Day 28 – Bitcoin Fees

I started the 100 Days of Bitcoin series to chronicle an experiment where I “invested” about $50 worth of bitcoin in a site offering 10% daily interest. For more info I suggest reading the first post. You can also take a look at the whole series.

Fees Inherent to Bitcoin

The topic of Bitcoin fees is closely tied to the topic of mining. I described Bitcoin Mining on Day 21.

You may recall that every Bitcoin miner (banker in the analogy from Day 21) can choose which transactions to include in a block.

To encourage a miner to include their transaction, the sender can include a voluntary fee. The miner receives the fee or sends it to the address of their choice.

The difficulty of signing a block depends on its size, so miners typically choose what transactions to include based on the fee divided by the size of the transaction.

A simple transfer of bitcoins is between 200 and 300 bytes (think letters). So the fees for them are fairly low.

The fee itself and its amount are both voluntary. The transactions with higher fees get included faster. Bitcoinfees.21.co tracks how long, on average it takes for a transaction to be included in a block.

Here are some examples, based on a 250 byte transaction:

  • Ƀ 0.00000000: 90 minutes or more, perhaps never
  • Ƀ 0.00000300: Up to 4 hours
  • Ƀ 0.00013000: Up to 1 hour
  • Ƀ 0.00018000+: In the next block created, usually up to 20 minutes

That doesn’t seem like much, but it adds up. As I am writing the most recent block is 441777 which contains 1104 transactions totaling Ƀ 0.35830617 in fees.

Purchase Fees

The voluntary fee discussed above is the only fee for transferring Bitcoin from one address to another. However, you may pay other fees for buying or selling Bitcoin.

Exchange Fees

I am using Bitcoin exchange Coinbase  which charges about 1.5% for US customers to exchange between Bitcoin and US Dollars. There are additional fees for using credit cards, PayPal, and wire transfers.

The downside to using an exchange is that it can take up to a week to deposit by electronic check. Credit cards are faster, but there are additional fees to pay the credit card company.

You can help me maintain this site by using this address to open a Coinbase account, at no additional charge to you.

https://www.coinbase.com/join/58070af9ff90ca0148668c77

Alternative Sources of Bitcoin

There are less formal ways to buy bitcoin. I will do a whole article on these in the future. For now it is sufficient to say that if you want to obtain bitcoin quickly it will cost you at least 15-20% and potentially much more.

If you want to put in the effort, you can also sell your bitcoin using some of these methods and collect some or all of the fees.

 

Day 26 – The End of the Beginning

I started the 100 Days of Bitcoin series to chronicle an experiment where I “invested” about $50 worth of bitcoin in a site offering 10% daily interest. For more info I suggest reading the first post. You can also take a look at the whole series.

The Experiment is Over

The original bitcoin experiment that I took on for 100 days is basically over. The site went down on Monday for a while then came back up. It was there for 3 days before going down again. In the meantime they didn’t process any of my withdrawals.

I will keep watching, but I am assuming at this point that the site is gone and that it was, as I suspected, a scam from the start. If it doesn’t come back up in a week then I will share the identity of the site.

But I am Not Finished

I will continue to post what I am learning about Bitcoin. I won’t be posting daily, but I will post 2-3 times per week.

I have learned lots that I still want to share, so keep an eye out.

In the next few days I will post about Bitcoin fees, Bitcoin Wallets, and Bitcoin mining as an investment.

 

Day 25 – A Second Attempt

I started the 100 Days of Bitcoin series to chronicle an experiment where I “invested” about $50 worth of bitcoin in a site offering 10% daily interest. For more info I suggest reading the first post. You can also take a look at the whole series.

 Too Good to be True, Again

At one point I took some of the returns from my main experiment and used it for a different one.

This new site is promising a mere 3.3% per day. I “Invested” Ƀ 0.01 on Day 16 and withdrew everything on Day 23.

I received Ƀ 0.00222364 in profit. Unlike the main experiment site, this site allows the withdrawal of the original balance, but with a 10% fee. So, I also got back Ƀ 0.009 of the principle.

