Bitcoin 101 an E-Book from Sgt. Crypto

Bitcoin 101
A Beginners Guide to Bitcoin

Sgt. Crypto

Contents
Disclaimers 3
What Are Bitcoins? 4
What Are Digital Currencies And How Do They Work? 7
Bitcoins As An Investment 9
How To Access And Use A Bitcoin Account 12
Getting Started 16
Receiving Bitcoin 17
Sending Bitcoin 18
Bitcoin Fractions 20
Bitcoin Mining 21
Conclusion 24

Disclaimers
Your Usage Rights
2018 © - All rights reserved.
You may NOT reproduce this book in any way, it cannot be stored in a retrieval system, or transmitted in any form or by any means, this includes electronic, mechanical, photocopying, recording, scanning, or any other means, without the prior written permission of the publisher.
Disclaimer
The material contained inside this book is for educational and informational purposes only. No responsibility can be taken for any results or outcomes resulting from the use of this material.
While the author has taken every attempt to provide information that is both accurate and effective, the author does not assume any responsibility for the accuracy or use/misuse of this information.
All the information and facts were correct and up to date at the time of writing.
Dedications
This e-book is dedicated to my sons, you guys motivate me everyday to be a better a person.
 
What Are Bitcoins?
Bitcoins are a type of digital currency that can be created via a free software application and transferred across the Internet without the use of financial institutions or clearinghouses. It can be sent from user to user on a peer to peer network. This means that there is no physical form of this currency; it is not like a U.S. Dollar or a Euro, or even like a piece of gold or silver. You cannot touch bitcoins and be in physical possession of them like you can those aforementioned physical currencies. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. To date the Bitcoin Blockchain is the most secure blockchain.
The best way for you to understand digital currency is by thinking of it as a code. The strength of the code makes the currency stronger. Cryptography ensures that the code cannot be accessed without proper authorization. This code has never been broken, though many people have tried!
How can Bitcoins be used then? A computer, Smartphone, tablet, or any device with Internet access can easily transfer Bitcoins from one person to another, even in transactions between a user and a business website. The number of bitcoins you have are stored in your “digital wallet,” which is similar to screens you see when you use online banking forms to authorize transactions.
When a Bitcoin transaction occurs, the bitcoin miners communicate over a Web-based network and add the transaction to transaction logs that record all Bitcoin transactions.
Peer-to-peer file-sharing technology allows all transactions to be processed and documented. An electronic signature is added, allowing the transaction to be stored on the Bitcoin network. This transaction is free for all to see, though you can use multiple bitcoin accounts and not transfer large amounts of bitcoins to each account in order to help camouflage your activities. This hides your accounts from other Bitcoin users, so they do not know which accounts are yours.
Bitcoin is unlike other currencies because it is decentralized; no one agency (world or national) controls the regulation of it. You may think because Bitcoins are a digital currency that there would be an unlimited supply of them, much like the space on a digital or virtual server.
However, thanks to a schedule planned by Bitcoin itself, there will be 21 million bitcoins in the year 2140. This number will be reached by each update being reduced by half every four years until 2140. At that time, there will be no more Bitcoins mined.
To further ensure that the exact number of 21 million Bitcoins will be in circulation in 2140, each Bitcoin is broken down into eight decimal places, leading to 100 million smaller units being created, known as “satoshis.” The name is based on the founder of Bitcoin, a software developer named Satoshi Nakamoto. Many people think that this name is a mask and helps to hide the true creator of the software.
When “mining” is mentioned, this means that the free application that creates the Bitcoins is automatically adjusted to ensure that the bitcoins are mined at a predictable and limited rate. There is a certain amount of processing work done by the bitcoin miner, allowing the network to control the exact number of bitcoins being circulated at any one time.
Bitcoins are being accepted at more and more retailers and other online sites throughout the world, changing the way people do business online. For instance, domain registrar Namecheap was one of the first major domain name registrar to allow the use of bitcoins as payment for domain name registration, Web hosting, SSL certificates, and WhoisGuard on Namecheap. Coinality.com, a site that launched in September 2013, profiles jobs that pay in digital currencies, including Bitcoins. Bloomberg TV said that Coinality.com is the “Monster.com for jobs that pay in Bitcoin.” There’s also coinmap.org, which allows you to search your local area for stores that accept Bitcoin as a form of payment.
As you can see, Bitcoin is gaining more influence in our world today. The creators of Bitcoin believe that as bitcoins become more prominent and more mainstream, a true global economy will start to emerge.
Unlike with physical currencies, Bitcoins and other digital currencies will not be hampered by the limitations and red tape of currencies, exchanges, and regulations. As mentioned above, the creators of Bitcoin planned on bitcoins becoming a part of our future, as bitcoins are to continue flowing into the world until 2140.
As a result, it’s likely that more and more companies and organizations will start taking Bitcoins and other digital currencies as payment and using them as payment, thus increasing the presence and influence of digital currencies in our physical world as we continue into the 21st century.
 
