What is bitcoin, how to use it, where to buy it...?
So far you have been using your credit card, debit card or banking facility to make purchases online. But the common factor between all these payment methodologies, as you might have noticed, is that a third party (like a bank or an institution), being a part of your transaction. But with the rise of new and cutting-edge technologies, people are no longer using these as payment routine and are yet transferring money faster and anonymously!
The Advent of Bitcoins
Wondering why people are now slowly avoiding these typical way of processing their remittance? That’s because they have discovered a new payment methodology to pay everything from their day-to-day groceries to buying smartphones and gambling online. This new payment form is slowly but surely taking the world by storm and is touted to be the next big thing. What we are talking about here is a virtual currency called Bitcoin. Bitcoin is a new form of virtual currency which came into being in the year 2008.
The Advent of Bitcoins
Wondering why people are now slowly avoiding these typical way of processing their remittance? That’s because they have discovered a new payment methodology to pay everything from their day-to-day groceries to buying smartphones and gambling online. This new payment form is slowly but surely taking the world by storm and is touted to be the next big thing. What we are talking about here is a virtual currency called Bitcoin. Bitcoin is a new form of virtual currency which came into being in the year 2008.
Bitcoin
The origin of bitcoin is as mysterious as the dark side of the moon. Where everybody wants to be known and gain fame for every single thing, no matter how big or small, an individual under the pseudonym Satoshi Nakamoto unveiled this new currency without revealing his true identity. Bitcoin is the first of its kind, a peer to peer payment network that is decentralized. This means the usage of bitcoin is autonomous with full control by its user involving no middleman (banks, institutions). The substantial fact about bitcoins is that, nobody in today’s date can claim ownership of the technology behind bitcoin.
How Does Bitcoin Work?
Using bitcoins to do a transaction is as simple as sending an e-mail. Users at first installs a Bitcoin wallet on his mobile phone or computer. A user may also use an online wallet but is not recommended at all. Using the wallet, a user generates an address through which all transactions take place. This address, assuming has bitcoins can thus be used to buy any merchandise as long as the merchant accepts this currency. People can also send bitcoins to each other, just like cash can be transferred online. Here is how a typical bitcoin transaction takes place.
How Does Bitcoin Work?
Using bitcoins to do a transaction is as simple as sending an e-mail. Users at first installs a Bitcoin wallet on his mobile phone or computer. A user may also use an online wallet but is not recommended at all. Using the wallet, a user generates an address through which all transactions take place. This address, assuming has bitcoins can thus be used to buy any merchandise as long as the merchant accepts this currency. People can also send bitcoins to each other, just like cash can be transferred online. Here is how a typical bitcoin transaction takes place.
Chris wants to send some bitcoins to Jimmy. This transaction will have three elements. The input, or the Chris’s bitcoin address, the amount of the value of transaction he wants to make and an output or Jimmy’s bitcoin address. The bitcoin address is somewhat like a safety deposit, but with a glass front. Thus while everyone can see what is in the safe, you're the only one able to make a transaction if you're the owner of the private key.
Bitcoin address looks like this: 1KULfj1CWGcH8FBrUsbwqCCa2kVjLeA34j
In this particular example of a bitcoin based transaction, when Chris wants to send bitcoins to his friend Jimmy, he signs in with his private key and mentions the amount and output. When Chris pushes send on his wallet, the miners authenticates and records the transaction in the public ledger or blockchain.
Bitcoin address looks like this: 1KULfj1CWGcH8FBrUsbwqCCa2kVjLeA34j
In this particular example of a bitcoin based transaction, when Chris wants to send bitcoins to his friend Jimmy, he signs in with his private key and mentions the amount and output. When Chris pushes send on his wallet, the miners authenticates and records the transaction in the public ledger or blockchain.
Bitcoin wallet
Any transaction using a bitcoins on an average takes 10 minutes to confirm. Note that, all transactions are instant but they need confirmation in order to check the validity of transaction. International payments through bitcoins are easy and cheap, because bitcoins are not subject to the regulations of any national or any particular banking regulator. Small businesses has the gain the most from bitcoins as there is no third party transfer fee or currency exchange involved that usually costs quite some money.
