“Do You Take Bitcoins?”
To cut through some of the confusion surrounding bitcoin, we need to separate it into two components. On the one hand, you have bitcoin-the-token, a snippet of code that represents ownership of a digital concept — sort of like a virtual IOU.
On the other hand, you have bitcoin-the-protocol, a distributed network that maintains a ledger of balances of bitcoin-the-token. The system enables payments to be sent between users without passing through a central authority, such as a bank or payment gateway.
It is created and held electronically. It was the first example of what we today call cryptocurrencies, a growing asset class that shares some characteristics of traditional currencies, with verification based on cryptography. The idea was to produce a means of exchange, independent of any central authority, that could be transferred electronically in a secure, verifiable and immutable way.
Bitcoin can be used to pay for things electronically, if both parties are willing. No single institution controls the bitcoin network. It is maintained by a group of volunteer coders , and run by an open network of dedicated computers spread around the world. This attracts individuals and groups that are uncomfortable with the control that banks or government institutions have over their money.
In electronic fiat currencies, this function is fulfilled by banks, which gives them control over the traditional system. With bitcoin, the integrity of the transactions is maintained by a distributed and open network, owned by no-one. Fiat currencies dollars, euros, yen, etc. Holders of the currency and especially citizens with little alternative bear the cost. With bitcoin, on the other hand, the supply is tightly controlled by the underlying algorithm.
A small number of new bitcoins trickle out every hour, and will continue to do so at a diminishing rate until a maximum of 21 million has been reached. This makes bitcoin more attractive as an asset — in theory, if demand grows and the supply remains the same, the value will increase. While senders of traditional electronic payments are usually identified for verification purposes, and to comply with anti-money laundering and other legislation , users of bitcoin in theory operate in semi-anonymity.
When a transaction request is submitted, the protocol checks all previous transactions to confirm that the sender has the necessary bitcoin as well as the authority to send them. The system does not need to know his or her identity. In practice, each user is identified by the address of his or her wallet. Transactions can, with some effort, be tracked this way. Furthermore, most exchanges are required by law to perform identity checks on their customers before they are allowed to buy or sell bitcoin, facilitating another way that bitcoin usage can be tracked.
Since the network is transparent, the progress of a particular transaction is visible to all. While this may disquiet some, it does mean that any transaction on the bitcoin network cannot be tampered with.
The smallest unit of a bitcoin is called a satoshi. It is one hundred millionth of a bitcoin 0. This could conceivably enable microtransactions that traditional electronic money cannot. Read more to find out how bitcoin transactions are processed and how bitcoins are mined , what it can be used for , as well as how you can buy , sell and store your bitcoin.
We also explain a few alternatives to bitcoin , as well as how its underlying technology — the blockchain — works. Authored by Noelle Acheson. Network image via Shutterstock. The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. But how?
You can pay for them in a variety of ways, ranging from hard cash to credit and debit cards to wire transfers, or even with other cryptocurrencies, depending on who you are buying them from and where you live. The first step is to set up a wallet to store your bitcoin — you will need one, whatever your preferred method of purchase. This could be an online wallet either part of an exchange platform, or via an independent provider , a desktop wallet, a mobile wallet or an offline one such as a hardware device or a paper wallet.
Even within these categories of wallets there is a wide variety of services to choose from, so do some research before deciding on which version best suits your needs. You can find more information on some of the wallets out there, as well as tips on how to use them, here and here.
If you lose them, you lose access to the bitcoin stored there. Cryptocurrency exchanges will buy and sell bitcoin on your behalf. As with wallets, it is advisable to do some research before choosing — you may be lucky enough to have several reputable exchanges to choose from, or your access may be limited to one or two, depending on your geographical area.
Other high-volume exchanges are Coinbase , Bitstamp and Poloniex , but for small amounts, most reputable exchanges should work well. Note: at time of writing, the surge of interest in bitcoin trading is placing strain on most retail buy and sell operations, so a degree of patience and caution is recommended.
With the clampdown on know-your-client KYC and anti-money-laundering AML regulation, many exchanges now require verified identification for account setup. This will usually include a photo of your official ID, and sometimes also a proof of address. Most exchanges accept payment via bank transfer or credit card, and some are willing to work with Paypal transfers. Each exchange has a different procedure for both setup and transaction, and should give you sufficient detail to be able to execute the purchase.