Overall I “earned” Ƀ 0.00122364 profit, or about 12.2%. That makes a 622% annualized return over 7 days.

So Why did I Stop?

I realized that I wasn’t taking money from the potential scammers. I was actually taking it from their victims.

I know that the victims will be duped whether I get a piece of it or not, but after 23 days of thinking about it I decided that I don’t want to do that anymore.

My main experiment site doesn’t have an option to withdraw my deposit. This one did, so I got out.

What is Coming

I have found a few ways to make money with Bitcoin that appear legitimate. I will be writing about some of them in the coming days. I will also continue posting the progress of my main experiment.

 

Main Experiment Results

I am still waiting for the withdrawal that I requested on Tuesday.

Day 24 – What is Going On

I started the 100 Days of Bitcoin series to chronicle an experiment where I “invested” about $50 worth of bitcoin in a site offering 10% daily interest. For more info I suggest reading the first post. You can also take a look at the whole series.

 What Happened?

Yesterday I posted saying that the site I am investing on was down.

Later on it came up again. I learned that there was a major cyber attack in Europe and it shut down a lot of sites for a large part of the day. For now, I am cautiously assuming that that was the entire problem.

I am pressing on for now. But, I my best guess is that this will collapse in the future.

Results

I don’t count results until the daily withdrawal is actually in my Bitcoin wallet. So, I don’t have my usual numbers to show right now.

Yesterday, after the site came up I had Ƀ 0.04249742 in my account. I started my daily withdrawal. As of this morning (about 8 hours later) it was still in a pending status. In the past withdrawals have only been pending for a few seconds.

When I returned to the site later today, yesterday’s withdrawal had been completely canceled. That is a yellow flag, but may be a decision that was made due to all of the other technical issues yesterday.

This afternoon my account had Ƀ 0.07526018. Once again I initiated a withdrawal, and once again it is stuck on pending. If it goes through later today I will post an update. If it isn’t until tomorrow then it will be in tomorrow’s post.

 

Day 23 – Is This The End?

I started the 100 Days of Bitcoin series to chronicle an experiment where I “invested” about $50 worth of bitcoin in a site offering 10% daily interest. For more info I suggest reading the first post. You can also take a look at the whole series.

No Results

I signed in to do my update today. The site that I have been using is down.

That means one of two things:

  1. The site is just down and will come up late; or
  2. This experiment has come to an early, though not unexpected, end.

Its too soon to be sure, but my confidence isn’t high that we will be continuing.

So, what now?

If the site comes up later then I will post an update with today’s results.

Whether it does or not I will continue posting in the coming days.

 

Day 22 – It’s Black Sunday

I started the 100 Days of Bitcoin series to chronicle an experiment where I “invested” about $50 worth of bitcoin in a site offering 10% daily interest. For more info I suggest reading the first post. You can also take a look at the whole series.

In the Black

It is two days after Black Friday in the United States.

Historically if you take the total expenses for a retail business for one year and compare them to sales. The sales for the year exceed the annual expenses on the day after Thanksgiving. In accounting red numbers are sometimes used to represent losses and black numbers are used for profits. So, the day after Thanksgiving is the day that the ink turns black, hence the name Black Friday.

That was two days ago. Today, my bitcoin experiment is profitable for the first time, its in the black. So, for me today is Black Sunday.

Anecdotally: I have now made Ƀ0.00275529 with an investment of Ƀ0.07 in 22 days. That alone makes this fairly profitable as investments go at an annual rate of return of 65%.

What is Coming

In the last three weeks I have been learning about Bitcoin. While the investment I have been writing about might be legitimate, it looks too good to be true.

Still, I have been looking at other opportunities related to Bitcoin and other digital currencies. I have even invested in a few of these. Some of them, like this, may appear too good to be true. Still others look like they are realistic and sustainable investments.

In the next two weeks I will be writing about some of these. I won’t be giving a daily update like I have this original venture, but I will give periodic updates.

The more reputable ones I will even be letting you in on the details so that you can participate with me if you wish.