Although the nature of the transaction using bitcoins seems very much alike to what we are more familiar with, there is one essential difference. In the traditional currency, the feds and treasury of a government, mints coin or issues paper currency when needed, but with bitcoins money is “discovered” or “mined”. In order to mine bitcoins, users have to solve complex mathematical equations. When equation is solved, the user is awarded with 25 bitcoins. All around the world, computer enthusiasts are competing with each other to mine bitcoins for themselves which they can later trade or exchange for goods or regular currency.
Ensuring the Safety of Transactions
But the obvious question that arises here is that who is keeping track of all these transactions? If people were to randomly send bitcoins to each other, nobody would be able to keep tabs on what really is going on, and it would soon collapse. In order to keep track of everything there is actually a Bitcoin network behind this currency that enables the sharing of a rather large public ledger that is called a “blockchain”. This ledger is maintained to keep a record of every transaction that goes through. But how to ensure that each transaction remains intact and is not compromised, as all of this is maintained digitally? The answer to this is the presence of the miners. When a block is created, the miners take that block of data and apply a mathematical formula to it.
Thus by referring to blockchains, the users of bitcoins can find out whether a transaction that is made is valid or not. Furthermore, the authenticity of each and every transaction can be later verified.
Bitcoin security
Acquisition of Bitcoins
Now that you know about how to transact with bitcoins, you may be curious to know how to obtain them. There are two ways to get bitcoins. One is to mine them and the other is to purchase them. Mining them, as you may have guessed is no child’s play and requires both expertise and expensive hardwares. The easier way to own bitcoins is to buy them. There are various market places online that are called Bitcoin exchanges where you can buy bitcoins with regular currency (USD, EUR, GBP…).
A list of popular and trusted exchanges can be found here.
Each exchange assigns you with an online wallet of their own. For example, you can trust a reputable source such as localbitcoins.com to get started. Once you have registered on their exchange, you get a wallet that is free and secure. You can then decide whether you want to make an online transaction to buy bitcoins or meet a local seller face to face.
Some other bitcoin wallets can be found here.
In 2013, bitcoin ATMs also came into being across the US and Europe. Nearest bitcoin ATM arround you can be located through this link.
Now that you know about how to transact with bitcoins, you may be curious to know how to obtain them. There are two ways to get bitcoins. One is to mine them and the other is to purchase them. Mining them, as you may have guessed is no child’s play and requires both expertise and expensive hardwares. The easier way to own bitcoins is to buy them. There are various market places online that are called Bitcoin exchanges where you can buy bitcoins with regular currency (USD, EUR, GBP…).
A list of popular and trusted exchanges can be found here.
Each exchange assigns you with an online wallet of their own. For example, you can trust a reputable source such as localbitcoins.com to get started. Once you have registered on their exchange, you get a wallet that is free and secure. You can then decide whether you want to make an online transaction to buy bitcoins or meet a local seller face to face.
Some other bitcoin wallets can be found here.
In 2013, bitcoin ATMs also came into being across the US and Europe. Nearest bitcoin ATM arround you can be located through this link.
Bitcoin ATM
The process of purchasing bitcoins using such ATMs is pretty simple. You need to press start on the ATM, scan the QR code of your bitcoin address (or manually enter it), put the required cash in the machine and press send. Within a matter of seconds, the bitcoins arrives in your bitcoin wallet. However, you must know that while the method to procure bitcoins is transparent and easy to use, bitcoin price fluctuates. At the time of writing this article price for one bitcoin was around $360. But, you don't necessarily have to buy one whole bitcoin. Bitcoin can be divided into small units. The smallest unit is 1 Satoshi, which is 0.00000001 Bitcoin.
