So in this review I continue to tell you about where to buy Bitcoin in Ukraine. Interest in Bitcoin among Ukrainian users continues to grow.

There are three main ways to buy Bitcoin:

• Buy bitcoin on an exchange (pay with a VISA or MasterCard debit card)

• Buy bitcoin for Yandex Money, WebMoney, OKPay and other online money (in exchangers)

• Buy bitcoin for cash hryvnias (in top-up machines)

In early March, the bitcoin rate jumped past the $1,200 mark per 1 BTC. Then the rate fell. Currently the rate is at 26,107 UAH (approximately $960 USD) per 1 BTC.

For those who believe it’s worth buying Bitcoin as an investment, here is a list of platforms for buying/selling BTC.

Buy Bitcoin on a cryptocurrency exchange by paying with a card

Ukrainian cryptocurrency exchange “BTC-Trade”

Convenient and reasonably priced to deposit/withdraw bitcoin if you are a PrivatBank and Privat24 client. There is withdrawal via LiqPay.

Exchange “CEX.io”

Identification requirements

You can provide a scan of your passport, ID card or driver’s license as identification. A photo with the ID document in your hands is required.

To confirm your address, you need to provide one of the following documents:

• Utility bill;

• Electricity bill;

• Bank account statement;

To link a card, you need a photo with the card in your hands and a photo of the card with an ID document.

Buy bitcoin for online money in exchangers

A few general points when buying Bitcoin through exchangers:

1. Most exchangers transfer money to your wallet with a delay of up to 3 days.

2. Many exchanges frequently lose payment methods.

3. The probability of getting scammed is higher than when buying on an exchange. What is listed below I checked personally, but everything is at your own risk.

4. Naturally, the rate is worse than on exchanges.

5. A big plus — no need for personal identification for small amounts.

Here are the exchangers I’ve personally tested:

Bitcoin exchanger “Arbitrcoin”

ArbitrCoin supports exchange of the following cryptocurrencies: Bitcoin, Ethereum, Litecoin, Monero, Dash for money in Advanced Cash, OkPay, Perfect Money and Yandex Money, and back.

Bitcoin exchanger “Bitcoin Obmen”

Bitcoin-Obmen.com supports the following cryptocurrencies: Bitcoin(BTC), BTC-E Litecoin, DOGE, EXMO, Dash, LiveCoin.

It differs from the previous one by the important (for Ukraine) support of payment services via Privat24 and Webmoney (WMZ and WMU) and the ability to pay with a plastic card in hryvnia without converting the payment to USD.

Buy bitcoin for cash

Provider btcu.biz allows you to buy bitcoin without a bank card. You buy a voucher code at an iBox self-service terminal, enter it on the website, and Bitcoin is credited to your account.

To buy bitcoin for cash at an iBox terminal, go to the “electronic money” section, find BTCU.biz, enter your mobile phone number, and get a receipt with a code. After entering the code on the BTCU.biz website, the amount in hryvnia will be credited to your account. There you can exchange UAH for BTC. The minimum payment amount is 50 hryvnias.

Convenient services unavailable for Ukrainian cryptocurrency users

Bitcoin wallet and exchange “Coinbase”

I include this site as an example of how convenient an exchange and related services for buying/selling Bitcoin can be in terms of interface. But unfortunately, this system is not available to users from Ukraine. Support for Ukraine is promised after bringing Ukrainian legislation to international norms for working with cryptocurrency.

//P.S. As I check deposit mechanisms and new exchanges appear, I will try to update this post. Suggest in the comments what else is worth trying.//

Bitcoin is not backed by anything

For some reason everyone thinks bitcoin is a currency. In the good old days, coins were minted from gold and silver. Then money was backed by precious metals and stones (gold reserve + paper currency). Today, currency is backed by confidence in the economy of the state that owns the currency.

Bitcoin has no central issuing authority, no notional treasury — it is not controlled by a specific state or government. That said, it has value and can be used as currency. It is based on blockchain technology. Bitcoin’s value lies in its convenience, partly in its anonymity, partly in its cross-border nature.

Bitcoin is limited in the number of currency units (coins) and cannot exceed 21 million. And this limited quantity implies deflation of this currency in the long term.

Potential bugs in blockchain technology

At the heart of the risk is the assumption that a critical error in the code will lead to the devaluation of bitcoin. Critical bugs have not been observed during the existence of this digital currency. But it is certainly possible. Any IT system is potentially error-prone.

