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For a newbie like me, I am still confused about how this bitcoins works. And I don't mind if someone can help me get a clear sight on how this thing works.

Thanks

marked as duplicate by chytrik, KappaDev, RedGrittyBrick, Andrew Chow Mar 12 at 18:25

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    How do you profit from dollars? – Pieter Wuille Mar 11 at 19:55
  • Thanks @TEV I was thinking it was an investment – leo Feliciano Mar 16 at 15:17
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Your question, “How do I profit from bitcoin?”, suggests that you have read some of the disinformation about Bitcoin that is to be found in the media.

Bitcoin is often described wrongly as an “investment”, which is absurd because it doesn't sell goods and services and therefore cannot generate a revenue stream. Also. you can't build anything on a bitcoin balance, so a property developer's definition of “investment” does not apply either. Bitcoin is just ten years old, and its novelty has attracted speculators, some of who made money by speculating that its price would go up as it grew more popular. You might therefore describe bitcoin as a speculative asset. The Bitcoin White Paper says its purpose is to be electronic cash.

You might speculate that its price is going to go up from its present value, but seeing as you freely acknowledge that you don't understand it, your speculation would be pure guesswork — gambling in fact. Among those who do understand Bitcoin, some expect its price to go up, and some expect its price to go down. Whom do you believe?

So, successful speculators have profited from bitcoin, and unsuccessful speculators have suffered losses. Can anyone else profit from bitcoin? I can think of two examples, traders and exchange operators. Successful traders make money from bitcoin using the same techniques that they use to make money from the forex markets, the stock markets, the oil market and so on; but very few people have the skill and self-discipline to trade profitably. If you don't have a solid understanding of derivatives in some other market, you're unlikely to succeed as a bitcoin trader. Bitcoin exchange operators make their money by providing a similar service to the people who run stock exchanges: they earn fees for connecting buyers and sellers.

If you don't own any bitcoins, and you're thinking of buying, I suggest you hold back until you've got your head around the following:— The statement “I own 0.25 bitcoins” is really just a short way of saying “I have a private key that lets me sign withdrawal transactions affecting a Bitcoin address where the present balance is 0.25 bitcoins.” (The 0.25 might be spread over multiple addresses, but you get the idea.)

You say you want to “get a clear sight on how this thing works”, so here's another suggestion:— If you can send cryptographically signed emails (and validate the signatures on cryptographically signed emails that other people send to you), then you will be off to a good start. Asymmetric cryptography is an astonishing invention that has changed the world in many ways, with Bitcoin being just one of them.

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