Today I am going to introduce Bitcoin, new currency although new is not the best word as it's being used worldwide since 2009. Bitcoin is new form of money which you cannot see, you cannot feel but you can use them much easier than any other currency on the world. Bitcoin is not only a currency, it's the whole new world living just next to you which hasn't been discovered yet :) I will show you step by step how to get it, use it and trade it.
Bitcoin for Dummies
Internet is full of information about Bitcoin as a currency and Bitcoin as a network. You'll find many new terms like "hash", "blockchain","mining","p2p","pool" etc. Those probably sounds scary to many of you so we are not going to use them. It will be plain and simple yet still detailed and will save you many hours spent on reading definitions, terms and other instructions. Do you know how does the current banking system works behind the scenes? Many of you don't but you still use cash machines, do bank transfers or pay with credit cards daily without even trying to understand what is actually going on. So I encourage you don't try to understand this technology behind the scenes at first, just read about smarter way of using money :)
What is Bitcoin?
As we previously stated, we will focus on a Bitcoin as a currency or if you prefer - money. It is very different from the currency you already know:
1. There is no paper version of it - it doesn't exist as coins and notes. Imagine you have only credit card and number on your online bank account. Congratulations - you have Bitcoin already.
2. There is no central banking system - Bitcoin network is not managed or controlled by any authority and no single person has control over it. Information about transactions, "bank accounts" etc. is scattered in entire network and accessible only with your special private key. Whenever you pay with Bitcoin thousands of computers around the world are informed, at the same time and this transaction will be stored globally on each of them. Thanks to that no one can fake it, undo it or do anything else to it. You don't have to be worried about privacy because...
3. All transactions made with Bitcoin are anonymous! - Yes that is correct. All that network knows is your Bitcoin wallet address (it is like bank account number but you can have thousands of them), and the recipient wallet address. As long as no one is be able to connect wallet address to you as a person you are anonymous. No one can tell that you are person having key to that wallet. Many people also use one wallet address per transaction.
4. Exchange rate is independent from any country. It is driven by demand and supply. And if it comes to supply...
5. Supply is limited to 21 millions and this will be reached around the year of 2140. Currently we have a little bit over 13,5 millions of Bitcoins floating around and every 10 minutes 25 new Bitcoins are created. This supply will be halved every 4 years so in about 2 years this number will be decreased to 12,5 BTC (abbreviation like USD or EUR) and after another 4 years 6,25 per 10 minutes and so on.
6. Bitcoin cannot be controlled - no government will be able to control the flow of Bitcoins, demand taxes, check your savings. It is due to anonymity of the transaction. It is a huge advantage and yes, can be used for illegal purposes, tax avoidance etc. Don't be fooled though that cash is any different...
7. Bitcoin cannot be counterfeited - unlike traditional cash no one can "print" new Bitcoins at any time.
8. Payments cannot be reversed - it is very important and makes it so much different than current banking system where anyone can withdraw their payment or cancel transaction or hold bank transfer so the bank can verify it...Simply if you pay someone it's done. You can ask the person to return you the money but this person will be the only one capable of doing so. No court order will be able to force that :) At the same time, if you receive payment from someone you are a 100% sure that money is yours, no bank will take your money due to fraud or any other reason.
How to use Bitcoin?
So first you need bank account. How to get one? No forms, no documents, no monthly payments and no waiting. Just download an application from the official website, install it and run. Voila! You already have unique bank account number and once the wallet is synchronized with the whole network (it is a long process only for the 1st time) you can accept and receive payments.
You'll see similar screen with no balance and no recent transactions. Now this is your bank account, you have the account number in File->Receiving Addresses, you can now fully manage your finances! Bitcoin Wallet is pretty straightforward to use, the only thing worth noticing is that Bitcoin amount is in format 0,12345678, so it has 8 decimal places to make micropayments easier. Smallest piece of Bitcoin (0,00000001) is called "Satoshi".
Your account number aka wallet address can be found under menu "File->Receiving Addresses". If you want to receive any payment just use on of the existing addresses or create new one with just one click.
