Bitcoin/cypto newbie questions

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RetireJapan
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Bitcoin/cypto newbie questions

Post by RetireJapan »

This will probably be the absolute peak of cryptocurrencies just before the massacre, but I am interested in learning more about it.

So far I have opened accounts with Bitflyer and Coinbase, and am planning to buy a little of Bitcoin, Ethereum, and Litecoin each month with play money I assume is gone as soon as I spend it.

What else should I know?
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N00bster
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Re: Bitcoin/cypto newbie questions

Post by N00bster »

Exchanges get regularly hacked and their assets stolen, so it may be a good idea to move your coins out into an external wallet that you control ASAP. Problem with that is that with the bitcoin value and volume getting higher, transaction fees have also increased which may make that solution impractical.

Bitflyer is much less shady than the exchange that I used that got hacked (and thankfully I made sure that my coins were only there when I was trading), but beware that if coins are stolen, there is no way to get them back due to Bitcoin's decentralized nature.
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Re: Bitcoin/cypto newbie questions

Post by Jamo »

While exchanges claim to have strong security measures, you should consider purchasing a hardware wallet. That way, your coins are safely stored offline. (Actually it's your private key that is stored offline and protected by the hardware wallet. Not the coins). I use and recommend the Ledger Nano s. It's generally regarded as the best and safest wallet.

When buying bitcoin on bitflyer, use the Bitcoin Exchange, not the Buy / Sell Bitcoin option at the top. That way you can buy at market price direct from another user, not the inflated Bitflyer price. Ethereum and litecoin don't have that option.

Make an effort to read and understand about blockchain and its benefits etc. The majority of people who call crypto a bubble and dismiss it probably haven't made a concerted effort to understand it.
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Re: Bitcoin/cypto newbie questions

Post by adamu »

Jamo wrote: Tue Dec 05, 2017 12:03 pm While exchanges claim to have strong security measures, you should consider purchasing a hardware wallet.
Seconded. Although since you've assumed it's lost money, leaving it in the exchange is probably the most convenient at first. Especially as there are transaction fees for deposits and withdrawals. Once it gets enough to worry about, then get the hardware wallet. I'm happy with Trezor, and it can be used with Bitcoin, Litecoin, and Etherium. :-)

In terms of exchanges, Bitflyer seems the best best and I've used them with success for Bitcoin many times. I've also traded Bitcoin → Etherium with them but thought their fees were a little high for that. I don't know of a place where you can easily buy Etherium and Litecoin with JPY, but you can convert BTC to them at lots of exchanges - I've had good experiences with Bitfinex, and they've even been hacked once and handled it well and with integrity. If you are not using Bitfinex for fiat currency (i.e. just trading cryptocurrency), you don't need to verify your identity, so it's quite simple.
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Re: Bitcoin/cypto newbie questions

Post by adamu »

I think the most fundamental thing to understand about blockchain-based cryptocurrencies are what the blockchain is, and how ownership works.

There are bazillions of explanations for this but I'll have a go here. :D

Blockchain

Blockchain is fundamentally a distributed ledger of transactions. Anybody can run a copy of the software and download and validate a full copy of this ledger. This ledger needs a way to make sure that if Alice sends money to Bob, that transaction is recorded and the ownership transferred to Bob. This is where mining comes in. A miner groups transactions into blocks. Once transactions are in a block, they are considered cleared and the ownership transfer is complete. What prevents anybody from making up these blocks? A miner must sign the block with a solution to a mathematical problem, in return for a mining reward and the transaction fees. The problem is very hard to solve, but very easy to verify when you know the answer. This means that it takes great effort to group transactions into blocks, so we can trust transactions that are successfully placed into blocks by miners.

Ownership

Every unit of cryptocurrency is assigned to an address, sort of like a bank account. The changing of addresses is recorded in the ledger. If you have a copy of the ledger, you can work out which addresses hold all of the cryptocurrency in existence. When a block is mined, new coins are deposited into the miner's address. From there they can be transferred to other addresses via transactions. A transaction groups a bunch of inputs into outputs. The inputs are the addresses you want to spend the coins from. The outputs are the addresses you want to send the coins to. Any balance that was in the inputs but not sent to an output is considered a transaction fee.

In order to send coins from an address, you need to create a transaction. In order to prove you have the right to spent the coins from an address, you have to sign the transaction with a randomly-generated cryptographic private key. You don't need to personally know the key, the creation, storage, and transaction signing is managed by the software. This private key is only known to you(r software), and is created at the same time an address is generated. It is ownership of this private key that makes you the owner of the coins. If this key is lost, the coins are lost forever. If it is stolen, somebody can act in your name and spend the coins stored at that address.

After sending a transaction, you must wait for it to be mined into a block. This can take from minutes to days, and depends partly on how fast the miners are mining, and also on whether a miner chooses to place your transaction in a block. The biggest factor that a miner uses to determine whether to include your transaction is how much of a fee you pay.

Wallets

Wallets are software that group your addresses into a single place, manage the corresponding private keys, and broadcast any transactions you make to the network. They generally do not show you the balance of individual addresses, but a total balance. When you send a transaction, the wallet software automatically selects some addresses as the inputs, and sends them to your specified outputs. It usually spends 100% of the inputs to new addresses. Any balance from the inputs that is leftover is sent to a newly generated output called a change address that your wallet has generated and has the private key for. Most people discover this point in a panic when they look at their transaction in a block exporter and think their change was sent somewhere else.

----

I think that covers the basics. Let me know if that was TMI or if I can clarify anything. :-)
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Re: Bitcoin/cypto newbie questions

Post by sutebayashi »

Why is monacoin going up again now after I sold it?

More seriously, what do we think of the impact of upcoming futures trading launches on cryptocurrencies? Personally I see futures contracts as providing an easy way to short bitcoins, which in my limited understanding, has not till now be readily possible.
Also the futures will be launched in markets infested with trading professionals.
Things could get interesting, or maybe prices will keep wild and going higher.
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Re: Bitcoin/cypto newbie questions

Post by Jamo »

sutebayashi wrote: Tue Dec 05, 2017 1:44 pm More seriously, what do we think of the impact of upcoming futures trading launches on cryptocurrencies?
Selling any coin now is a waste I think. It's going to explode next year. Futures trading and rumoured ETF launches etc. will give the average investor easier access to crypto, driving demand and an increase in price. It's bad enough now, next year is going to be crazy. Barring any big shocks, we could see btc at 20,000 by early next year. Though we could have a 20-30% correction at any time.
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Re: Bitcoin/cypto newbie questions

Post by N00bster »

If you want to understand why blockchain (and not only Bitcoin) is a game changer, this article does a good job at explaining:

https://hackernoon.com/why-everyone-mis ... 0b0151c169
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Re: Bitcoin/cypto newbie questions

Post by N00bster »

Interesting view about the current frenzy. Would love to hear others' opinions on this:

https://medium.com/@kristopolous/heres- ... a11e0f835b
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Re: Bitcoin/cypto newbie questions

Post by RetireJapan »

N00bster wrote: Fri Dec 08, 2017 6:18 am Interesting view about the current frenzy. Would love to hear others' opinions on this:

https://medium.com/@kristopolous/heres- ... a11e0f835b
My totally clueless take on this is that it's a mania, and momentum will carry on for a while longer :)
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