However, the good news is that you can obtain some bitcoins for free. There are different ways to do it. Various websites are there that offer the opportunity to earn free bitcoins. You will have to carry out small tasks for such websites like participating in a survey, or play certain games or even stay on a said page for a certain stipulated time. This can earn you “rewards” in the form of free micro bitcoins. Another way to earn free bitcoins is through “faucets”. The principle is the same as mentioned above.
In such websites, the time frame in which you can earn free micro bitcoins is mentioned and in this time frame you need to perform the tasks specified by them. These can be anything from watching videos to playing games. You can also resort to very popular gambling which is on the rise for the last year or two! The most popular gambling website we found is www.crypto-games.net with various games. You can gamble here with free bitcoins and try to win some coins while chatting with players online.
However, the good news is that you can obtain some bitcoins for free. There are different ways to do it. Various websites are there that offer the opportunity to earn free bitcoins. You will have to carry out small tasks for such websites like participating in a survey, or play certain games or even stay on a said page for a certain stipulated time. This can earn you “rewards” in the form of free micro bitcoins. Another way to earn free bitcoins is through “faucets”. The principle is the same as mentioned above.
In such websites, the time frame in which you can earn free micro bitcoins is mentioned and in this time frame you need to perform the tasks specified by them. These can be anything from watching videos to playing games. You can also resort to very popular gambling which is on the rise for the last year or two! The most popular gambling website we found is www.crypto-games.net with various games. You can gamble here with free bitcoins and try to win some coins while chatting with players online.
Crypto-Games.net gambling website
Storage of Bitcoins
After the bitcoins has been procured, obviously with much effort, the number one priority is to keep one’s bitcoins safe. Bitcoins are stored on your wallets. These wallets are sort of a bank account in the virtual space and allows users to send or receive bitcoins, save bitcoins and pay for goods and services through bitcoins. But unlike a bank account there is not federal institution that is guaranteeing the safety of these wallets. But will this mean that wallets are unsafe and perilous? Not necessarily.
Wallets for bitcoins can be extremely safe depending on how you manage them. There are private keys that serve as the main gateway to access your wallet, so you need to keep this safe. The one way to safeguard it is to encrypt your wallet with a strong password. Also it is also a good practice to keep a backup of your wallet in several different places, so that you have no fear of your wallet getting corrupted in case of a malware/virus attack. But if you are really losing sleep over the safety of your bitcoins you can use a cold storage wallet that are used to store the bitcoin keys in an offline format.
Better still, you can use a paper wallet. A paper wallet is a cheap and easy way to keep your bitcoins safe. There are several websites that are known to offer paper wallets. The paper wallet operates by generating a bitcoin address for you and creating an image containing two QR codes. One of the QR codes is an address that is public and can be used to receive your bitcoins and the other QR code is representative of the private key which, as we mentioned earlier, is the way in which you access your bitcoin stash. The advantage of using a paper wallet is that since these private keys are not stored anywhere in digital format, you do not have to fret or be concerned either about a breakdown from a hardware failure or being subject to cyber-attacks.
Bitcoin paper wallet
What the Future Holds
Bitcoin is being considered the next big step in the evolution of currency. It is the first currency born of the internet and many facsimiles and similar currencies has emerged from it. There might come a day where existence of physical currencies might become void, with the rise of virtual money. Since the bitcoin space is not really regulated it has its own pros and cons, though it is considered quite safe. What the future holds in store, no one knows as of today, but if the current hype over bitcoins goes on, it would not be an overstate to say that this is a currency that will replace the physical money we use today and it’s only a matter of time till it becomes a global phenomenon!
Bitcoin is being considered the next big step in the evolution of currency. It is the first currency born of the internet and many facsimiles and similar currencies has emerged from it. There might come a day where existence of physical currencies might become void, with the rise of virtual money. Since the bitcoin space is not really regulated it has its own pros and cons, though it is considered quite safe. What the future holds in store, no one knows as of today, but if the current hype over bitcoins goes on, it would not be an overstate to say that this is a currency that will replace the physical money we use today and it’s only a matter of time till it becomes a global phenomenon!