Welcome to Metacoin!
We launched this site to help you take advantage of the growing Bitcoin, altcoin and digital currency, or “cryptocurrency,” revolution. Here, we’ll cover all sorts of terms that might be unfamiliar to you – like the blockchain and ICOs – and we’ll introduce you to websites you can use to buy, spend, save, and invest your digital assets (sites like Coinbase, Poloniex, Bittrex and the like).
But we know that some of you are brand new to the world of Bitcoin, so this page is designed to introduce you to the very basic terms, and to get you started by helping you make your first Bitcoin, Ethereum or Litecoin purchase.
What is Bitcoin?
Created in late 2008 and launched in early 2009 by a mysterious character named Satoshi Nakamoto, Bitcoin is a digital asset, or “cryptocurrency,” that operates without a central bank. Transactions are between peers – “peer-to-peer” – and are confirmed by using a distributed ledger called the “blockchain.”
Let’s take this example: Bob buys a cup of coffee at Mary’s coffee shop, and wants to pay with Bitcoin. Mary is okay with accepting Bitcoin, so Bob uses his Bitcoin “wallet” to buy the coffee.
He clicks to send a couple bucks worth of Bitcoin to Mary…and that’s when the confirmation network goes to work.
The code from Bob’s wallet goes out into the network, and those who confirm the purchase, called “miners,” use their excess computing power to solve a puzzle – where the “crypto” in “cryptocurrency” comes in. The miners also double-check to see that this particular piece of Bitcoin hasn’t been used before for this transaction, so there’s insurance against being double-charged. (Imagine a system where the serial number on your dollar bill gets checked so that the merchant knows there’s not a counterfeit dollar bill being used somewhere else with the same number…it’s sorta like that.) The purchase gets confirmed on the blockchain, without the use of a bank or payment processing system, and Mary gets her Bitcoin. (Bob gets his coffee, too.)
But what about the miners?
Well, they’re not doing this for nothing: the Bitcoin system is set up so that each time a miner solves a puzzle and help to confirm a purchase, the miner gets rewarded with a tiny amount of Bitcoin. More Bitcoin gets released into the economy, but only at a rate that doesn’t inflate the price too much.
Visit Coinbase and you’ll get a $10 bonus with qualifying Bitcoin purchase.
How do I get some myself?
You’ll need to link a bank account to a Bitcoin wallet, and that’s something you can do through Coinbase (which we suggest as the “hub” for beginning your Bitcoin and cryptocurrency journey). You can start with a really small amount, and put it in a wallet and then you can start spending (or trading or investing). We help you get started at this post on Using Coinbase.
How much is Bitcoin worth?
Let’s look at this from two angles: the value of one Bitcoin, and the value of the Bitcoin network.
First of all, that Bitcoin that you own in your wallet: how do you find out its value? Well, there are tons of Bitcoin calculators out there – you can check out Coindesk or even Google the term “bitcoin price” and a handy calculator will show up.
Let’s go back to the Bob and Mary story above. Since it doesn’t make sense for Mary’s coffee shop to charge 1 Bitcoin (“BTC” in trading parlance) for a cup of coffee, prices are often denominated in “millibit,” or 1/1000 of a Bitcoin (.001 BTC). So Mary’s probably charging around 2 millibits, or .002 BTC, for that cup of coffee. Mary’s happy to charge that and avoid credit card and bank processing fees, and Bob thinks that’s a fair price for what he considers to be a damn fine cup of coffee.
As for that “value of the Bitcoin network” question, it’s in the billions. If you judge based on market capitalization – which is commonly used for stocks of public companies, and makes sense here – Bitcoin is above $41 billion. In other words, multiply the price of Bitcoin on the open market times the number of coins currently in circulation, and that’s a pretty tidy sum.
At this writing, around 16,300,000 Bitcoins have been mined.
Can’t the Bitcoin network just make an unlimited amount of coins?
That’s a great question, and it’s one that will help ensure Bitcoin remains relevant and doesn’t become like, ahem, the US Federal Government.
There’s some complex math involved, but when Satoshi (who’s like Charo or Madonna in that he is known by just his first name) created the system, he capped the number of Bitcoin to be created at just 21,000,000. The rewards for mining keep being cut in half – “halving” – over time, so those who got in early were getting larger numbers than those who start mining now; but mining was tougher then than it is now, so that reward makes sense.
What about other coins?
Here’s where the excitement kicks in for all sorts of people: programmers, miners, banks, businesses, traders, investors, speculators. You can find several hundred coins being used – and some of them are becoming part of the everyday economy throughout the world.
In addition to Bitcoin, here are four other names you should know – these are coins that you might see “in the wild,” such as a sign that says “Bitcoin accepted here:”
- Ethereum, or Ether, which is the second-largest in the world right now (and is one of the three coins you can currently get on Coinbase, so…you may want to go to that link we shared in the ADVERTISEMENT above) (Market cap: around $16B.)
- Ripple – which is used widely in Japan (a country that has made digital currency transactions acceptable legal tender) (Market cap: more than $10B.)
- Litecoin – making news lately because of its tremendous growth; was also added to Coinbase recently (Market cap: $1.6B.)
- Dash – also widely used and has a very strong community of advocates. (Market cap: $950M.)
What if I want to trade my coins, or invest, or speculate?
To be honest, that’s why we launched this site. We see a growing market for trading and investing – and we also see a wild west mentality, similar to what existed before the first dot-com boom in the late 1990s, or with early investors in companies like Facebook or Apple.
You’ll hear stories about the early adopters of Bitcoin buying when coins were ten cents a piece (in 2010) and now sitting on vast piles of digital money. And you’ll continue to hear stories about “ICOs” – “Initial Coin Offerings” – where investors can get a piece of a digital asset that they hope will go from next-to-nothing to the stratosphere.
We’ve got tons of posts here that walk you through various trading and investing strategies – and we promise more to come in the weeks ahead. But if you have coins – let’s say you’ve purchased some over the years, or you’ve signed up for a (hint, hint) Coinbase account – you can trade them for other coins, or for “fiat currencies” like the almighty US Dollar.
Here are a couple of the names you need to know when you want to trade:
- Poloniex – this is one of the largest trading and investing sites, and it’s based in the US
- Bitfinex – another large trading site
- Bittrex – a newer entry, based in the US as well
- Genesis Trading – you’ll have to apply to learn more; don’t confuse this site and company with Genesis Mining.
Did you say “Bitcoin Mining?”
Yes, yes we did. BUT…
Let’s just put it this way: you can mine Bitcoin and other digital currencies in your basement if you want. You’ll need specialized equipment. You can also sign up with a company such as Genesis Mining – and you can do a cost/benefit analysis, buy whatever power you need, and get to it.
But really, though, you might want to think very carefully about how/if/when you do that: it’s complex and you’ll be entering the world of “pools” and “hashrate” and “ASIC” and it’s a LOT to learn.
Why this may be just the start for Bitcoin and cryptocurrency
Cambridge University estimated that the number of individuals using a Bitcoin (or other digital currency) wallet had grown from less than million worldwide in 2013 to somewhere between 3 and 6 million in early 2017. Compare that to a worldwide population of 7 billion, and, as of this writing, less than 1 in 1000 people worldwide are using digital currency.