As you can see on the example above I have couple of receiving addresses, I tend to have 1 for each possible sender. Why do I need that many? It allows me to track who pays me. Example:
1LnwZmPoqLMWZdta7TfkueWFAH3cZ5LpeJ is an address for Smarter Way donations, if anything comes to this address I know it is anonymous donation from one of you. If I receive at the same time any other payment to the same wallet but with different address, which I revealed to my friend only it is very likely that he paid me for something :)
How to transfer money?
Making money transfers is one of the easiest thing in entire process. Just go to "Send" tab and enter long wallet address received from someone. It can be payment in store, address which belongs to your friend, institution, or just your saving account address. With each transaction there is a small transfer fee included which helps to keep up the network and it goes to all machines around the world which are securing this transaction. List of recent transactions can be found under "Transactions" tab.
The biggest advantage of Bitcoin payments is that you can pay anyone around the world 7 days a week, 24 hours a day and payment will be made within few minutes and transaction will be fully confirmed within an hour! There are no limitations like weekends, operating hours, amount limits etc.
Encrypt and backup your wallet!
This is the very first and probably the most important thing before you start using your wallet. ENCRYPT IT! Why? If you loose your wallet which you keep in your pocket, then anyone can pick it up and spend your money. With Bitcoin it is not that straightforward. Someone can access your computer or mobile phone and steal your wallet BUT will not be able to spend money without your password if your wallet has been encrypted! This makes Bitcoin more secure than your cash in your pocket. So the very fist thing you'll do after running the wallet is going to "Settings->encrypt wallet" and choose secure password which you won't forget. If you do you can only look at your wallet balance and you'll not be able to use it ever. Next thing to do after encrypting wallet is making a backup. You can do this from "File->Backup wallet" section. In case your hard drive fails or anything else happens then you'll always keep a copy of your unique private key to access your money which will continue to exist in the Bitcoin network.
How to get Bitcoins?
We will talk about trade in the future articles, for now since you have your wallet installed you would like to try how does it work! Below you'll find the list of so called Bitcoin faucets where you can get small amounts for free.
1. Coinad - many ways of earning free Bitcoins including chat!
2. Freebitco.in - you can win free Bitcoins every hour!
3. Moonbit.co.in - you decide how often and how much would you like to claim, instructions on the site.
4. Coingamez - you can play simple game every 15 minutes
In each one of them you can earn even more by inviting people
What can I do with Bitcoin?
List of businesses accepting Bitcoin is growing every day. You can use it as a form of storing money outside the bank (this can be risky because exchange rate is extremely volatile), you can use it as a short term or long term investment if you know something about trading or you can simply spend it on the internet or in store. Just take a look at following websites:
Coinmap.org - Coinmap is a great website which gathers merchants accepting Bitcoin and shows their location on the map. Thanks to their service you can actually see places where using Bitcoin is becoming natural habit of people.
More and more big companies are taking advantage of Bitcoin payment system. In order to pay you need mobile phone with Bitcoin wallet installed on it + internet connection. Mobile plans are becoming more accessible and also many places offers free wifi for clients which makes payments a lot easier. There are different Bitcoin wallets for mobile phones, one of the easiest to use is Blockchain mobile wallet availbable for Android and iOS.
Bitcoin is a very revolutionary technology which has many advantages over current banking system. Bitcoin has already managed to be with us for more than 5 years and proved to be capable of being fully functional payment system which meets our needs. Truly limited supply can make it also perfect way for investing money although currently exchange rate is extremely volatile and it is a high risk investment with potentially big returns. With the growing list of merchants accepting Bitcoin soon to be extended by Paypal and Ebay in a few years time it might become widely known and accepted form of payment just like credit cards :)
In future we will talk about possible use of Bitcoin in a real life situations like making international transfers.
In this article you will find one more smarter way to life. Green referral links in "How to get Bitcoins?" section take you to the sites which have affiliate marketing program up and running. I encourage you to first test them and make sure they are of any value to you or others and then you can easily use your referral links to inform other people about them and earn some money! The way it works is that people using your referral links will be getting free Bitcoins and you will be earning them as well each time they play! Give it a try and share your experience with us!