The Bitcoineers Guide to Bitcoin.
What is Bitcoin? How does it work? Why does it matter? There are understandably lots of questions when it comes to Bitcoin. This guide will help you get started learning more about Bitcoin.
1. What Bitcoin is & How it works.
Bitcoin is a new and exciting advancement in computer science technology. It’s true that this technology that has enabled the first “internet money” but you’ll discover that it has and will enable so much more. Take some time to learn more about what bitcoin is and how it works so you can make use of it properly and safely.
*Disclaimer* – This page is for educational & informational purposes only and is to not be construed as investment advice. DO NOT INVEST ANYTHING YOU CAN’T AFFORD TO LOSE.
Here is a playlist full of a variety of illustrations, interviews, & lectures that further explain Bitcoin/Blockchain technology in more detail.
2. You Need A Wallet
Bitcoins are digital so you need a digital kind of wallet to put your bitcoins in. Lucky for us, there are apps for that. We highly recommend downloading the Airbitz wallet for iOS & Android mobile phones. Made to feel familiar, like mobile banking, except it’s completely private only you have access to your account. Airbitz has several features built-in that make it a must have for any novice or expert bitcoineer.
Simply download the app, create a very good password/phrase and remember it forever. The “keys” to your wallet funds are automatically encrypted on your device and backed-up to Airbitz distributed server network so you never have to worry about loosing access to your wallet, even if you loose or break your device.
3. Getting Bitcoins
There are several ways to obtain bitcoins.
Simply accept bitcoin. Offering to accept bitcoin for your business or organization is the easiest way to get bitcoin. In order to do so we recommend using the worlds leading bitcoin payment processor Bitpay. Much like Paypal, they provide you with plug-n-play tools to accept bitcoin payments online and in person as a POS. Bitpay lets you set the payout perimeters, so you can keep any percentage of payments in bitcoin you want, from 100% to none. For the bitcoin you don’t want to hold, Bitpay will convert any bitcoin payment to dollars and automatically deposit those dollars into your bank account the next day with little to no processing fees. We do encourage you to keep at least a portion in bitcoin and try paying your supply chain with bitcoin.
- Cash to bitcoin marketplace. These services let you deposit cash at a designated local bank account and they send you bitcoin once your deposit is verified. They have many banks to choose from so you won’t have to go far. It’s one of the fastest and safest ways to buy bitcoin. We recommend Wall Of Coins.
- Do a local trade with someone who has bitcoin. A local bitcoin meetup would be a great place to find people. Or use the local trader on the Mycelium app or on Local Bitcoins.
- Through an online exchange. Just like you would exchange USD for Euro if you were traveling to Europe, you can exchange dollars for bitcoins. It’s a bit of a process to get verified, but once you connect your bank account to an exchange, buying and selling bitcoin is fast & convenient. These are like bitcoin banks, which means you do have to provide a lot of personal information.
WARNING: Keeping bitcoins with a 3rd party means you are not in full control of your bitcoin funds. It is not recommended you keep any amount of bitcoins in an exchange unless you’re using it immediately to trade. If you buy bitcoins here, move them to a private wallet immediately.
- Go to a Bitcoin ATM (aka BTM) if there is one in your area. You can use the directory in Airbitz to search for BTM’s near you. (Coming soon to the Tampa area)
- Mining. The most difficult way to acquire bitcoin is through a process known as ‘mining‘. Basically, mining is the process of minting new bitcoins. Miners dedicate computer processing power to the bitcoin network in order to confirm transactions and find blocks in which the bitcoin protocol rewards participants with new bitcoin. This process is necessary to confirm transactions and to secure the bitcoin network from attacks. At this point, mining is very intense and requires very expensive hardware to compete with the current hash rate, so we do not recommend this way for the newcomer or faint of heart. You can learn more about mining here and here.
