A Beginners Guide to Using Bitcoin
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You've likely heard of Bitcoin, but you probably don't understand how it works or what makes it so special. The biggest hurdle that cryptocurrencies have to overcome is to provide a platform that is not only easy to use and understand but one that is also ubiquitous.
We're going to spend some time explaining why Bitcoin, and indeed cryptocurrencies, are set to be a substantial part of the future of safe, secure and anonymous online shopping. While we're at it, we're going to explain how to setup your own Blockchain Wallet, how to buy Bitcoins, and how to make transactions using this digital currency.
The Power of Blockchain Technology
The Blockchain is a digital ledger of transactions that can be used to record anything of value. It is the technology that cryptocurrencies like Bitcoin are built on.
The digital ledger is recorded chronologically and publicly, yet it is pseudo-anonymous. In a nutshell, Blockchain technology allows digital information to be distributed on a decentralized network, but not copied. This prevents what's known as double-spending.
Here's an example: Think of document collaboration - you can save a document on your phone or computer and email it to someone for revisions, but you have to wait for them to return it to you before making any further amendments. If you share it with multiple people, it becomes a problem. However, this problem is solved by having a single document online (in the cloud) that everyone has equal access to.
If you'd like to learn more about the backbone technology that Bitcoin is built on, there is a host of information available via Google.
The History of Bitcoin
Bitcoin is open source software introduced in 2009 as a peer-to-peer payment system and digital currency. It uses cryptography for controlling and transferring money, all based on the Blockchain technology. It is used in the exchange of currency, services or goods.
Cryptography is a secure method of storing and transmitting data in a particular form so that only those for whom it is intended can read and process it. Bitcoin is decentralized, meaning there is no single server - it is a global network that everyone has access to, and one that is not and cannot be controlled by a single party. This is why financial institutions have reason to be concerned.
There are no intermediaries in these transactions, network nodes verify the transactions (this is what is known as Bitcoin mining).
Since the invention of Bitcoin, it has become highly extensive; minimal regulations and fees make it easier and cheaper to send money to anyone, anywhere, at any time.
How Does It Work?
With Bitcoin, you can send and receive money for goods or services without a bank or service provider deciding whether they approve of how you spend your money, or what you choose to buy.
The first thing to understand is that you don’t need to know how the Blockchain works to use it. If you are not a technical person, still you can easily use Bitcoin. You don't need to be a mechanic to drive your car, so the same principles apply here.
Key Facts about Bitcoin
- Transactions are Irreversible: After a transaction is confirmed, it cannot be reversed by anyone. Not even you.
- Pseudo-Anonymous: Bitcoin transactions and accounts have no 'real' identities connected to them. Your wallet address is randomly generated, your identity cannot be linked to a transaction, whether sending or receiving.
- It's fast and global: Transactions are propagated instantly on the network, and usually confirmed on a global network of computers within a couple of minutes.
- It's Secure: Cryptocurrency funds are locked to the Blockchain ledger. Only the owner of the private key can perform transactions. A Bitcoin address is more secure than any bank in existence.
- Unregulated: You don‘t need anyone's permission to use Bitcoin. It is free software that anyone can download. Once installed, you can send and receive Bitcoins or other cryptocurrencies without anyone telling you what you can or can't spend your own money on. Just like it should be, not so?
Getting Started with Bitcoin
When you install a Bitcoin wallet on your mobile phone or computer, your very first Bitcoin address will be generated by default. You can create more addresses in future if needed. Let your friends and other people know the address of your Bitcoin wallet so that they can pay you or vice versa you ask for theirs to make transfers to them. Think of this as your account number, much like how PayPal uses email addresses to send and receive money - just much more secure.
The Bitcoin Address that will be generated for you contains around 30 characters and will look something like this: 1WaurEJKVhom7xXEXaHnnX79RFvEGLnJvJjV
Balance: The confirmed transactions are stored in a shared public ledger - the Blockchain. Here, the cryptography is used to calculate the spendable balance of your Bitcoin wallet.
Transactions: This is the secret data that is kept in your Bitcoin wallet and is a transfer of value between Bitcoin wallets. This is proof that the transaction has been done from an authorized person that is the owner of the wallet. Once the signature is done, this transaction cannot be prevented.
Setting Up your Wallet and Buying Bitcoin
Making payments with Bitcoin is very easy, and you can do this following these three easy steps:
Step 1: Create Your Wallet
To use Bitcoin, the very first thing you need to do is get the Bitcoin wallet. Just like if we want to do a transaction from a bank, we need to open an account in that bank, in the same way, we need a Bitcoin wallet for making transactions with Bitcoin. With this account, you can send or pay Bitcoins, receive Bitcoins and even store Bitcoins. For this, we highly recommend using Blockchain.info (online and app) or Bitpay (app). You can also use an offline wallet on your computer like the one offered by Electrum.
Much like selecting which bank you keep your money in, the wallet provider you choose is completely up to you - they are all just as fast and secure as each other. Just make sure to secure access to your wallet and save the 12-word seed code in a safe place. The seed code is a combination of 12 words, that you can use as a backup at any later time to recreate or recover your wallet.
Step 2: Buy Bitcoins
Once you have installed the setup of the wallet, you need to have some Bitcoins in it. You can purchase Bitcoins using your credit/debit card or with a bank transfer. All you need to do is to provide your default generated Bitcoin address. Once you provide your Bitcoin address, the Bitcoins will be transferred to your account.
These are our recommendations:
- Blockchain.info - You can buy Bitcoins instantly either through PingIt Deposit or Phone Deposit, directly through the app on your smartphone.
- Bitinstant - Under "Pay to" select "Bitcoin Address", under "Pay from", select your convenient method of purchase. In the table below be sure to input your Bitcoin Address, amount of money you want to convert and so forth. Proceed along with the instructions.
- Coingate - We use Coingate to receive Bitcoin payments in our stores. You can buy Bitcoins with your debit or credit card on this site. You can also buy Bitcoins directly by visiting this link.
- BitPanda - Like Coingate.com, there is another site - from where you can buy Bitcoins and other alternate cryptocurrencies.
- Coinify is another trading platform for buying and selling bitcoins. You need to register here to trade.
Step 3: Paying with Bitcoin
Once you have Bitcoins in your account, you are free to spend them whenever and however you like. Here is the step by step guide to paying an invoice or placing an order in our stores using Bitcoins:
If you have taken the recommended option of choosing a wallet you can access on your smartphone, like Bitpay or Blockchain.info, you can easily scan the QR provided when checking out your order in our store. This informs the wallet about the exact amount to be transferred, and the right Bitcoin address to send to.
Automated QR-code Payment
- On the checkout page, select ‘Pay with Bitcoin’ as your payment method, and then hit the "Place Order" button.
- Select Bitcoin when the popup appears, taking you to the final confirmation page with the order total.
- Select "I confirm my order". A QR code is generated for your specific order and you will be asked to scan this using the wallet app on your smartphone.
- Once you scan the QR code, your wallet will prefill the exact amount and our Bitcoin Wallet address, and all you need to do is hit the "Send Money" button to complete your order.
- Within a few seconds, this will turn green, indicating that the payment transfer has been successful.
You can also pay with Bitcoin manually. Sometime wallets do not support QR-codes, like some desktop wallets or those accessed from the web. What you need to do is copy the Bitcoin amount and the address from the order page into your wallet, and send the payment manually.
That's it! Once you've setup a wallet, shopping with Bitcoin is faster and more secure than any other online platform.
If you have any questions, let us know below.