If not, consider changing the service provider. Once the exchange has received payment, it will purchase the corresponding amount of bitcoin on your behalf, and deposit them in an automatically generated wallet on the exchange. This can take minutes, or sometimes hours due to network bottlenecks. If you wish recommended , you can then move the funds to your off-exchange wallet. Platforms such as LocalBitcoins will help you to find individuals near you who are willing to exchange bitcoin for cash.
Also, LibertyX lists retail outlets across the United States at which you can exchange cash for bitcoin. And WallofCoins , Paxful and BitQuick will direct you to a bank branch near you that will allow you to make a cash deposit and receive bitcoin a few hours later. ATMs are machines that will send bitcoin to your wallet in exchange for cash. Coinatmradar can help you to find a bitcoin ATM near you. Note: specific businesses mentioned here are not the only options available, and should not be taken as a recommendation.
Bitcoin image via Shutterstock. Before owning any bitcoin , you need somewhere to store them. If the wallet software is well designed, it will look as if your bitcoins are actually there, which makes using bitcoin more convenient and intuitive. Actually, a wallet usually holds several private keys, and many bitcoin investors have several wallets. Electronic wallets can be downloaded software, or hosted in the cloud. The former is simply a formatted file that lives on your computer or device, that facilitates transactions.
Hosted cloud-based wallets tend to have a more user-friendly interface, but you will be trusting a third party with your private keys. Installing a wallet directly on your computer gives you the security that you control your keys. Most have relatively easy configuration, and are free. The disadvantage is that they do require more maintenance in the form of backups.
If your computer gets stolen or corrupted and your private keys are not also stored elsewhere, you lose your bitcoin.
They also require greater security precautions. If your computer is hacked and the thief gets a hold of your wallet or your private keys, he also gets hold of your bitcoin. The original software wallet is the Bitcoin Core protocol, the program that runs the bitcoin network.
As you can guess, this takes up a lot of memory — at time of writing, over GB. Exodus can track multiple assets with a sophisticated user interface.
Some such as Jaxx can hold a wide range of digital assets, and some such as Copay offer the possibility of shared accounts. Online or cloud-based wallets offer increased convenience — you can generally access your bitcoin from any device if you have the right passwords.
All are easy to set up, come with desktop and mobile apps which make it easy to spend and receive bitcoin, and most are free. The disadvantage is the lower security. Some leading online wallets are attached to exchanges such as Coinbase and Blockchain. Some offer additional security features such as offline storage Coinbase and Xapo.
Mobile wallets are available as apps for your smartphone, especially useful if you want to pay for something in bitcoin in a shop, or if you want to buy, sell or send while on the move.
All of the online wallets and most of the desktop ones mentioned above have mobile versions, while others — such as Abra , Airbitz and Bread — were created with mobile in mind.
Hardware wallets are small devices that occasionally connect to the web to enact bitcoin transactions. They are extremely secure, as they are generally offline and therefore not hackable.
They can be stolen or lost, however, along with the bitcoins that belong to the stored private keys. Some large investors keep their hardware wallets in secure locations such as bank vaults. Trezor , Keepkey and Ledger and Case are notable examples.
Perhaps the simplest of all the wallets, these are pieces of paper on which the private and public keys of a bitcoin address are printed. They are, however, easier to lose. With services such as WalletGenerator , you can easily create a new address and print the wallet on your printer. Send some bitcoin to that address, and then store it safely or give it away. See our tutorial on paper wallets here. The safest option is a hardware wallet which you keep offline, in a secure place.
That way there is no risk that your account can be hacked, your keys stolen and your bitcoin whisked away. The least secure option is an online wallet, since the keys are held by a third party.
It also happens to be the easiest to set up and use, presenting you with an all-too-familiar choice: convenience vs safety. Whatever option you go for, please be careful.
Get the Latest from CoinDesk
If you're getting started with Bitcoin, there are a few things you should know. Bitcoin lets you exchange money and transact in a different way than you normally do. As such, you should take time to inform yourself before using Bitcoin for any serious transaction. Bitcoin should be treated with the same care as your regular wallet, or even more in some cases! Like in real life, your wallet must be secured.
Where can I spend bitcoin?
If you're getting started with Bitcoin, there are a few things you should know. Bitcoin lets you exchange money and transact in a different way than you normally. As such, you should take time to inform yourself before using Bitcoin for any serious transaction. Bitcoin should be treated with the same care as whta regular wallet, or even more in some cases!