What Are Digital Currencies And How Do They Work?
Digital currencies are electronic money that aren’t denominated by any national currency, nor are produced by any government-endorsed central banks. These currencies are known as “alternative currencies,” and thus are sometimes called “altcoins.”
Many digital currencies are cryptocurrencies, a type of digital currency that relies on cryptography, as well as a proof-of-work scheme. Essentially, it involves a mathematical process to create the currency at a reasonable rate so that the currency doesn’t become too numerous, and thus, lose its value. Bitcoin was the first cryptocurrency, while many others have followed.
The second-most valuable “altcoin” is known as of writing this is, Ethereum. It shares many similar features to Bitcoin, however it is used as a platform for launching or building other altcoins, decentralized applications, and smart contracts. Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network.
The third-most valuable altcoin again as this writing is, XRP and was developed by Ripple labs. Ripple is a real-time gross settlement system, currency exchange and remittance network created by Ripple Labs Inc., a US-based technology company. Ripple is built upon a distributed open source internet protocol, and supports tokens representing fiat currency, cryptocurrency, commodities, or other units of value such as frequent flier miles or mobile minutes. Released in 2012, Ripple purports to enable "secure, instantly and nearly free global financial transactions of any size with no chargebacks."
Ripple is based around a shared public ledger, the XRP Ledger, which uses a consensus process that allows for payments, exchanges and remittance in a distributed process. The network can operate without the Ripple company; among its validators are companies, internet service providers, and the Massachusetts Institute of Technology. The ledger employs the decentralized native cryptocurrency known as XRP, which as of October 2018 was the third largest coin by market capitalization. To find out more about the cryptocurrency market capitalization, you can visit the following websites, coinmarketcap.com and coincheckup.com.

Digital currencies work by mining those currencies on one’s computer via a “mining” software that brings about the currency. This is recorded in the respective network to show such new units of the currency exist. These coins can go into a person’s digital wallet, then be used to complete transactions. The types of transactions include physical items such as books and video games to digital items such as domain name registration and digital salaries for work performed.
As you can see, there are more digital currencies out there than just Bitcoin, and it seems to be that there will probably be more in the future, both based on current digital currencies and even brand new ones.
As the world continues to become more “digitized” in terms of the Internet and e-commerce, digital currencies will continue to gain more prominence and use. While replacing physical currencies is probably unlikely, especially in the near future, having more sites accepting digital currencies and merchants accept and conduct transactions using digital currencies is the new normal.
 
