Based on the “crypto-currency” concept of Wei Dai, Bitcoin is a peer-to-peer payment network established in 2009 that uses a virtual currency, the bitcoin, to conduct transactions. Bitcoin is independent of any country or stock exchange, but is used as an investment and medium of exchange by all members of its network. Getting bitcoins of your own is thus a matter of becoming a part of the Bitcoin network, and there are several ways to do this.
Steps
- Get a Bitcoin wallet. In order to keep the bitcoins you get, as well as to pay others with bitcoins, you first have to have an account, or virtual wallet, in which to keep them. Bitcoin wallets are part of the “block chain,” a shared public ledger that records each transfer of bitcoins, authenticating those transactions by matching the digital signatures of the sender and recipient to the sending and receiving addresses, which are 34 to 36-character strings of numbers and upper and lowercase letters.[1] [2] Wallet applications are available from bitcoin.org or a third party provider. There are software wallets for both personal computers and mobile devices, Web-based wallets, and hardware wallets.
- Bitcoin-QT is a software wallet application that runs on Windows, Mac, and Linux operating systems. Armory works on Windows and Linux, but not Mac. Bitcoin-QT was the first wallet application;[3] it is one of the most secure, but also one of the most memory-intensive. Bitcoin Core is a similar application. [4]
- Multibit is one of the easiest software wallet applications to use, supporting a number of languages. Like Bitcoin-QT, it runs on Windows, Mac, and Linux.
- Electrum, another downloadable application, is also designed to be fast and easy to use. Like Multibit, it runs on Windows, Mac, and Linux, but unlike Multibit, it also runs on the Android operating system.[5]
- Bitcoin Wallet is designed for mobile devices that use the Android and BlackBerry operating systems. Like Multibit and Electrum, it is designed to be easy to use. [6]
- Armory, in contrast, is a software application intended for serious users, with a number of ways to back up and encrypt transactions, including storing transaction records offline. However, it runs only in Windows and Linux.[7]
- Web-based wallet applications include Blockchain, Coinbase, CoinJar, Coinkite, and Coinpunk.[8] [9] They are more convenient to use because they can be used from any computer, but they are also less secure than software applications that reside on your computer.
- Hardware wallets install a portion of the wallet application to a USB flash drive or memory card.[10] [11] The hardware wallet must be connected to a computer in order to make bitcoin transactions. Example hardware wallets include Pi Wallet, BitSafe, and Trezor.
- Buy bitcoins. You can buy bitcoins from one of a number of bitcoin exchanges.
- Some exchanges are based in one country but accept currencies from several countries, such as Australia’s CoinJar, Slovenia’s BitStamp, or the United States’ Coinbase. Many of these exchanges are listed in directories such as How to Buy Bitcoins.[12]
- You can also search for people willing to sell you bitcoins directly through sites such as Bittylicious or LocalBitcoins.com.[13] [14]
- Accept bitcoins as payment for your services. A number of businesses and services now accept bitcoins as payment. To handle processing bitcoin payments, you can sign up for a merchant account through a service such as BitPay, CoinBase, or Coinkite.[15]
- Online services that presently accept bitcoins as payment include Flattr, Namecheap, Reddit, and WordPress.[16] Gyft.com allows users to purchase gift cards with bitcoins that can be used at various merchants such as Sears and Target.[17]
- You can find lists of businesses and charitable organizations that accept bitcoins as payment on directories such as the Bitpay Merchant Directory and Coinmap. .[18]
- “Mine” bitcoins. Although the best-known method to get bitcoins, mining is now the most difficult method to get bitcoins in any significant quantity, due to the half-life nature of bitcoin availability. (There are to be no more than 21 million bitcoins in existence, with the number of bitcoins to be created each year reduced by half from the previous year’s output.)[19] To “mine” bitcoins, you volunteer to process bitcoin transactions with your computer, similar to the way SETI@Home works.[20] For doing so, you get paid in newly-minted bitcoins or fractions thereof, as well as earning the transaction fee in existing bitcoins charged to those making the transaction. Miners must prove they have processed transactions by performing a series of mathematical calculations with their computers before they can receive payment.[21]
- To mine bitcoins with your computer, you need to install a mining application. Windows users can use applications such as GUIMiner or 50Miner; Mac OS X users can use RPCMiner or DiabloMiner, although the latter requires having OpenCL on your Mac; while Linux users can use CGMiner.[22]
- Mining bitcoins requires leaving your computer on for extended periods of time. Because of this, many bitcoin miners pool their efforts by joining a mining pool such as Slush’s Pool or a guild such as the BTC Guild. Pools and guilds typically charge an administrative fee such as 2 percent of your earnings. Each computer you dedicate to mining bitcoins as part of the pool is designated as a “worker,” and you’ll need to provide the address to your bitcoin wallet so your “workers” get paid.[23]
- Additional information on how to mine bitcoins is available at BitcoinMining.com. [24]
Tips
- Your computer does not have to be up and running for you to receive bitcoins. Payment transactions are recorded in the Bitcoin public ledger, which then updates your wallet when you open your wallet application.[25] You do have to leave your computer running to mine bitcoins, however.[26]
- Bitcoin transactions are confirmed slowly, often taking up to 10 minutes. During this time, the transaction can be reversed, but not after being confirmed. Large-value transactions may require multiple confirmations before being completed.[27]
Warnings
- While most jurisdictions regard bitcoins as legal, some, such as Argentina and Russia, have laws restricting or banning foreign currencies that may apply to bitcoins. Other jurisdictions, such as Thailand, may have laws that restrict bitcoin exchanges and related entities.[28] Those jurisdictions that do not restrict the use of bitcoins, while not regarding them as an official currency, may subject them to being taxed the same as any tangible currency or property, however.[29]
- If you’re considering bitcoins as an investment, be aware that exchange rates with non-virtual currencies can fluctuate wildly, given the novelty and speculative nature of bitcoins. You should not invest any more of your money in bitcoins than you can risk losing at any given time.[30]
- When purchasing bitcoins, investigate the reputation of the exchange you plan to deal with before buying or selling bitcoins through that exchange. Japan’s largest bitcoin exchange, Mt. Gox, declared bankruptcy in February 2014 due to poor management and having been hacked several times since 2011.[31]
- Although bitcoin owners’ identities are protected by their lengthy user IDs, their transactions are a matter of public record.[32]
- Because of the method of proving that miners have processed bitcoin transactions, previous bitcoin transactions cannot be reversed once a new transaction is processed. [33] Furthermore, if you should lose your bitcoin wallet, you lose your bitcoins forever.[34] (Similarly, the bitcoins in the Mt. Gox exchange were destroyed when its computers were hacked.)[35]
Sources and Citations
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source How to of the Day http://ift.tt/1CfWnaG
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