What is Bitcoins and Blockchains and Cryptocurrencies? Read on and Get the Headlines Here!

A Brief Preface:

chart above showing the development in bitcoin prices from

October 1th 2017 and untilJanuary 9th 2018.

Words like cryptocurrency, e-wallets, blockchain and especially Bitcoin(1) are becoming more and more widely known and used. Some have heard the terms, but don´t really know anything about it -some know a little, but very few knows enough- or at least sufficient to even be able to explain the terms and concepts and pass it on. '

Wether we like it or not, it is not in the grand picture, going anywhere, so I have made an attempt to shorten, simplify and share a little about this bitcoin, what it is and how it largely works. The technology that is the foundation for #bitcoins, the blockchain #technology is briefly described as well. Other cryptocurrencies and more on the topic is in writing and – if anyone is interested- I shall gladly publish on GAG(2)

Bitcoin- The System Explained in Short:

Possessing a certain amount of a currency means possessing the promise that one can collect favors from others in the future whose value is equal to those oneself had to give to others to acquire the amount. Thus, scarcity is a necessary property of anything that is used as a currency. If it could be produced at low cost, devaluation would destroy the trust in this promise. Building upon this property, it is also necessary that the currency can be transferred from one person to another, ideally in any quantity. The transaction mechanism must make sure the currency is correctly transferred in the sense that the overall amount of currency is preserved and that the transaction cannot be reversed later on. We will call this integrity.

For ordinary physical cash, both scarcity and integrity are enforced by the laws of nature, i.e., usage of physical tokens (also, legislation imposes constraints on counterfeit money, theft etc. With electronic currencies however, the amount of currency one possesses is nothing but an account balance. Thus, it requires a financial institution to manage these accounts and enforce scarcity and integrity. Bitcoin has been proposed as a distributed peer-to-peer accounting system accomplishing this without relying on trust in a central authority.

A Bitcoin is represented by a chain of publicly announced transactions every participant of the network is aware of. Each transaction contains a public key signifying the owner of the Bitcoin. It further contains a hash of both the previous transaction and this public key, thereby entangling the previous transaction with the next one. The previous owner signs this hash using his private key. Any user can now validate if the signature of transaction matches the public key of the previous owner. He will only accept the transaction if it does. Thus, knowledge of the private key enables a user to spend a Bitcoin. As long as users keep their private keys secret, this mechanism prevents potential attackers from spending Bitcoins they do not own. Nothing however stops them from spending those they once received twice. What is required to prevent double spending is a consensus on a temporal ordering of transactions among all users. This way, the current owner of a Bitcoin can always be determined. Attempts of previous owners to spend it again can be detected.

The temporal order is established by what is called a block chain. Blocks collect transactions combined with a hash of the previous block, thereby creating a chain. A block is valid only if it exhibits a special property which proves that a certain amount of work has been put into its creation. In particular, blocks contain a nonce value. It must be chosen by the creator in such a way that, when hashing the block, the hash starts with a certain number of zeros. As for an ideal hash function, this can only be achieved by randomly trying many different nonce values. The probability of finding a block depends on the number of trials. It can be adjusted globally by changing the number of leading zeros the hash must have.

Regular adjustments ensure that new blocks are found on average each ten minutes. Via the block chain users collectively agree on the temporal order of transactions as defined by the order of the blocks containing them. Users always believe in the longest valid block chain they are aware of. As long as the majority of users are honest, no single attacker will be in the position to deliver the PoW necessary to change the temporal order to his advantage. Removing a transaction one did an hour ago (i.e., about 5-6 blocks in the past) from the block containing it would not only require recreating this block but also all subsequent ones, since the hash of the altered block is part of the next, and so forth. Thus, it quickly becomes computationally intractable to alter blocks deep within the chain.

To motivate users to participate in creating blocks, optional transaction fees can be paid by users creating transactions to users ironing these into a new block. Furthermore, a special transaction rewards the creator with a certain amount of newly created Bitcoins (in form of a special initial transaction preceding every valid Bitcoin). This rewarding mechanism—called Bitcoin mining—constantly issues new currency. The amount is reduced at regular intervals and will eventually stop by convention. Once stopped, all Bitcoins are in circulation and the system will solely be in the transaction phase (as opposed to the mining phase in which new Bitcoins are created). Consequently, scarcity of Bitcoins is ensured by eventually stopping Bitcoin supply, and integrity is ensured by digitally signed transactions timestamped in a publicly visible block chain receiving credibility by the work invested into its creation.

There is much more to this part, but I have chosen to divide the chapter into 2, simply because I feared the rest of the security related stuff would get too confusing. I will however, gladly supply the rest of my original chapter to anyone that is interested.

