How can one obtain bitcoin?
Let’s commence off with the million-dollar question very first. There are four main ways by which one can obtain Bitcoin:
- Trade your fiat currency (Euro, U.S. Dollar, etc) to Bitcoin using an exchangesuch as Bitstamp
- Ask someone to send you Bitcoin
- BTC Faucets – these are websites which give out a nominal amount of free Bitcoin, sometimes in exchange for a Facebook-page “like” and so on.
Keep in mind that a single BTC unit is divisible up to 100,000,000 times, that is up to 0.0000001 BTC; this smallest unit is known as a “Satoshi” (in honour of BTC’s creator). So if you happen to receive 0.05 BTC for example, don’t feel bad about it; in fact, that translates to forty five Euro at the current exchange rate!
Moving on to the thousand-dollar question: where do you store Bitcoin?
Think of Bitcoin wallets as a far more nimble and versatile alternative to your (faux) crocodile leather wallets and purses. You can store them digitally, create numerous backups and can choose from a myriad of different Bitcoin wallets, all with different features and handy instruments. The basic purpose of a Bitcoin wallet remains the same across, namely that of accessing your Bitcoins and sending/receiving Bitcoins to your own wallet address.
A wallet address is a unique string of letters and numbers to which one can send or receive Bitcoins, and is the only means by which a sender or receiver can be identified, making Bitcoin a pseudonymous cryptocurrency. Endless wallet addresses can be created, with many persons opting to use a different address for each transaction in order to increase one’s privacy. Wallet addresses are generated from the public key, which can be securely collective with other people (unlike the private key, but we’ll leave that one aside for now). Naturally you still want to share the wallet addresses rather than the public key itself, as Bitcoins cannot be sent to your public key but only to your wallet address.
A typical Bitcoin wallet interface looks something like this:
A – Wallet balance
B – Wallet address
C – Exchange rates with fiat currencies
D – Transaction History
Sending Bitcoins is plainness in itself – click on Send Coins, paste the wallet address of the recipient, input the amount to be sent and hey presto! Transaction finish.
Disclaimer: we will be coming in into a slightly more technical, but still largely superficial, explanation of how transactions work. You are more than welcome to proceed reading, but if you choose lounging back on a sofa and binge-watch Game of Thrones, then that’s ideally fine as this will not influence your usage of Bitcoin.
Very first of all, it is significant to keep in mind that transactions are encrypted and the encryption protecting them can only be unlocked by the recipient of such transaction. This means that as the transaction is travelling through the network, no other person can access sensitive data in that transaction, and that includes the knot processing the transaction. The only accessible information is that which is listed on the public ledger, such as the transaction size and amount; no one can, say, stop the transaction, alter the amount from 0.1 BTC to ten BTC and redirect the transaction to another address, not even if that person were to control more than 51% of the network.
Bitcoin transactions work a bit differently than fiat currency transactions, with the major difference being the following one. If you have ten BTC and you want to send one BTC to another person, you are not just sending out one BTC, but in actual fact you are sending out all of your ten BTC. This is known as the transaction output. one BTC will be sent to the recipient, and nine BTC will be sent back to you, the sender, minus any transaction fees of course. In this way, a record can be kept of spent and unspent Bitcoins associated with your wallet address(es), and if one were to go after the trail of a single Bitcoin unit or a fragment thereof, one can trace it back to the block out of which it was generated.