Introduction: How to Use Bitcoins – the Peer-to-peer Internet Currency
Step 1: What Is Bitcoin?
What BitCoin is : Bitcoin is an Internet currency.
Unlike fiat currency, no central authority can print money at will. The total number of Bitcoin te existence at any time is known to the Bitcoin community and managed by a known algorithm.
Because it is based on military-grade cryptography, Bitcoin is unlikely to counterfeit.
One Bitcoin (or BTC) can be divided into spil petite of chunks spil you want (down to 0.00000001 BTC) and they can be transferred instantly across good distances via a digital connection such spil the Internet.
Step Two: Is It Anonymous?
Bitcoin developer Gavin Andersen notes that “bitcoin transactions are more private than credit card or bankgebouw transactions, but less private than metselspecie transactions”. The system relies on all transactions being verified by the p2p network, so ter effect anyone can view all Bitcoin transactions that have everzwijn bot made. However, spil each transaction is linked only to a hash (long string of characters) rather than a name, it provides a degree of anonymity. But, if any of the addresses ter a transaction’s past or future can be tied to an actual identity, it might be possible to work from that point and figure out who wields all of the other addresses. This identity information might come from network analysis, surveillance, or just Googling the address. Using a fresh address for every transaction is designed to make this attack more difficult.
Step Three: Getting a Bitcoin Wallet
Bitcoins are stored te Bitcoin wallets, which contain a series of sets of private and public cryptography keys. The public keys are collective to permit other to send you Bitcoin, and function te a similar way to a (Swiss?) handelsbank account number. The private keys are your password to proof that you are the proprietor of those Bitcoins. You can get a wallet with an online Bitcoin eWallet provider, or you can download a client to host the wallet on your possessor rekentuig.
Step Four: Getting Bitcoins
When you very first install the client, your Bitcoin balance will be zero. A wallet is not much good when it’s empty, so you need to know how to get bit coin.
Fresh Bitcoins are created by a process known spil “mining”. By running a series of calculations to solve a difficult computational problem, which are used to secure the Bitcoin network, miner computers have a chance of being allocated a block of 50 Bitcoin ter terugwedstrijd. Fresh blocks are formed around every Ten minutes. Madness’s ‘ible describes how to set up the client to mine, so I won’t go into that here. Thesis days, because so many computers are doing it, mining is hard work, and it’s unlikely to be profitable unless you have a high-end graphics processing unit.
So how else can you get Bitcoin?
There are a duo of Bitcoin faucets, which can be used to get your very first pinnig of Bitcoin to play around with. The original Bitcoin faucet has run out of coins lately. There’s another faucet that presently gives out 0.01 BTC if you come in ter a mobile phone number (to zekering people using it numerous times).
Come in you receiving address te the form (you can click “Copy to Clipboard” ter the client and then paste the address ter the form). Once you submit the form on the faucet successfully, you should see a fresh transaction te your client within seconds. But you can’t spend your Bitcoins just yet. Under status, the transaction will be listed spil unconfirmed and it would showcase ter you Balance. This is a security feature to zekering Bitcoins being able to be spend more than once te quick succession. Once your transaction has bot confirmed by 6 knots on the network (those mining computers), the status will switch to confirmed and you will be able to spend your coins.
The Bitcoin you received from the faucet won’t get you very far. There are a number of exchange webstek on which you can convert your fiat currency specie (e.g US$) into BTC.
Mt Gox is by far the most popular by turnover at the ogenblik. You can wire te US dollars, Australian dollars or Euros to fund your account or use Dwolla. Funds deposited te EUR or AUD will be converted into USD te your account, and may take a few days to get te there. Once your account is funded, you can then trade on the market with people willing to sell BTC for US dollars. You can either accept the best current market rate, or set a price you are willing to pay and wait for someone willing to sell at a price you come in. Mt Gox charges 0.65% commission on the exchange. [Update: Spil at September 2014, Mt Gox is undergoing bankruptcy proceeding and its reopening is questionable.]
Tradehill is a relatively fresh exchange that is growing quick ter popularity. If you join using a referral code, you get a 10% discount on commission to 0.54%, and also receive 10% of the commission from everyone who joins using your referral code.[Update September 2014: Tradehill is no longer operational.]
Bitcoin7.com is a very fresh, but flash looking exchange. Most likely the most professional looking exchange yet. It presently does’t have the same market depth spil Mt Gox or TradeHill however. While they are te embark up mode, they have very low commission.[Update September 2014: No longer operational.]
Camp BX is a fresh US-based exchange, accepting Dwolla deposits and will soon permit trading on margin. Like Bitcoin7, it doesn’t yet have much liquidity and is presently only useful to those with US accounts, but if you are worried about dealing with non-US exchanges, then this one could be for you.
Coinjar is an Australian exchange and wallet service showcasing promise [spil at September 2014].
Once you have exchange your fiat currency for BTC, you can withdraw it your Bitcoin address.
Sell goods or services for BTC
Don’t have the contant to buy Bitcoin. Maybe you ahve a marketable skill or service you can provide ter come back for Bitcoin. Postbode it on Forbitcoin.com .
Step Five: A Note About Security
You take care of your physical wallet so you don’t lose it or have it stolen. You need to take certain precautions with your bitcoin wallet too! Bitcoins work by a combination of a public key and a private key. You give your public key to people for them to pay you, and your private key permits you to send those bitcoins to others. If you lose your private key, those bitcoins are lost forever!
1. Use the third-party disk pic encryption program of your choice to create and climb on an encrypted disk photo of at least 100 MB te size.
Your BitCoin gegevens directory is usually located at C:\Documents and Settings\YourUserName\Application gegevens\BitCoin (XP) or
C:\Users\YourUserName\Appdata\Wandering\BitCoin (Vista and 7).
For example, if you installed Bitcoin te the default directory, mounted your BitCoin encrypted drive spil E:\, and stored your BitCoin gegevens directory on it spil Bitcoin, you would type the following guideline spil the shortcut Target:
C:\Program Files\Bitcoin\bitcoin.exe -datadir=E:\Bitcoin
This is to permit you to climb on the BitCoin encrypted disk photo before embarking BitCoin.
Step 6: Spending Bitcoins
Buying or earning bitcoin is not much use if there is nothing to spend it on. Albeit the bitcoin economy is still te its infancy, more merchants and services providers are appearing each week. Bitcoin gained notoriety spil the payment method for an anonymous online drug webstek. However, there are legitimate things you can spend your Bitcoins on:
Step 7: Advanced Topics and Final Notes
There is a entire Bitcoin economy developing with features resembling those found for regular financial systems. Te future ‘ibles, I may voorkant:
* the Bitcoin stock exhange,
* the use of escrow services to provide more trust when performing transactions.
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