The Author:

I thought it might make sense to briefly explain my part in this and why I might be crazy enough to write about this stuff.

I hold a MSc in computer science from DIBU in Copenhagen, though I originally started reading a bachelors degree in psychologi, but made the switch 1½ in. Since 2008 I have furthermore acquired various certifications within cybersecurity, infrastructure and networks. They are CCNA(3) – CCNP(4) – CISA(5) - ECSA((6). I was one of the founders of my present company in 2008. We develop, implement and maintain infrastructure solutions, mainly cloud storage/network and security. I function as CTO and security solutions architect.

In 2011, I got fascinated when learning about bitcoins for the first time, back then NOBODY had a clue -and the more I got into the stuff, the more it fascinated me! So teaming up with a good friend who is a financial controller and expert in start-ups, we began forming a small cryto-company. The first couple of years was mainly minor investmenst and analytic work, consulting for some of the more foresighted businesses around, but in the last couple of years the paste has shifted quite a bit ! We invest in cryptocurrencies and offer safe platforms, wallets etc. for handling them, along with key consulting for start-ups within the crypto area and companies wanting to implement or migrate cryptobased solutions. Lastly I hold seminars and lectures and holds a chair in a tech-company board of directors.

NOTE: The only sources I have used writing this is the original “bitcoin manifest” and my own knowledge of the topic. The manifest I have provided a link for, marked reference 1.

Pictures are with thanks to: www.blockchain.info

1. Bitcoin: A Peer-to-Peer Electronic Cash System, by Satoshi Nakamoto, only published online -2008

2. GAG . Www.girlsaskguys.com -online forum for asking questions and debating
3. Cisco certified network associate (security and network)
4. Cisco certified network professional (security and network)
5. Certified information systems auditor (ISACA- information systems audit and control association)
6. EC-council certified security analyst


Most Helpful Guy

  • After learning about Bitcoin, I really wished I had known about it beforehand and had invested in it when it was first available back in 2011. But who would have been able to foresee the future? I would have had a huge or decent fortune by now, and then I wouldn't have to worry much or at all about any financial problems that I could potentially encounter in the future. Such as another layoff and losing my job or inadequate amount of work hours, etc. But it's also about right timing, because once you have accumulated a huge fortune from something like this, it's time to exchange it back to real assets such as real money use it to purchase things like precious metals, real estate, having a good property to rent out, etc., making a really decent and good amount of passive income consistently would greatly reduce financial worries in the future. In other words, diversifying assets. Having a enough for a comfy and early retirement, with very little to no worries and stress about being fucking broke and homeless one day just because you're out of work, I mean who the fuck would not want that?

    By now, I'm too late in the game. Unless somehow BitCoin re-crashes back to being worth a few hundred or much less first of course, then I'd still have a second chance at buying complete Bitcoins, the last time I had a chance to purchase a complete Bitcoin was last year when it was around $700 to $800, which is when I first learned about it.

    But right now I can't afford to buy a complete one as it costs way more being between $15,000 to $16,0000. Although I can buy smaller units of a single Bitcoin, but do you think it's really even worth it? I'm also considering other alternatives such as Litecoin, any advice you can give me on investing in Cryptocurrencies would be much appreciated.

    • You just voiced the greedy sentiment of the 99% who are poor.

      "Oh, I wish I bought in early", and "I wish it would crash, so I could buy in lower".
      That's exactly what people say, just moments before losing all their money because they are buying into a "get rich quick" scheme.

      Becoming successful does not happen with a single gamble. It is a slow, meandering process that requires a lot of thought and focus.

      If you're only buying in because "everyone else is", you don't really understand what you're getting. I wrote a reply here 5 days ago about some of the crypto risks. Those 5 things are only the tip of the iceberg. Gov't crackdown and banning are the real risks of crypto. Basicallly, governments will not allow their citizens an option to launder money. After China banned cryptos (the place where 95% of cryptos come from), you'd think people would be smarter. When I wrote my response, BTC was 18000 USD, now it is 9000 USD.

      There's your drop. Now buy in if you're still a fool.

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    • @jacquesvol Don't forget about that time with the Ransomware computer virus too, Because those viruses demanded payments in Bitcoin in exchange for returning users' access to their precious and important computer files. Specifically the WannaCry Ransomware.

    • I remember THAT ransomware, indeed.
      I had to format my HDD for another kind of ransomware, 2 years ago.

Join the discussion

What Girls Said 2

  • 7d

    Good written post. Bitcoin is a form of digital currency, created and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people by using some complex algorithm which is called Mining Bitcoin. Also there are many interesting ICO projects. For instance I invested in Keep network ICO after reading the detailed review on https://icopulse.com/blog/keep-network-ico-review/ . There are a few benefits of using Keep Network. It's decentralized transactions confirmation on the main blockchain can use this network. Creation of private wallets for exchange between blockchains. Decentralized encrypted data repositories.