There is a very real risk of a bitcoin exchange being hacked. But the protocol itself, the code that runs everything, has never been hacked. If that were to happen, bitcoin would presumably collapse.

Investors can be advised to be careful when buying and storing bitcoins. Large amounts of bitcoins should be stored in hardware bitcoin wallets.

Bitcoin is used by criminals for illegal transactions

Criminals do use cryptocurrencies. The anonymity of bitcoin makes it possible to conduct illegal transactions. Yet bitcoin and blockchain startups have received over $1.5 billion in investments. And the fact that bitcoin and blockchain are being developed by IBM, Intel, Microsoft and other IT giants, and invested in by J.P. Morgan, Bank of America, Merrill Lynch, and Goldman Sachs makes one reconsider the controversiality of these claims about bitcoin’s criminality.

Bitcoin is not regulated

It cannot be said that bitcoin is not regulated — the management of bitcoin exchanges in China essentially drives the exchange rate, as practice shows. And miners mining coins affect what happens to the rate. But BTC is indeed not regulated in the same way as other investment instruments.

Bitcoin exchange rate is too volatile

The price can indeed jump or drop 10 or 15% within an hour, which is considered unacceptable for a currency or most stocks.

But the fact that bitcoin functions as a currency doesn’t mean it’s only a currency. More importantly, it is a way to seamlessly transfer money over the Internet. Bitcoin also allows you to verify ownership of funds when making a transaction.

P.S. A couple of useful links about Bitcoin in Ukraine

Exchanges, BTC wallets

• Coinbase

• CEX.io

• BTC-Trade

BTC exchangers

• Arbitrcoin

• Bitcoin Obmen

You can read more about conditions, features, exchange limits and identification in the post “Exchanging and buying Bitcoin in Ukraine”

My colleagues and friends constantly ask me three questions:

1. What is bitcoin?

2. What is blockchain?

3. Does it make sense to invest in Bitcoin?

I found an “elementary explanation” of how cryptocurrencies work for people who don’t understand programming. The text below is approximately what I’ve been telling all my curious friends and acquaintances.

What is Blockchain?

Kolya decided to keep a diary. He got a notebook and started writing lines like these:

1. Bought a hamburger
2. Called Vova
3. …
4. …
5. Lent Vasya 100 rubles
6. Loved Masha
7. Drank tea

Kolya kept his diary honestly, and if a dispute arose about something that had happened before, he would take out the diary and show the entries. One day Kolya argued with Vasya about whether he had lent Vasya 100 rubles or not. But at that moment Kolya didn’t have his diary with him and promised to bring it the next day to prove it to Vasya.

Vasya sneaked into Kolya’s house at night, found the diary, found line 5 and replaced it with “Hugged Olya”. In the morning, Kolya took out the diary, didn’t find the entry about the debt to Vasya, and went to apologize.

A year later, Vasya was tormented by guilt and confessed everything to Kolya. Kolya decided to use a more reliable recording system in the future, one that couldn’t be faked so easily.

And he came up with the following. He found a program called md5sum, which takes any text and calculates its hash function — 32 cryptic digits. For example, if you enter the word “hello” into the program, it returns “8b4609d7e974702ff1451220c7ededcf”. And if you enter seemingly almost the same thing, but with an extra space, it’s already “69ab827825fdb876e709abd3d783dbb6”.

Kolya devised a way to make replacing entries more difficult: after each entry, he inserted a hash obtained by feeding the program the text of the entry and the previous hash. The new diary looked like this:

1. //0000 (initial hash, showing four characters for simplicity)// Bought a hamburger

2. //4178 (hash of 0000 and “Bought a hamburger”)// Called Vova

3. //4234 (hash of 4178 and “Called Vova”)// …

4. …

5. //4492// Lent Vasya 100 rubles

6. //1010// Loved Masha

7. //8204 (hash of 1010 and “Loved Luda”)// Drank tea

If now some Vasya wants to change line 5, the hash of that line will also change (it won’t be 1010, but something else). This in turn will affect the hash of line “6. Loved Luda” (it won’t be 8204, but something else), and so on to the end of the diary. Now, to change one entry, Vasya would have to rewrite the entire diary after it, which is difficult.

Time passed, Kolya opened a bank. He still wrote “lent” and “borrowed” entries in his diary, supplying them with hashes. The bank grew, and one day he lent (a new) Vasya a million. The next night, ten workers hired by Vasya for half a million sneaked into Kolya’s room, replaced the entry “143313. Lent New Vasya 1,000,000” with “143313. Lent New Vasya 10” and quickly recalculated all the hashes to the end of the diary.

