Durov through the ICO attracted more than $ 1.7 billion of investments.

However, do not forget that the cryptocurrency market in many countries is in the gray zone in terms of regulations, and in some jurisdictions, such as in China, it is completely banned. The choice of any intermediaries, whether it is a crypto-exchange or an exchanger, is based on taking into account the relevant risks.

Bitcoin for business

With the growing popularity of cryptocurrencies, more and more enterprises begin to accept payments in cryptocurrencies, and more and more buyers begin to pay in cryptocurrencies, refusing to interact with banks that have lost the trust of the population.

For business, this is an additional opportunity to attract customers, reduce transaction costs, and therefore improve the financial position of the company. Thus, the Australian coastal town of Agnes, previously unknown to a wide audience, attracted many tourists only by providing the opportunity to pay for hotels, food in restaurants and other services in cryptocurrency.

International charitable organizations also use new technology to attract more donors and lower commissions that charge international payment processing systems and banks. Thus, the UN Children’s Fund, UNICEF, accepts donations in bitcoins in several countries, including France and Australia.

In Russia, there are still not many goods and services that can be paid with bitcoins, so adding a new option for receiving payments can be a competitive advantage. You can connect the option of accepting payments using special services.

Thus, in 2020, bitcoin, as the main cryptocurrency, opens a window of new opportunities for those who would like to get the benefits of using new technology and make money. For more than 10 years, the blockchain industry has moved to a new level of development, where you do not need to have special technical knowledge to gain benefits.

Basic facts about Bitcoin (at the time of publication)

  1. Bitcoin is more than 10 years old. Bitcoin’s birthday is January 9, 2008.
  2. Bitcoin is the first cryptocurrency in the world and the widespread use of blockchain technology.
  3. The author or authors of the open source code of the Bitcoin network are still unknown.
  4. Bitcoin is still cryptocurrency No. 1 with a share in the cryptocurrency market of more than 65%.
  5. The market capitalization of bitcoin is more than $ 159 million.
  6. Over the past 24 hours, the network processed about 280,000 transactions with a total volume of more than $ 20 billion.
  7. Bitcoin emission is technically limited to 21 million BTC. Now in circulation more than 18 million bitcoins, i.e. more than 85%.
  8. The Bitcoin price record was registered on December 17, 2017 at $ 20089.
  9. Over the past 30 days, the maximum price exceeded $ 9400, the minimum was $ 7400.
  10. The total return on investment since the launch of the cryptocurrency at the moment is more than 6400%.

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