  • I was going to buy but l'm too scared because l have no clue what will happen.

    • The safest way I can think of to buy them is from a local Bitcoin ATM machine. you can find them at http://www.coinatmradar.com

      You'll need the right stuff to safely secure any Bitcoin or Cryptocurrencies though, such as any of the following:

      Trezor https://trezor.io/

      or a Ledger Nano S https://www.ledgerwallet.com/

      or Keepkey https://www.keepkey.com/

      But it's really not worth it anymore since we had all missed the window of opportunity, unless Bitcoin somehow re-crashes low enough, otherwise you'll only be risking large sums of money for smaller gains, unlike how when in the beginning, people can risk a smaller sum of money on buying multiple complete Bitcoins, because now, we'd only be able to afford units of a Bitcoin rather than a complete one.

What Guys Said 4

  • There are some major underlying problems with bitcoin. The obvious one being hacks. The second being that it is vulnerable to being banned by a country (China has banned it), or made illegal as a criminal offense due to its original use of being used to launder money and purchase illegal items on the dark web/silk road.

    Most bitcoin fanatics are young, and too young to recognize an obvious bubble forming. Bitcoin has no inherent value. It does not create jobs or new wealth. Bitcoin buyers and sellers are simply moving the same money back and forth.

    The REAL problem with bitcoin right now is that 95% of the currency is mined in China, and by a handful of mass-miners. There is a real problem when a single entity holds most of a commodity. They have the leverage to influence/manipulate the market value.

    People ignorantly think that "bitcoin's value is going to skyrocket". What is ACTUALLY happening is that the Chinese bitcoin miners simply aren't selling their bitcoin. They have held onto them, letting the hype grow. When you see huge drops in BTC value like around Christmas time, it was the result of those Chinese miners offloading huge quantities of their coins. This essentially funnelled massive amounts of USD into China. Then they wait for the price to rebound, and unload more and more coins. Americans are basically giving billions of dollars to the Chinese for nothing.

    There is another problem with crypto and that is the trading platforms. Many trading applications allow instant buying at any quantity. But in many countries and for many apps, you cannot sell instantly. It can take hours or even days to confirm a sale. Given the volatile price, not confirming a sale for an hour or day can make a huge difference.

    The other problem with trading apps is that many have a "sell limit". You can buy $1 million in BTC in an instant. But some apps have a selling limit of $1000. Meaning it will take you 3 years to sell $1 million in BTC.

    This obviously allows money to flow IN to cryptos, inflating the value - but it does not allow money to flor OUT of cryptos. And that's why the price is going up like the way you see it.

    There's no such thing as a get rich quick scheme that works. No doubt some early adopters have made money. But people buying in now are fools following the sheep.

    • Russia too banned the Bitcoin and France thinks about banning it.

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    • @DanishSaint Any idea how many Bitcoins have already been mined or generated by now out of the 21 Millions supposed limit? regardless of difficulty it's still in the favor of those that have the resources to finance and fund an operation like this:


      And if those devices are all the Antminer S9, that's going to be one expensive electric bill PLUS the costs of all of those devices. No average folks can do something like this, and with a massive operation like that they easily would receive hundred, or thousands if not hundreds of thousands of complete Bitcoins by now.

      Check the other messages I sent you earlier and get back to me when you get the chance.

    • Another problem:
      "A giant botnet is forcing Windows servers to mine cryptocurrency

      The Smominru miner has infected at least half a million machines - mostly consisting of Windows servers - and spreads via the EternalBlue exploit":
      Some are getting rich, that way but who pays it? Btc owners

  • The Biggest Risk of Investing in BitCoin is it’s instability. You do not know, whether you are going to get huge profit or huge loss.

    Only invest in BitCoin what you can afford to lose. Definitely people are making really good profits out of BTC trading / mining. But still you never know when this BitCoin bubble will burst and your all investment goes to ZERO.

    It is always adviseable to diversify your risk, and invest in multiple crypto currencies instead of putting your all eggs in one basket.


    Risk is always associated with it.

    It's only recommend for Risk Takers.

    Alibaba founder Jack Ma said that he doesn't have much interest in bitcoin. In a new series, the CEOs of Chinese e-commerce giants because they are knowing what is future of Bitcoins.

    In today morning I was reading this news.