By a miracle, Kolya discovered the substitution and decided to make the diary harder to forge: “Now,” Kolya decided, “I will add a number (’nonce’) in brackets at the end of each entry, and I will select it so that each hash ends with two zeros.” The only way to do this is to brute-force numbers until you get the right hash:

1. //0000 (initial hash, again four characters for simplicity)// Bought a hamburger (22)

2. //4100 (hash of 0000 and “Bought a hamburger (22)”, 22 was selected so that the hash ends with 00)// Called Vova (14)

3. //3100 (hash of 4100 and “Called Vova (14)”)// …

4. …

5. //1300// Lent Vasya 100 rubles (67)

6. //9900// Loved Masha (81)

7. //8200 (hash of 9900 and “Loved Masha (81)”)// Drank tea

To create each entry, Kolya now needs to try about 50 numbers on average, which is labor-intensive. Accordingly, if someone changes an entry, forging it and all subsequent ones will also be 50 times harder, meaning that now even Vasya with hired workers can’t manage.

After a while, Kolya took on a partner and they both started keeping the diary. For each new entry, both simultaneously started guessing the nonce, and whoever found a suitable one first would make the entry. Since two people guess nonces faster, Kolya made the task harder and required all hashes to end with three zeros instead of two.

This final version of Kolya’s diary is essentially a real blockchain — except that Kolya and his friend need to be replaced by a bunch of networked computers, and hash calculations need to be made more complex so that even computers struggle.

A blockchain is nothing more than a journal of entries that can be written collectively and in which old entries cannot be forged.

With such a journal, you can build different systems. For example, Bitcoin. Bitcoin is a diary where each entry takes the form “Transfer X amount of money from wallet A to wallet B”. Since the diary cannot be forged and stores the entire history of transfers, at any moment you can calculate the amount of money in each wallet from it. And so that the system has any money at all, bitcoin is designed so that each diary entry ends with the words “Produce Z coins and transfer them to me”, where “me” is the user who first “guesses” the nonce that provides a hash with the required number of zeros at the end.

Blockchain is an open transaction ledger stored in hundreds of thousands of copies

Imagine you lend a stranger $10,000 for a year at 10% interest. You got two witnesses and wrote a receipt. A year passed — the witnesses refused to testify (we don’t remember anything, we didn’t see anything, those aren’t our signatures), and the borrower tells you to get lost. To court.

But what if you wrote 5,000 receipts and handed them to 5,000 different witnesses? And all Internet users have access to any of those 5,000 receipts without time or status restrictions. Police, courts, neighbors and relatives can open the receipt and see it as it was written a year ago. Would your borrower still deny it?

To hide 5,000 copies, you’d have to hack each custodian and delete or alter the text of the receipt. But what if there aren’t 5,000 copies, but 2 million? The task becomes nearly impossible.

How are this cunning borrower, the debt receipt, and blockchain connected?

Blockchain is an open electronic ledger. This ledger is installed on the devices of hundreds of thousands of users. When the system adds a new entry to the ledger, that entry automatically appears for all users connected to the system. Changing an entry is not possible. User A transferred the equivalent of $10,000 to user B — this information will be displayed to all users of the system.

All users connected to the system become witnesses to the transfer of the equivalent of $10,000 from user A to user B at a specific point in time.

Information about one such transfer is added to a group of similar information — this is called a hash (if we were writing information in a notebook). A group of hashes makes up the overall transaction hash (if we filed the notebook for February into the common archive). The volume of hashes for a period (100 boxes of notebooks per year) makes up a block. All blocks added to a specific chain are called “blockchain”. Roughly speaking, there is a common archive containing all hashes for a specific day, month, year — any user can find the needed hash and transaction information in this catalog.

The less trust there is in society, the more widespread blockchain will become! An unbiased witness to the creation and storage of any kind of information. The probability that your borrower Uncle Valera will call two witnesses and bribe them to refuse to testify in court is huge.

The probability that Uncle Valera will hack 2 million users and change the transaction information is about zero.

P.S. A couple of useful links about Bitcoin in Ukraine

Exchanges, BTC wallets

• Coinbase

• CEX.io

• BTC-Trade

BTC exchangers

• Arbitrcoin

• Bitcoin Obmen

You can read more about conditions, features, exchange limits and identification in the post “Exchanging and buying Bitcoin in Ukraine”