4. Secure Your Bitcoins
With Bitcoin it’s very important to know that you are now in complete control of your funds. This is the equivalent of digital cash, so bitcoins can be lost or stolen if you’re not careful. and there is no one to appeal to once your bitcoins are gone, they’re gone. Therefore, it’s vital to learn about the different ways to secure your funds and even backup the keys to your bitcoin wallet. It can be confusing at first, but it’s imperative to learn the processes to make sure you can confidently secure your own funds. Here are the different types of bitcoin storage you’ll want to be familiar with.
Hot wallets (aka Desktop or Mobile wallet) is best thought of as a “Debit” account. The most user friendly wallets are mobile apps although there are desktop clients as well. Hot wallets are considered to be inherently less safe then “Cold” because they use devices that are connected to the internet and therefore susceptible to hacking. The trade off is being able to spend bitcoin quickly. Consider holding only what you plan on spending in these wallets, similar to holding cash in your normal wallet. You wouldn’t walk around with large amounts of cash, same principle should apply here. Again, we recommend using Airbitz because of it’s high security features and ease of use.
Cold storage (aka Paper Wallets) is best thought of as a “Savings” account. When done properly, this is considered to be one of the most secure ways to store your bitcoin. Cold storage means there is no way to hack into your wallet because a thief would have to obtain the physical object you’ve embedded your keys to. You can generate a wallet key pair offline (using bitaddress.org), send bitcoin to it, then lock it away in a “cold”, safe place. For an added layer of security, you can even encrypt the keys with a secret passphrase before you print them using BIP38. This way, even if someone was able to access your paper wallet, they’d still have to hack your passphrase to steal your bitcoin. This is to be considered your savings account because accessing bitcoins in cold storage is not quick or convenient.
Multisignature Wallet is a wallet where multiple keys are made to the same wallet, however it takes more then 1 key to sign the transaction for the funds in that wallet to be spent. You can set up a multisig wallet to require anywhere from 2 to 14 signatures to process the transaction. Multisig wallets can provide a very high level of security and makes it much harder for someone to steal your funds or spend fraudulently. Other uses for multisig wallets range from family finances to organizations being more transparent and accountable with funds. For instance, Parents can give their kids allowance through the wallet where the kid can spend, but need the parents to approve the purchase and sign the transactions before that transaction is sent. Organizations can give their board members access to their wallet so funds are spent in a way that everyone knows about and agrees to.
Multisig wallets are also becoming very important to bitcoin e-commerce. Marketplaces utilizing multisig to enable people to sell things to other people online like Ebay does, however it doesn’t require a 3rd party to be trusted to hold funds in escrow. Buyers and Sellers can create multisig wallets to initiate and complete sales between each other that require no trust.
We recommend using Copay by Bitpay for a consumer friendly multisig wallet application (available on all platforms).
5. Spend Your Bitcoins
First (you should’ve already done this by now) download Airbitz to your mobile device. Then search the local bitcoin business directory for places that accept bitcoin near you. The real power of bitcoin becomes very evident once you send some from your wallet. Airbitz also lets you buy discounted Starbucks & Target (more to come) gift cards using bitcoin from the app in seconds. Spending bitcoin while saving money.
Shop on Amazon? Who doesn’t? Now you can save up to 20% on all your Amazon purchases by using bitcoin with a service called Purse.io. You can also earn bitcoin by making purchases for bitcoin bounties. Check it out!
When your favorite retailer doesn’t accept bitcoin directly, such as Best Buy, Victoria’s Secret, Game Stop or Applebees, you can still use bitcoin to make purchases by using Gyft! Simply download the app on your phone and scroll through the hundreds of name-brand companies you can purchase a gift card for using bitcoin. Bonus 3% cash back rewards!
Transacting has never been easier & safer, once you spend some bitcoin you’ll want to do it again. Over 150,000 merchants around the world accept bitcoin including major retailers like Microsoft, Dell, Expedia, CheapAir, Overstock, NewEgg, just to name a few. Everyday more and more businesses & organizations are starting to accept bitcoin as payment. Whether buying something online, at a local merchant near you, or donating to a charity, paying with bitcoin is becoming increasingly popular.