Like in real life, your wallet must be secured. Bitcoin makes it possible to transfer value anywhere in a very easy way and it allows you to be in control of your money. Such great features also come with great security concerns. At the same time, Bitcoin can witg very high levels of security if used correctly. Always remember that it is your responsibility to adopt good practices in order to protect your money.
Read more about securing your wallet. The price of a bitcoin can what can i do with bitcoin money increase di decrease over a short period of time due to its young economy, novel nature, and sometimes illiquid markets. Consequently, keeping your article source with Bitcoin is not recommended at this point.
Bitcoin should be seen like a high risk asset, and you should never store money that you cannot afford to lose with Noney. If you receive payments with Bitcoin, many service providers can convert them to your local currency. A Bitcoin transaction cannot be reversed, it can only be refunded by the person receiving the funds. This means you should take care to do business with people and organizations you know and trust, or who have an established reputation.
For their part, businesses need to keep track of the payment requests they are displaying to their customers. Bitcoin can detect typos and usually won't let you send money to an invalid address by mistake, but it's best to have controls in place for additional safety and redundancy. Additional services might exist in the future to provide more choice and protection for both businesses and consumers. Some effort is required to protect your privacy with Bitcoin.
All Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances.
This is one reason why Bitcoin addresses should only be used. Always remember that it is your responsibility to adopt good practices in order to protect your privacy.
Read more about protecting your privacy. Transactions don't start out as irreversible. Instead, they get a confirmation score that indicates how here it is to reverse them see table.
Each confirmation what can i do with bitcoin money between a few seconds and 90 minutes, with 10 minutes being the average. If the transaction pays too low a fee or is otherwise atypical, getting the first confirmation can take much longer. Bitcoin is an experimental new currency that is in active development. Each improvement makes Bitcoin more appealing but also reveals new challenges as Bitcoin adoption grows.
During these growing pains you might bitxoin increased fees, whatt confirmations, or even more severe issues. Be prepared for problems and consult a technical expert what can i do with bitcoin money making any major investments, but keep in mind that nobody can predict Bitcoin's future.
Bitcoin is not an official currency. That said, most jurisdictions still require you to pay income, sales, payroll, and capital gains taxes on anything that has value, including bitcoins.
Some things you need to know If you're getting started with Bitcoin, there are a few things you should know. Securing your wallet Like in real life, your wallet must be secured.
Bitcoin price is volatile The price of a bitcoin can unpredictably increase or decrease over a short period of time due to its young economy, novel nature, and sometimes illiquid markets. Bitcoin payments are whwt A Bitcoin transaction cannot be reversed, it can only be refunded by the person receiving the funds. Bitcoin is not anonymous Some effort is required what can i do with bitcoin money protect your privacy with Bitcoin.
Confirmations Lightweight wallets Bitcoin Core 0 Only safe if you trust the person o you 1 Somewhat reliable Mostly reliable 3 Mostly reliable Highly reliable 6 Minimum recommendation for high-value bitcoin transfers 30 Recommendation during emergencies to allow human intervention. Unconfirmed transactions aren't secure Transactions don't start out as irreversible. Bitcoin is still experimental Bitcoin is an experimental new currency that is in active development.
Government taxes and regulations Bitcoin is not an official currency. Support Bitcoin. Recommendation during emergencies to allow human intervention.
A complete beginner's guide to Bitcoin, how it works and why it's so expensive.
If not, consider changing mondy service provider. With bitcoin, the integrity of the transactions is maintained by a distributed and open network, owned by no-one. Each Bitcoin that is mined requires more processing power and therefore mining Bitcoin now involves significant processing power and can no longer be done without specialized equipment. The idea was to produce a means of exchange, independent of any central authority, that could be transferred electronically in a secure, verifiable and immutable way. I want someone to expand my knowledgeteach me how it works and so many other things to do for me not to be cheated and make a mistake thanks. This can take minutes, or sometimes hours due to network bottlenecks. Find merchants and products. Dennis March 22, at cqn. The repercussions could be huge. The network automatically finds the shortest route. Click here to post a comment. Show comments Hide comments. Paper wallets Perhaps the simplest of all the wallets, these are pieces of paper on which the private and public keys of a bitcoin address are printed.