    • One thing first and foremost that applies regardles if its commodities, stocks, squirrels or government low-risk bonds; Never invest money that you ultimately can't afford to walk away from! Always keep in mind, that no matter what kind of investment you go into, that is the first rule and most important rule! Investing money is ALWAYS combined with risks, no matter how likely.
      Second; you mention some of it yourself; never put everything on one board! Spread out a little, if the figure you are investing are sizeable, consider using two-way diversion- but always go by a rule of thumb; The bigger the risk, the lower percentage of the total ! Stocks and bonds-wise you normally go with something like 60-40 or 70-30, putting a larger sum into the safer bonds and the other into stocks. Then you can graduately start to reverse the percentages over a couple of transactions if you have build a fairly good baseline for your stocks !

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    • @JudgmentDay


      Thanks for sharing. I inquired from few friends in India associated with this field. Bitcoin ATM operators need to adjust the limits on deposits and withdrawals according to AML/KYC standards applicable in the jurisdiction where their ATMs are placed. In some countries / states this requires a money transmitter license.

      I appreciate your opinions.

      Check out this articles.



      Thanks for links.

    • @Being_a_good_Indian it's better that they have regulation than not, the system was meant to be an alternative way to send and receive payments as well as an investment opportunity, but like I said to you earlier that window of opportunity is largely gone when it comes to Bitcoin, and should and if it ever re-crash low enough to very low like when it first was or a few dollars worth, then it would be worth the money and risks again, but for now, the only thing to consider are other alternate cryptocurrencies that are pennies or a few dollars worth, when it comes to taking chances of getting a return on investment and profits on them.

      They still haven't sorted out all of the tax laws etc. when it comes to cryptocurrencies yet although I hope they will, or at least specifically for when investors cash them out back into real currency and assets. Like I said it wasn't meant to be abused but because of the pseudonymous nature of them, they are attractive to criminals.

  • Bitcoin is a scam where you provide your computer hardware's capacity to calculate unknown algorithms what is seemingly necessary for someone, and that someone is rewarding the jackass greedy people with Monopoly money. Bitcoin is basically one calculator, ran by the largest hardware ever connected together to calculate unknown calculations, algorithms for some unknown people. But if something is ran this shady way, that thing cannot be good. It's shady, it's all about greed and no one really knows what your hardware is calculating. Maybe you're just giving life to an A. I., aimed to kill mankind, or you're running decrypting calculations for a foreign intelligence agency. Who knows what these miner hardware are actually calculating.

    • @Guardian412

      "Maybe you're just giving life to an A. I., aimed to kill mankind.."
      Or giving your savings to very human smart crooks.

    • @jacquesvol obviously the internet black market likes cryptos as they had made exchanging illegal services and goods easier than ever before.

  • They are or became a Ponzi scheme
    Others think it too:
    The Rise of Cryptocurrency Ponzi Schemes - The Atlantic: www.theatlantic.com/.../
    Bitcoin is a Ponzi scheme: The Internet currency will collapse. www.slate.com/.../...t_currency_will_collapse.html
    Paul Krugman on Trump, Fed, and bitcoin www.businessinsider.com/paul-krugman-on-trump-the-fed-and-bitcoin-2017-12
    Krugman is a Nobel Prize laureate (Economy)

    • Bad news:
      Bitcoin speculative bubble is bursting and has a long way to fall, economists warn: www.theguardian.com/.../bitcoin-speculative-bubble-bursting-long-way-to-fall-economists-warn

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    • @jacquesvol The location is very critical. I have a few that I could ride a bike to, but here's the thing, here's the catch: some of them have fees for both buying and selling (cashing out) and some of those fees can be high, and as well as cash out limitations on how much cash you can withdraw from them in one day, some atms you can only buy but does not support cashing out from, and even buying has limitations, you can't deposit too much. the fees can be for both buying and withdrawal.

      So like I said, we're too late in the game, if you want to risk it, you'll have to get a hardware wallet made for cryptos for maximum protection and defense against hackers and thieves:

      Trezor https://trezor.io/

      or a Ledger Nano S https://www.ledgerwallet.com/

      or Keepkey https://www.keepkey.com/

    • Wow, wow, wow... hold your horses man!
      Just need to get one thing a little clearified here: Bitcoin is NOT a ponzi-scheme, no.
      Two very simple reasons why:
      Bitcoin is tradeable; they are NOT confined by 3. part and anyone can both win or lose money just the same if trading/bying bitcoins.
      A Ponzi-scheme is not in effect, when there are basis for 1. Consolidating funds at any time without the interaction of a 3. party. (man or machine, that one I´ll give you)
      2. Ponzi-schemes are constructed a bit like gravity; it works in one direction - and it simply doesn't allow the extend of randomization that bitcoin partially functions by. This would be the worst ponzi in history, mainly because NOBODY has any control of the rate or the flow, nor the direction of the money stream.