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Bitcoin Basics, Litecoin Basics, and a Comparison.

Updated on September 8, 2014

Summaries

  • Bitcoins are exchanged by allowing a peer to peer network to decode blocks of data anonymously. This makes them essentially impossible to copy or trace.
  • Bitcoins are paid out to owners of computers that run bitcoin mining clients each time a chunk of data is successfully decoded.
  • Bitcoins are then used online at specific retailers just like money, or sold at exchanges like stocks for money.
  • Bitcoins can also be earned by taking advantage of pay per click sites, called faucets.

Crypto what!?

Cryptocurrency is a digital form of money that relies on often complex cryptography to ensure its own security. They are backed by no bank or government; they only retain value so long as people keep trading them. They are in essence pure, ungoverned capitalism. This is a really scary thing to think about getting on board with. I hope to take some of the terror out of this fancy new toy so that some of us can get some use out of it.

First off, there is no guarantee that bitcoins will retain any type of value; they are not backed by anything physical. Having said that, today 12/9/2013 they have been selling for between 8 and 9 hundred dollars. a few years ago they were selling at less than $200.

Bitcoins are added to the market by paying users who give up huge amounts of processor power to the peer to peer network. Bitcoins are paid out to owners of computers and computer farms that use "Mine" software to decode the large chunks of cryptography that keep the bitcoin network turning. it takes a hefty amount of computer to mine bitcoins using this method. There is a version of bitcoins called litecoins that you can use on a more consumer grade computer, we will compare those later.

Bitcoins are then used just like any currency; there are services and work you can perform to get bitcoins, you can sell things, you can buy things. They even call the system that keeps your bitcoins a wallet.

So how to earn bitcoins?

There are three ways to make money with Bitcoins:selling things, buying coins, or using faucets.

Buying bitcoins takes at least a few thousand dollars now; if you're an investor you can literally buy and sell these things like a day trader; it is an extremely volatile market with only one stock to buy and sell.

Selling products with Bitcoins is exactly like selling products with anything else, with the added fun of the volatility of the value of bitcoins. Most shops set prices higher than the current exchange rate in order to account for any price fluctuation.

The third method is the one we're going to talk about, because most of us reading this blgo are looking for some simple extra income.

First you need to set up your wallet, I STRONGLY recommend you use coinbase.com. It was so easy I felt like I must've missed something. When you've got it done go to account settings, then go to Bitcoin Addresses; there will be a long sequence of numbers and letters, this is your bitcoin wallet adress, where people will send you bitcoins, and receive bitcoins from.

Once this is done you need to find yourself a faucet and get registered. I use VirtualCoin myself. Virtual Coin runs a script that times the payouts of a network of faucets. When you register it shows a coutndown time for the next time you can draw a reward from each faucet on the list.

Would you accept payment for entering captcha codes even knowing it will eventually result in you scalping tickets and creating spam bots?

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The system, the results, and some sad news

The results were largely unimpressive; I make noticeably more immediate income from answering questions on Webanswers. In short you are being paid to do very short manual tasks, mostly entering captcha codes. This forced me to do lots of more research into captcha and how people are making money from it. I discovered some things that made me question the method I was using.

The captcha data links in many of these bitcoin faucets are linked from spam bots from other websites so that bots can create new email addresses and new accounts on websites. That means that accepting payment from a captcha entry may well be helping bots enter legitimate websites and forums posting harmful or worthless spam, or scalp tickets to sporting or music venues. This means that while it is safe for you to use this system to get paid in small quantities of bitcoins, you have to be ok with the fact that you may be helping scalp the first row of tickets to the latest Alice Cooper show.

Pretty much you have to make "drinking" from bitcoin faucets something you do in the background. I would suggest doing something you normally do online and checking into your VirtualCoin account to see whats available whenever you get bored. The cash value of the output I have managed has been below 20 cents daily.

Alternatives!

Litecoin is designed along the same lines as bitcoin. It is designed to have a much longer lifecycle, and so that the code chunks can be decoded by smaller consumer grade computers. This will result in many more litecoins being in circulation. This will lead to a generally more stable price and a longer useful lifecycle than bitcoins. This makes it less of a boon to investors who have the capital to build super computers and to take advantage of the huge prices; but it makes it much more useful to the average joe at home.

The mining process is very specific, heres a link to an excellent mining pool with consistently proven results. There are some things you need to know BEFORE you get started though; most of them are about your computer.

Any mining program you download and run will MAX OUT your computers processor power, this means it will generate LOTS of heat and will draw LOTS of power. You need to make sure your computer is well cooled and that you monitor the heat while you are mining. You can set up your fan system fairly easily to keep temperatures at an acceptable range constantly; most computers will turn off before they fry, but this is not fool proof. Because of the power draw you need to make sure your computer is the only thing on the surge protector as well, or you may be at risk of tripping the breaker.

Mining software makes use of your graphics cards AND your processor. Any upgrade you throw into a computer will make it better at mining, and thereby will get you a greater share of the earnings.

In comparison

Bitcoins are extremely pricy, and difficult to mine. If you have a stellar computer rig or enough money to invest they are an excellent source of revenue. The value fluctuates sometimes a few hundred dollars daily; this instability generally points towards a point at which the market is either going to completely crash, or else stabilize at a likely lower, more usable price.

"Drinking" from bitcoin faucets generaly means taking micro payments for creating spam bots and spoofing legitimate security systems, and the hardware to mine bitcoins is extremely expensive.

Litecoins are not pricy and still very young on the scene. They are designed to be a more manageable product for the average consumer both in terms of mining and buying and selling. The market is liable to move up similarly to bitcoins but with more stability.


All in all my adventures into the crypto currency world have been fascinating; I discovered a whole wealth of new information about the internet world and I managed to make a few bucks. Those of you who can do so, take this prophecy from your friend Jarod; Litecoins will be worth the move, if your internet provider will let you, and you have a fair computer, hop into litecoin mining NOW. Don't wait for the value to skyrocket. It only costs you some time and some extra power and the payoff may be enormous.

Sustainable international currency? Which is your vote, comment why on the blog!

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What should I read next?

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