Top Bitcoin Tips
Although Bitcoin makes moving money across the internet incredibly simple and can be an excellent investment opportunity, the system is unique and thus it’s important that you know what you are doing. As a digital currency, Bitcoin is different from fiat currencies in that no one controls it and the bitcoins instead are produced by lots of people running computers around the globe that are programmed to solve specific mathematical problems. Thus, as a bitcoin user, there are certain things to keep in mind in terms of strategic planning, investment decisions, and general security issues. Whether you are new to Bitcoin or have been at this awhile, here are some tips to help you maximize your efforts in your Bitcoin venture.
- Have a plan: Whether your strategy involves mining or trading bitcoins, it’s a good idea to have a framework in place before you get started. This will provide a framework whenever you need to make decisions concerning trade-offs between risk and reward. For instance, deciding whether bitcoin will be a short or long term investment for you will help you determine how much risk you want to take on.
- If you plan to mine, join a pool: Since bitcoins are awarded in blocks (usually 50 at a time), unless you get extremely lucky it’s difficult to see any of the reward, at least until you’ve been going at it for a while. In a pool, you are given smaller and easier algorithms to solve, and when your work is combined with that of other miners in the pool, you are much more likely to solve the bigger algorithms and share in the reward with the other pool members. In a mining pool, bitcoins are spread throughout the pool based on contributions, and thus you will be able to make a more consistent amount of bitcoins and be more likely to receive a good return on your investment in a mining pool environment.
- Make security a priority: Bitcoin gives owners 100 percent control over their funds, which is a great power but also a wieldy responsibility. When weighing security options, it’s important to keep in mind that Bitcoin does not work like a credit card. Thus, if you are hacked or otherwise lose money due to fraudulence or theft, that money is gone and there is no way to reclaim it. Since there is no central authority governing Bitcoin, there is no one policing the system, and thus the security of your assets is going to be ultimately up to you.
- Keep your savings offline: Although the security of online digital wallets has been significantly improved following a series of incidents where web wallets were hacked and subsequently emptied, if you have any significant savings, they should be stored in a safe offline location (often called “cold storage”). Although web wallets are convenient, they should be used similarly to how you carry cash in your wallet: containing small amounts that you will be using in the near future. If you only keep a small amount of spending money in a digital wallet and it gets hacked, this will effectively limit your loses.
Many speculators predict great things for bitcoin miners and investors in the future. With a little research and a few precautionary measures, you are much more likely to benefit from any participation in this relatively new technology.