Bitcoin is a digital asset designed by its inventor, Satoshi Nakamoto, to work as a currency. It is commonly referred to with terms like digital currency, digital cash, virtual currency, electronic currency, or cryptocurrency.

2. Bitcoin exchange: Bitcoin's price hit a new record this week, soaring above $15,000 on
Thursday morning. The price has been a roller coaster since then, with the price briefly dropping
to $9,000 later on Wednesday before regaining much of its lost value in recent days.
FURTHER READING
How bit coins became worth $10,000
The currency's astonishing gains—it was worth less than $1 in early 2011—has caused a lot of
people to wonder if they should be paying attention to the technology. Coinbase, a popular
service for trading dollars and bitcoins, now says it has more than 13 million users. While almost
everyone has heard of Bitcoin at this point, many people are fuzzy on the details: what is a
bitcoin, exactly? How do I buy some? What would I use it for?
We're here to help. Read on for a beginner's guide to bitcoin. We'll explain what Bitcoin is, how
it works, and what ordinary people should know about the technology.
1) What's a Bitcoin?
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Chris Ratcliffe/Bloomberg via Getty Images

3. The term Bitcoin actually refers to two different things. Capital-B Bitcoin is a payment
network—like MasterCard is a payment network. Lower-case bitcoin refers to the currency of
the Bitcoin network—much like MasterCard uses dollars in the United States.
Difference between bitcoin and PayPal
What makes Bitcoin different from MasterCard, PayPal, and other payment networks that existed
in 2008 (when Bitcoin was invented) is that Bitcoin was the world's first payment network that's
completely decentralized. The MasterCard network is operated by MasterCard Inc., but there's
no Bitcoin Inc. in charge of the Bitcoin network. Rather, it's a peer-to-peer network that
maintains a shared transaction ledger called the blockchain.
Inventing a new currency was an unavoidable consequence of making the Bitcoin network fully
decentralized. On a conventional payment network, the network owner promises to redeem
balances for conventional currencies like dollars or euros. But there's no Bitcoin company, so
there's no one to guarantee that Bitcoin balances will have any particular value. Instead, bitcoins
float against conventional currencies, with their value determined by supply and demand.
Physical appearance of bitcoins
And no, those physical "bitcoins" you see in a lot of pictures aren't what a bitcoin "really" looks
like. Bitcoins are just entries in the Bitcoin blockchain. If you own some bitcoins, that means you
have some cryptographic private keys stored on your computer, on an external drive, or printed
out on a piece of paper somewhere. These keys allow people to spend bitcoin balances in much
the same way that the password to your bank's website allows you to spend the balance in your
bank account. But you can't withdraw bitcoins from the network the way you withdraw physical
currency from your bank.
2) If Bitcoins aren't tied to a conventional currency, how did
they get so valuable?

4. Enlarge / Notice that this chart has a logarithmic Y axis.
Bitcoincharts
Good question! When the Bitcoin network was first created in 2009, bitcoins were barely worth
anything. Bitcoin lore holds that the very first real-world Bitcoin transaction occurred in May
2010, when one early Bitcoin user paid another user 10,000 bitcoins for two pizzas. At the time,
Bitcoins were trading for less than a penny each.
But as the Bitcoin community grew, the currency's value steadily climbed. By the time I started
paying attention to Bitcoin in April 2011, its value had climbed to $1. This was at the start of the
first great Bitcoin bubble. Media coverage of Bitcoin attracted new users, which caused the price
to rise. The rising price, in turn, attracted more media interest. The value rose to more than $30
by June, before it crashed and fell to $2 before the end of 2011.
This cycle repeated two more times in 2013. In May 2013, Bitcoin's price briefly rose above
$250, before falling by about 80 percent. Then in late 2013, Bitcoin's price rose above $1,000
before once again crashing by 80 percent. The current boom—which has taken the currency from
a low of $200 in early 2015 to a high above $10,000 in recent days—is the fourth major Bitcoin
boom.
Each of these booms—and, for that matter, most bubbles throughout history—has been driven by
the same basic publicity-price feedback loop. As an Internet writer, I've seen this process first
hand. During times when the price is rising, there's a lot of traffic to be had writing about
Bitcoin, so reporters like me write articles (like this one!) about it. The articles cause more
people to pay attention to the currency, and some of those people decide to buy. That pushes the
price up even more, triggering more media coverage and more public interest.
Bootstrapping process
This bootstrapping process has achieved something that most people—including me—would
have thought was impossible a decade ago: a valuable currency that's neither backed by a
commodity like gold or silver, nor by a powerful institution like a government or bank. On one
level, Bitcoin's value is rising simply because more and more people are betting that its value
will continue to go up over time. The question, of course, is whether they're right about that.