Bitcoins As An Investment
Every day, more and more talk about Bitcoins is occurring, not only as a digital currency, but also as a financial investment. Many people are intrigued by this digital currency, but they also have reservations about it as well. For now we will discuss how to evaluate bitcoins as an investment.
There are Bitcoin & cryptocurrency exchanges, just as there are stock market exchanges. As October 2018, there are over 200 such exchanges and the largest Bitcoin exchanges by volume available to everyone includes, Binance (based in Malta), Coinbase and Gemini (based in the United States).
In order to open an account with the exchanges in the United States, you usually have to link a bank account to your Bitcoin exchange account, as you need to wire transfer the money for bitcoins to use in your account. Credit cards and PayPal are not options (at least not at the time of writing) because the transactions can be reversed very easily, whereas a wire transfer cannot be reversed. Truly it’s because, credit cards and PayPal fear the competition from digital currencies like Bitcoin.
Usually, only bank accounts from that specific exchange’s home-based country can be linked to the exchange account (for example, CoinBase, based in the U.S., only allows U.S. bank accounts).
Like the financial stock markets, bitcoins fluctuate in value against real currencies such as the U.S. Dollar, the Euro, the Japanese Yen, and others. One important distinction between Bitcoins and fiat currencies to this point in Bitcoin’s history is the fact that Bitcoin’s valuation has been much more volatile than fiat currencies.
In 2017, Bitcoin’s valuation went from $1000 up to about $19,300 within one year, a 19X rise in the price of the of Bitcoin, and as of this writing, Bitcoin’s price is $6450. That is virtually unheard of within the traditional equities market, let alone any “strong” fiat currency.
The reason that this sharp rise in valuation took place was because the CFTC (The U.S. Commodities Futures Trading Commission) and the CBOE (The Chicago Board of Options Exchange) announced Mid 2017 that they were going to open Bitcoin futures contract later that year. As a result, the price of Bitcoin skyrocketed to all time new highs. It was a lot of FOMO (Fear of Missing Out) and speculating from everyday “investors.”
This event reflects the major concern that most financial experts have about the currency. Many feel it is too volatile as an investment, leading to sharp price spikes and declines that are virtually not seen in other currencies, the equities market, or mutual funds. Most financial experts feel that the digital currency must stabilize in value and not be so prone to such rapid peaks and valleys for it to be taken more seriously as a solid investment.
The problem that many financial experts and institutions have with Bitcoin is that not enough is known about how the currency is mined and how it is “regulated”, so that the currency stays on track of having 21 million bitcoins in the year 2140.
While safeguards are in place to keep the currency on that path, there have been attempts to try to disrupt the network and give a few select bitcoin miners the ability to mine as many coins as they wish. There has also been concern that a group of miners could combine together, and work toward their mutual benefit, and to the detriment of everyone else on the network. This would occur by harnessing their mining power to get more coins for themselves and leave little to the rest of the network. This is known as a 51% attack and wouldn’t be beneficial to those bad actors, both practically and financially. You see Bitcoin has the most secure blockchain and network of any blockchain out there. No nation, company, organization or entity can take down Bitcoin, many have tried and have failed. It’s just too expensive and impractical to even try (that’s for another eBook).
It will take more time and a longer track record for Bitcoin to establish the trust of the financial community to where Bitcoin can be seen as a solid investment for most investors. Or you can set a path of your own and start investing in Bitcoin today. DO NOT wait on Wall Street to tell you when you can start buying and HODL’n (Hold on for Dear Life) Bitcoin.

How To Access And Use A Bitcoin Account
With all the current news in regards to finances and the Internet, you are likely wondering how to get set up and use Bitcoin. As we mentioned earlier Bitcoin is the network that is using a digital currency to conduct transactions in many places across the Internet. Unlike a physical currency such as U.S. Dollars and Euros, Bitcoins are “mined” on the Internet, and all transactions are validated on the Bitcoin public ledger, the Bitcoin Blockchain.
So just how do you get access to Bitcoins?
There are two ways in which you can gain bitcoins:

1. You can buy bitcoins from various sources
2. You can mine them yourself
   There are two main sources from which you can buy bitcoins: Bitcoin/cryptocurrency exchanges and from other people who are selling them. You can pay for bitcoins in a variety of ways; most people will use either hard cash or wire transfers. It really depends on where you live and who you are buying them from, as different sellers have different requirements for selling bitcoins to others.
   Here in the U.S. there are several different exchanges, that can be used to purchase Bitcoin and other cryptocurrencies. The main exchange that people use is CoinBase, for its ease of use, getting in & out of FIAT, plus the fact that you can download an app either from the Apple or Google. The other main U.S. based exchange is Gemini, you can transfer FIAT currency in & out of this one as well. There is also Kraken, Uphold, Bittrex all of which you can deposit FIAT to buy/exchange for Bitcoin and cryptocurrencies. Here in NY State, the easiest ones FIAT to crypto exchanges to use are both Coinbase and Gemini, both of them have met the “proper” regulatory guidelines, for the State.
   Being that the Bitcoin itself is a transfer of bits, most governments and agencies will not see this as proof of goods changing hands, and consequently, the bitcoin seller will be out of gaining any money for the transaction. This is why credit cards and PayPal are largely avoided by exchanges and private sellers when offering Bitcoin payment options.
   The other main option to gain bitcoins is to mine them yourself. However, this isn’t as easy an option as it may sound. For one thing, you need a Field Programmatic Gate Array (FPGA) or an Application Specific Integrated Circuit (ASIC) to really be able to mine Bitcoins on your own. Even a computer with a graphical processing unit (GPU) would not be able to mine for bitcoins nowadays, because the mathematical process of mining them has become too complex.
   You also have to factor in the amount of electricity used for the computer or circuit to mine those Bitcoins, as there will be more electricity used than is used by most of your household appliances and items.
   Even if you do get the necessary equipment for mining, you’d still have to join a pool of other miners in order to really obtain bitcoins. Thus, while mining bitcoins is an option for some, it’s for a relatively small portion of the population and is definitely not for everyone.
   When you do get bitcoins via purchasing or mining, you need to have a digital wallet. This is similar to an online bank account.
   You have several options:
3. A software wallet stored on the hard drive of your computer
4. An online Web-based service that acts as a digital wallet
5. A paper wallet
6. A mobile wallet for your Smartphone or other mobile device
   When you want to send bitcoins to someone else, the transaction takes place between your digital wallet and the other person’s digital wallet. When this occurs, everyone on the Bitcoin network knows about the transaction. Plus the history of a transaction can be traced back to the point where the bitcoins were produced. This is thanks to the public ledger where all Bitcoin mining and transaction are recorded.
   As you can see, bitcoins can be acquired either via purchasing from a bitcoin seller or from mining the bitcoins yourself, though the latter option is only practical for a small number of people.
   You keep the bitcoins in a digital wallet, either on your own computer or via a Web-based service. When you want to conduct a bitcoin transaction, the transaction takes place between your digital wallet and the digital wallet of the other person.
   By knowing how a bitcoin account works and how to use it for funding transactions, you now have the opportunity to utilize the first digital currency in the history of humankind when making purchases on the Internet.

Setting Up Your Bitcoins Wallet
There are several places where you can get a Bitcoin Wallet for the purpose of this ebook we will use one that is easy to set up. Coinbase is a web based exchange and wallet service and there is also an app. You can download, it on your mobile devices, on either platforms, Android or iOS. Once installed the Welcome screen below will be shown.
 
Getting Started
Follow the instructions above and sign up for an account, you will be asked to link your Bank Account or Debit Card. Adding a Bank Account will allow you to purchase Bitcoin and cryptos with a higher daily/weekly spending limit. Adding your Debit Card will limit you to only $2500 weekly, and the fees are much higher.
You may wish to set up a 2 step authentication process. This is where an outside source sends you a code to your Smartphone and verifies that you own the account.

Receiving Bitcoin
To receive Bitcoin you need to use your Bitcoin Receiving address. It looks like this.

This is a public address, think of it in the same way as an email address.
The basic steps to receive Bitcoin are:

1. Create a New Receiving Address, by clicking the QR Code in the top right corner, after setting up your account.
2. Copy the address, or the sender can scan the QR Code.
3. Add the amount to be send.
   Sending Bitcoin
   To send Bitcoin click on the Send tab.
4. Enter the destination address or scan the QR Code.
5. Enter amount.
6. Send.
   Once you click Send a pop up will appear to confirm your transaction. This is the only time you can change your mind and cancel it. Once you verify and hit send the transaction is no longer reversible.
   When adding the destination address you can type in the address, drag the QR code or copy and paste the code (to avoid any errors, I like to scan the QR Code and verify it’s correct).
   An error message will appear if there was a problem with your transaction.

