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Recommended Host for Bitcoin
What is Bitcoin Hosting?
Compare hosts that accept Bitcoin as payment. Bitcoin hosting is often presented as a solution for those seeking privacy and anonymity on the Web.
Bitcoin was developed and released in 2009 by an anonymous developer or group of developers. The identity of the developer, alias Satoshi Nakamoto, remains unknown to this day.
Bitcoin was designed as a cryptographic peer-to-peer network, as a way of decentralising trust among network participants. The bitcoin network is maintained by 'miners' - individuals and companies employing specialised bitcoin mining equipment, based on application-specific integrated circuits. In the early days, bitcoin could be mined using standard CPUs and GPUs, but this is not longer the case.
Miners essentially resolve immensely complex crypto puzzles, thereby verifying transactions. It usually takes several confirmations to finalise the transaction. Miners are rewarded with blocks of new bitcoins, currently 25 bitcoins (or BTC) per block, which is mined every ten minutes. The number of bitcoins is finite, just under 21 million, but bitcoins are highly divisible and the network supports values as low as one hundredth-million bitcoins.
All bitcoin transactions are stored in a public ledger, the bitcoin blockchain. However, the blockchain can also be employed for a number of different applications, hence many developers are working on so-called bitcoin 2.0 or bitcoin 3.0 projects, built on top of the blockchain.
What's the hype about and what can bitcoin do for business?
Bitcoin was a geeky curiosity for years, but over the last two years it has attracted a number of mainstream merchants and venture capitalists. While bitcoin can be used as a currency, that's just one side of it. In fact, many investors are actually looking to cash in on something else.
Bitcoin can be used to facilitate fast and cheap transactions, including microtransactions which are not feasible with traditional payment rails. While it's digital, in many respects bitcoin is more like cash than your average credit card. It sits in your wallet, there is no fee and it can be spent anonymously. This is what makes it suitable in certain niches - why share your credit card details to make an $0.99 in-game purchase if you can do it anonymously?
Bitcoin is not just a currency, it is also a payment network and this is why many people are getting involved. They don't have to believe bitcoin can be a viable currency in order to make use of the network.
Do you want to mine or just use bitcoin?
The term bitcoin hosting has two very different meanings depending on who you ask.
In case you want to get involved in mining, you can lease some ASIC computing power and hope for the best - usually in the form of 'cloudhashing' services.
However, if you just want to build a bitcoin related site, you just need a standard hosting plan of your choosing.
These are two very different concepts.
Bitcoin cloud mining
Bitcoin mining used to be a geeky pursuit for hobbyists, but over the past two years hundreds of millions of dollars poured into the industry, so much of the 'hashing power' now comes from industrial scale mining operations, rather than a decentralised P2P network supported by enthusiasts.
- Currently there are two main forms of bitcoin cloud mining:
- Hosted bitcoin mining - where you lease a bitcoin miner hosted by a third party, usually in a data centre with access to cheap electricity and cooling.
- Leased hashing power - in this model you lease a certain amount of hashing power, not a dedicated miner
These services are offered by highly specialised companies rather than your average host. It is vital that you do a lot of research prior to choosing any of them. Bitcoin mining is an extremely competitive space and volatile prices make any mining investment speculative. The good old days are over and making a fortune in bitcoin mining is easier said than done.
Remember - the best way of making money in a gold rush is selling shovels, not digging for gold, so keep your eyes peeled and do your homework.
Accepting bitcoin payments is another matter
However, if you are not interested in mining and just want to build a site with bitcoin support, then you may proceed and choose a standard hosting plan.
There are a few different ways of going about the problem. If you want to create an e-commerce site with support for bitcoin payments, you don't actually need to do anything with bitcoin - the whole process can be outsourced to payment processors such as BitPay or Coinbase. This means your business can accept bitcoins without actually holding any. You just need to create a standard website and the payment processor will be glad to take your business.
If on the other hand you want to be paid directly, you needn't store bitcoins on your site, either. Bitcoin and other cryptocurrencies are stored in wallets, so you simply need to choose a digital wallet and list the address of said wallet - or a site that would allow users to make direct payments to each other in some setting (e.g. a poker site).
Security, legal and tax ramifications
Regardless of the approach you choose, you should invest heavily in security. Bitcoin is a huge target for hackers and even if your site does not exchange or hold bitcoins, hackers could still target it in the hopes of obtaining useful information.
Remember, they are not going after your website - they are going after your bitcoin wallet. Beware of phishing attacks and use secure wallets (or even cold wallets, hardware wallets) if you happen to store bitcoins.
Some bitcoin-related activities can also result in legal ambiguities depending on jurisdiction. This usually involves taxation of profits obtained through mining, application of VAT or capital gains tax or permits needed to digitally transfer money.
It is best to consult your local bitcoin community and make sure you doing everything by the books.