5. 3) Why would I want to use Bitcoin?
Enlarge / A Bitcoin ATM in Albuquerque, New Mexico.
@99Piloto
Honestly if you're an ordinary American consumer, you probably wouldn't. Despite years of
effort, Bitcoin startups haven't had much luck building payment applications that ordinary people
find useful.
One of the most often-discussed applications for the Bitcoin network is international money
transfers. Conventional financial networks like Western Union and Moneygram are expensive,
and it can often take a long time for money to go through. In theory, a Bitcoin-based money
transfer system could be cheaper and faster.
In practice, however, Bitcoin has struggled to gain traction as a platform for remittances. One
way to see this is by looking at the prices charged by Bitcoin ATMs, which allow people to
exchange cash for bitcoins and vice versa. The average transaction fee for a Bitcoin ATM—at
least according to one website that tracks these things—is currently around nine percent for
buying bitcoins and six percent for selling them. So to send money to an overseas friend or
family member using Bitcoin ATMs, you could wind up paying transaction fees as high as 15

6. percent. That's on top of the transaction fee charged by the Bitcoin network itself, which
has averaged around $5 in recent weeks.
Popularity and making bitcoins easy to use
There are a number of companies working to improve the experience of making international
payments using Bitcoin, especially in Asia. These companies may eventually figure out ways to
make payments fast, convenient, and affordable—but they haven't achieved critical mass yet.
Bitcoin has also shown enduring popularity with illicit transactions. A succession of
underground websites have popped up on Tor to serve as a kind of eBay for illegal drugs. These
sites rely on Bitcoin because they would immediately get shut down if they tried to get accounts
on conventional credit card networks. But no one has the power to block anyone from using
Bitcoin.
There is also anecdotal evidence that Bitcoin is popular in countries
like Argentina and Venezuela with unstable currencies or dysfunctional financial systems.
But if you're an ordinary person in the United States or another rich Western country and you
don't want to buy drugs or speculate on Bitcoin's future value, Bitcoin might not have much to
offer you—at least not yet.

7. 4) If Bitcoin has few practical applications, how can it be
worth $150 billion?
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Andrzej Barabasz
One possibility is that Bitcoin speculators are simply delusional and Bitcoin's price will
inevitably plunge. There are other possibilities, however.
One is that the Bitcoin economy is still in its early years. It took the Internet about 25 years to go
from being an experimental technology—ARPANET in 1969—to becoming a mass market
phenomenon—Netscape in 1994. Bitcoin is a comparatively young technology, having been
around for less than eight years. It's possible that Bitcoin will eventually become a key part of
the global financial system—it will just take another five, 10, or 20 years to work out exactly
how to apply the technology in useful ways.
It's also possible that Bitcoin will have important applications that are not consumer-facing. For
example, the Bitcoin network charges roughly the same transaction fees whether you're sending
$10 or $10 million, so Bitcoin could become a standard way to move large sums of money
overseas for international trade or investment. Big companies are conservative institutions, so it
might take several years to build the infrastructure necessary to support these kinds of
transactions—and then several more years after that to convince companies to make a switch.

8. Bitcoin exchange
Another reason for optimism: Bitcoin is becoming the reserve currency of a broader
cryptocurrency economy, much as the dollar is the default currency in global trade. Bitcoin has
deeper markets and more sophisticated bitcoin exchange services than other cryptocurrencies.
So people wanting to buy any one of the dozens of lesser-known Bitcoin competitors often first
trade their dollars in for bitcoins and then swap their bitcoins for dash or litecoins or whatever.
As the broader cryptocurrency economy grows, it pushes Bitcoin's value upward.
A final possibility is that Bitcoin could primarily become a store of value much like gold. Gold
has practical uses in industrial applications and jewelry. But most of the world's gold is kept in
vaults and under floorboards as a long-term means of storing wealth. People like to hold gold
because it is compact, easy to conceal, and exists outside of conventional financial systems.
Bitcoins have similar advantages. You can store millions of dollars' worth of bitcoins on a thumb
drive or even a piece of paper. As long as the encryption keys are secure, bitcoins can't be seized.
Bitcoin also has a big advantage over gold because it can be transferred around the world
electronically.
5) OK, I'm sold. How do I get some?
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9. Thomas Trutschel / Getty Images News
Before we answer that question, we want to emphasize that investing in bitcoin is insanely risky.
Bitcoin has been known to lose 80 percent of its value in a matter of days. And while bitcoins
recovered their value after previous crashes, the price is much higher today. There's no guarantee
that Bitcoin will recover after its next crash. So please don't invest money you can't afford to
lose.
That said, acquiring some bitcoins is pretty easy. To do this you go to a site called a Bitcoin
exchange and set up an account. Bitcoin exchange is an amazing portal. You then send dollars
(or whatever currency they use in your country) to the account using an electronic bank transfer
or similar mechanism. Once the money arrives in your exchange account(bitcoin exchange) , you
can trade dollars for bitcoins at the current market price.
Storing bitcoins
Once you have your bitcoins, an important question is whether to leave the deposit with the
Bitcoin exchange or withdraw them into your own custody. There are several ways to store
bitcoins yourself. You can store the encryption keys on your own hard drive. Or can store them
on a Web wallet app that encrypts them client-side using a customer-supplied password. Also
you can print out the encryption keys onto a piece of paper and store the paper (hopefully
multiple copies) in a safe place.
Risks associated with bitcoins
All of these options have risks. If you leave your money on deposit with the bitcoin exchange,
the risk is that the bitcoin exchange itself will lose your bitcoins due to hacking,
mismanagement, or fraud. In 2014, the then-biggest Bitcoin exchange, called Mt. Gox, declared
bankruptcy after millions of dollars in bitcoins were stolen by hackers. Other early Bitcoin
services simply disappeared from the web, taking customers' bitcoins with them The Bitcoin
economy doesn't have anything resembling FDIC insurance, so if your bitcoin exchange loses
your bitcoins or goes bankrupt, you might be out of luck.
On the other hand, bitcoin exchange have matured significantly since 2014, and holding bitcoins
yourself is risky, too. If someone puts bitcoin-stealing malware on your computer, you could lose
your bitcoin regardless of how you store them.
In short, there's no completely safe way to hold on to bitcoins, and technical newbies are at
particular risk. Investors in Bitcoin are at much greater risk of losing their investments to
accidents or thefts than investors in conventional assets like stocks and bonds.
6) I just made a killing! How do I cash out?