Important Note: While anyone can see the buyer's or seller's address, only they can actually unlock the transaction and move the Bitcoin. The unlocking process is accomplished with your private key. Currently each wallet comes with 100 private keys. 
Once you have your account set up your next step is to buy your Bitcoin. The easiest way to do this is to buy it through your Coinbase or Gemini account.
Another way to get bitcoins into your wallet is to accept it as a form payment for a service or product.

Bitcoin Fractions
Bitcoins can be divided into fractions. So you could technically spend .15 of a Bitcoin on a purchase. The smallest fraction is one hundred millionth of a Bitcoin or 0.00000001. This fraction is called a Satoshi.
 
Bitcoin Mining
For bitcoins to be usable, one has to first mine them via a computer engaging in a mathematical process to add them to the public ledger that keeps track of all bitcoins on the Bitcoin network. You’ll learn more about this process below.
Bitcoin mining involves a software program known as a “bitcoin miner.” This program is downloaded onto any device that can connect to the Internet, such as a desktop computer, laptop computer, Smartphone, or tablet.
However, the process is resource-intensive, and even high-end computers with graphical processing units (GPUs) have only a very limited ability to mine Bitcoins. You really need a Field Programmatic Gate Array (FPGA) or an Application Specific Integrated Circuit (ASIC) to really be able to mine bitcoins on your own. If you have either of those, you are in much better shape to mine bitcoins on your own.
The bitcoin miners communicate over the Bitcoin network and verify all legitimate transactions by adding them to a decentralized log, known as the “blockchain,” that is updated every 10 minutes across the entire Bitcoin network. Think public ledger!
The block chain helps to ensure that the total number of bitcoins in circulation at any one time is always known and recorded. The idea behind this is to attempt to keep the value of the Bitcoin currency as stable as possible. When the log is updated, more bitcoins are added to the network as well.

As mentioned above, bitcoin mining is resource-intensive. This was designed on purpose to ensure that bitcoins cannot be produced more frequently than what was designed to occur.
This is because there will only EVER be 21 million bitcoins by the time mining ends in 2140. The mining process also has to become more resource-intensive as time goes on because already over 85% of the 21 million planned bitcoins have already been mined.
Thus, it will take even longer to mine the remaining bitcoins in the future. Each time a block is mined, an electronic signature is attached and is verified by other bitcoin miners on the network to ensure that those bitcoins are legitimate and can be added to the total number of bitcoins available on the network.
This mining process was established so that no one could control all of the Bitcoin currency, nor could the currency be produced right away. This is in an effort to keep the currency’s valuation relatively stable, since there is no physical form in the world and no centralized agency behind the currency.
In addition, by having many bitcoin miners exerting a great deal of computational power to manifest the bitcoins, the miners cannot attack the network itself to where people can take advantage of the Bitcoin network.
Bitcoin is the first digital currency on the Internet, and there have been ramifications both in the digital world and the physical world. In the digital world, more websites and companies are starting to accept it for payment, while other digital currencies are being formed and circulated.
In the physical world, the financial industry and governments around the world are talking more about it and wondering whether to recognize it as a legitimate currency, and if so, how.
Many banks are against digital currencies because they fear the repercussions digital currencies could have on their businesses, businesses that have been stable and dominant for centuries. It will be interesting to see how Bitcoin is seen over time as more and more companies, agencies, and individuals use the currency frequently for purchases, transactions, and payments.

Conclusion
One of the easiest ways to get started with using Bitcoins is to sell some of your stuff from home on Bitify, it is similar to eBay and you can sell your old unwanted items for Bitcoin or Litecoin. Why not take the time to do a clean up and see what items you can sell. This allows you to sell unwanted or unused things that are laying around your home and get some Bitcoins instead. Or just open an account with Coinbase and purchase some, remember you don’t have to purchase a whole Bitcoin, you can purchase fractional shares.
As you can see there is a lot of technical jargon attached to this cryptocurrency, but once you start to understand the terms, you have a better overall comprehension of what Bitcoins are all about.