Results

“Earnings”: Ƀ 0.03759954 ($27.44)
Reinvestment: Ƀ 0.03007963 ($21.95)
Withdrawal: Ƀ 0.00751991 ($5.48)
Net GAIN to Date: Ƀ 0.00275529 ($2.01, 4%)

Day 21 – Bitcoin Mining

I started the 100 Days of Bitcoin series to chronicle an experiment where I “invested” about $50 worth of bitcoin in a site offering 10% daily interest. For more info I suggest reading the first post. You can also take a look at the whole series.

Mining Digital Currency

It is easy to understand how to mine gold. You can dig for it and find it in the ground. But, no one has ever found raw bitcoin in the dirt.

So if bitcoin doesn’t exist physically, how can it be mined?

To answer that I am going to need to get a little technical, but I will try to only go as deep as needed.

The Blockchain

There is a master record of all bitcoin transactions that have ever happened, it is called the blockchain. You can think of the blockchain as an old bank ledger written on paper.

If the blockchain is seen as a ledger then each page of the ledger in Bitcoin terms is called a block.

Transactions

Extending the bank analogy from above…

When I send 0.00529421 from my “investment” to my bitcoin address, as I did a short while ago, I am asking a banker (any banker) to transfer the money.

I can’t force the bankers to transfer the money, all I can do is ask. But, I can incentivise them by offering a voluntary fee.

Building a Block

Any banker who knows about my transaction can choose to add it to a new blank ledger page.

Once the page has as many transactions on it as the banker would like to include, she signs it and shouts to the whole bank “I have a page!” That page then gets added to the ledger and becomes as official as anything ever is with Bitcoin.

If more than one banker makes a page with the same page number then everyone in the bank votes on which one to accept and generally the one that finished first gets included and the other one gets thrown out.

The banker is awarded all of the fees paid by all of the transactions on the page plus is awarded a pre-determined fee by the bank itself. In fact the page includes where these fees go, usually to the banker’s own account.

So a Block is Just a List of Transactions?

Yes, a signed list of transactions.

Believe it or not, the hard part is the signature.

The Bitcoin rules specify certain requirements for the electronic signature on each block. It requires that the signer guess a number which, when combined with all the data of the block, will have a certain mathematical result that is easy to verify.

It is difficult to find a number that works for any given block. So, computers are used to try billions of billions of different values to find one that works.

Bitcoin Mining is therefore, the process of finding the right values to sign a block of bitcoin transactions.

How Long Does it take?

The average time for the entire world to produce a block is 10 minutes. That is actually built into the rules of the Bitcoin system.

Worldwide this month there averages about two-billion-billion attempts to make a block every second. So, on average it takes 1,200-Billion-Billion attempts to make one valid block.

The Value of a Block

The 30 day average Bitcoin fees awarded per block is about Ƀ 0.56.

In addition to that there are a certain number of new Bitcoins created by each block which is calculated in the bitcoin rules based only on the page number (called the Block Height for the geeks out there).

Right now that amount is Ƀ12.5. It started at Ƀ50 and is cut in half every 210,000 blocks (about ever 4 years) until it finally goes to zero at block 6930000. That is expected to happen in about 2040.

Decoding the Bank Analogy

Here are how the elements of our proverbial bank relate to their counterparts in the Bitcoin world.

The bank

The worldwide community of Bitcoin users and minors

The master ledger book

The blockchain

A ledger page

A block

A ledger page in the maser book

A block generally accepted as part of the blockchain

A page number

The block number, also known as the block height

A banker

A bitcoin miner or group of minors working together

Results

I am easily on track to break even tomorrow.

“Earnings”: Ƀ 0.02647102 ($19.47)
Reinvestment: Ƀ 0.02117681 ($15.58)
Withdrawal: Ƀ 0.00529421 ($3.89)
Net Loss to Date: Ƀ 0.00476462 ($3.50, 7%)

Day 20 – Looking to the Goal

I started the 100 Days of Bitcoin series to chronicle an experiment where I “invested” about $50 worth of bitcoin in a site offering 10% daily interest. For more info I suggest reading the first post. You can also take a look at the whole series.