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Getty Images | Jonathan Kitchen
If your cash is still deposited at a Bitcoin exchange, you just execute another trade to convert
your bitcoins back to dollars at the new—hopefully higher—price. Then you withdraw the funds
to your bank account.
The bitcoin market is very liquid, so unless you have millions of dollars in bitcoins, cashing out
won't be difficult. Major bitcoin exchange do have daily dollar withdrawal limits to minimize
fraud, however. So, if you sell thousands of dollars' worth of bitcoins, it might take a few days or
weeks to transfer the cash into your conventional bank account.
We've seen some people argue that Bitcoin's $150 billion market capitalization isn't real because
people can't cash out all of that value simultaneously. But that's not true actually. The same basic
point applies to any asset. If Jeff Bezos tried to sell all of his Amazon shares at once, the stock
would crash. But people still say he has a net worth of nearly $100 billion. There's enough
liquidity in Bitcoin markets that all but the very wealthiest Bitcoin holders can quickly and easily
convert their holdings to conventional currency(via bitcoin exchange). And even the wealthiest
holders could cash out their holdings gradually over time if they wanted to.
7) Is it true that Bitcoin wastes a ton of energy?

11. Enlarge/ Emissions rise from smokestacks at Pacificorp’s 1,000MW coal-fired power plant on
October 9, 2017 outside Huntington, Utah.
George Frey/Getty Images
Yes. The Bitcoin network maintains its shared transaction ledger, called the blockchain, using a
computationally intensive process called mining. Miners compete with each other for the right to
add blocks to the blockchain—each comes with a reward of 12.5 Bitcoins—or around $125,000.
Because electricity is the biggest cost for Bitcoin mining and this is a competitive market, we
should expect miners to keep spending more and more money on electricity until electricity
spending is on par with the size of the block reward. One back-of-the-envelope
calculationsuggested that each Bitcoin transaction uses 271kWh of electricity—enough to power
a typical American home for nine days.
Bitcoin Networks
The Bitcoin network generates blocks at a rate of about six per hour, and mining a block takes
essentially the same amount of energy whether it contains one transaction or 2,000 (the current
average). And for a given bitcoin price, it would take roughly the same amount of energy if,
someday, the Bitcoin network is processing tens of thousands or even millions of transactions
per block.

12. Energy and bitcoin minng
This means that we can't save energy by reducing the number of bitcoin transactions. And
increasing the number of bitcoin transactions doesn't directly increase energy consumption. What
does cause Bitcoin's energy usage to rise however, is when Bitcoin's price goes up. A higher
price means the 12.5 bitcoin reward becomes more valuable, and so miners spend more resources
to capture the larger prize.
Fortunately, this is a problem that will solve itself in the long run. The per-block reward halves,
in Bitcoin terms, every four years. It has fallen twice—it started out at 50 bitcoins in 2009—and
is scheduled to fall to 6.25 bitcoins per block some time in 2020, then to 3.125 bitcoins per block
around 2024. As the per-block reward falls, the network's energy consumption will fall
proportionately.
So it's true that the Bitcoin network is an environmental disaster. Using vastly more energy per
transaction than any other payment network. However, we can expect the network to become
less wasteful. Aat least on a per-transaction basis, in the coming years and decades.
Have further Bitcoin questions or bitcoin exchange? Ask away in the comments for now, and stay
tuned to Pakistaniupdates as we continue to follow the cryptocurrency.
bitcoin exchange and tricks.