Please see our Article on Basic terminology which you may want to read for a more in-depth understanding of Bitcoins, Blockchain Technology, Miners and more. For now, we will keep this simple.
What is Bitcoin? Bitcoin is the largest digital currency with $3.5 trillion changing hands each day. Think about a long, long time ago when only cash was accepted. Then came checks, debit cards and credit cards and now digital currency. Digital currencies are already here so you might as well dip your toes in the water. Most major banks and financial institutions are exploring how the Bitcoin’s Blockchain technology can help improve security. There are 1,000’s of alternative digital currencies or altcoins – Bitcoin is the 1st, the largest and most well-known. Their are coins for games, gift cards, shopping, food… Just about everything. Some are just for transactions and others pay from 5% to 500% annual interest.
Why Bitcoins (and other digital currencies)? Money can easily be sent anywhere in the world via the internet without needing to trust anyone. Or, you could just pay with you phone at a local store that accepts Bitcoin. Transactions are fast and irreversible. Money received can be spent within a few minutes to an hour. This means no more bounced checks, high merchant credit card fees or long bank holds until funds clear! The typical Bitcointransaction costs less than 2 cents vs. 3%-4% for credit cards. In addition, the supply of Bitcoins is limited; no more government inflation by turning on the printing press.
What are Bitcoin Wallets?
A “Wallet” is like a Bitcoin bank account except you control your money. A wallet allows you to receive and send Bitcoins. There are many wallet options:
- On your Computer or Laptop
- On your Phone – iPhone or Android
- On a Website – Web Wallet (the cloud)
First, decide if you want a Web Wallet, a Computer Wallet or a Phone Wallet. You are not limited to one type but, a specific coin (or fraction of a coin) can only be in one place at a time – like your right pocket or your left pocket. Learn to use one type 1st and the others will be easy.
A good place to start is the Bitcoin.org website. They have a variety of wallets available in one place. A Web Wallet is hosted on a company website and is the easiest to use, however, you must trust the site to protect your Bitcoins.
If you select a Web Wallet, the host company has it all set up, secure, backed up and ready to go. You just add the coins. Coinbase is a major player with the home office located in the Silicon Valley and the company is quickly expanding worldwide. They are also a seller of Bitcoins.
If you select a Computer Wallet to start, you need to download it and open it in your computer (I use one callled MultiBit). Security is the key ingredient. We recommend you have Anti-Virus and Anti-Malware software (you should have these already ). In addition, we recommend an Anti -Keylogger – this stops hackers from recording your wallet’s password when you type it. Finally, you should backup the wallet.dat file. Caution: All digital currencies use the same name for the coin file – wallet.dat. They are each in their own folder. If you accidentally move or save the Litecoin wallet.dat file to the Bitcoin wallet.dat file the coins are lost unless, you have the all-important backup. A hard drive crash means no more money unless you have a backup of this file.
The Bitcoin wallet program will typically place the program in C:/Program Files/Wallet name. The wallet.dat file is “your money”. This file is located in a folder in the “Roaming” folder (Usually: C-drive – Users – Your Login Name – App Data Folder – Roaming Folder – Wallet Name.
A Phone Wallet can be downloaded from the same site as you download apps for your phone, in fact, several of the top 10 downloaded iphone apps are Bitcoin wallets.
All wallets automatically generate an address – a 34 character random string of letter and numbers. All transactions (coins in and out) are recorded and tied to your address.
The price of Bitcoins fluctuates the same as stocks do and you can buy, send or receive fractions of a Bitcoin. Currently a Bitcoin is less than $250. Fractions of Bitcoins are referred to as Sat (for Satoshi – the psuedonym of the creator of the technology). 1 Sat is .00000001 Bitcoins and approx. 4250 Sat = 1 cent US.
If you need help setting up a Computer Wallet, we can help and ensure that you have the safeguards necessary to protect your Bitcoins.
www.circle.com/en (wallets for androind & wallet)
Next week: Buying your 1st bitcoin, Sending and Receiving Bitcoin and where can you spend Bitcoins.