Results

My first goal in this experiment is to not loose any money. It still looks like I will get the remainder of my investment back by Day 22.

“Earnings”: Ƀ 0.02868189 ($21.19)
Reinvestment: Ƀ 0.02294551 ($16.95)
Withdrawal: Ƀ 0.00573638 ($4.23)
Net Loss to Date: Ƀ 0.01005883 ($7.43, 15%)

Day 19 – Bitcoin Units

I started the 100 Days of Bitcoin series to chronicle an experiment where I “invested” about $50 worth of bitcoin in a site offering 10% daily interest. For more info I suggest reading the first post. You can also take a look at the whole series.

What is Bigger or Smaller Than a Bitcoin

Yesterday I wrote about the symbols for Bitcoin.

But sometimes, I daresay frequently, it might be convenient to refer to a fraction or multiple of a Bitcoin.

Bitcoin can be used in units of 0.00000001 and a balance could theoretically go as high as 21,000,000.

21 million is about the total amount of Bitcoin that will ever exist, but I will save that explanation for a separate post.

Units:

  • Satoshi (sat.) = Ƀ0.00000001: The smallest unit of bitcoin possible. It is named after Bitcoin creator  Satoshi Nakamoto (a pseudonym for an unknown person)
  • Micro-Bitcoin (μBTC) = Ƀ0.000001
  • Mili-Bitcoin (mBTC) = Ƀ0.001
  • Bitcent = Ƀ0.01
  • Bitcoin (BTC) = Ƀ1: Duh
  • Kilo-Bitcoin (kBTC) = Ƀ1,000
  • Mega-Bitcoin (MBTC) = Ƀ1,000,000: If anyone were to have that much

These units and more can be found at the Bitcoin Wiki.

Tonal Bitcoin Units

If that weren’t enough there is a separate unit called a Tonal Bitcoin or TBC. TBC is delineated in the Tonal number system.

For the geeks out there Tonal numbers are similar to Hexadecimal numbers, but use different digits and names based on a hexotonic music scale.

If this doesn’t make sense, then just ignore it. It isn’t something that you need in order to use Bitcoin.:

  • 0.0001 TBC = Ƀ0.00000001 (1 Satoshi)
  • 1 TBC = Ƀ0.00065536
  • 32098.5 TBC = Ƀ1
  • 1,0000,0000 TBC =  Ƀ2,814,749.76710656

 

Results

“Earnings”: Ƀ 0.02763583 ($20.36)
Reinvestment: Ƀ 0.02210866 ($16.28)
Withdrawal: Ƀ 0.00552717 ($4.07)
Net Loss to Date: Ƀ 0.01579521 ($11.63, 23%)

As expected, My balance has reached 4x my original investment today at 0.28681890.

Day 18 – Symbols for Bitcoin

I started the 100 Days of Bitcoin series to chronicle an experiment where I “invested” about $50 worth of bitcoin in a site offering 10% daily interest. For more info I suggest reading the first post. You can also take a look at the whole series.

What is The Symbol

Bitcoin can be referred to as:

  • Bitcoin: The full name
  • BTC: This is the most common abbreviation, but doesn’t conform to international money naming standards
  • XBT: This abreviation conforms to the international standards and is used by some formal financial publications
  • BitcoinSign.svg (a B with two vertical lines) is the official Bitcoin symbol. It is proposed to be added as a standard computer symbol, but currently isn’t
  • Ƀ is an existing standard computer symbol and some have proposed adopting it as the official bitcoin symbol instead of the above

Clear as mud?

On this blog I will be using BTC as an abbreviation. I will also start using the symbol Ƀ.

Results

“Earnings”: Ƀ 0.02788569 ($20.68)
Reinvestment: Ƀ 0.02230855 ($16.54)
Withdrawal: Ƀ 0.00557714 ($4.13)
Net Loss to Date: Ƀ 0.02132238 ($15.81, 31%)