Getting Started with Bitcoin (Beginner #2)

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Getting-Started-With-Bitcoin (Presentation from Video)

If you are new to Bitcoin this is what you need to know to get started.  This is for new users who just want to get a small amount of Bitcoin to see how it works.  Subjects such as long term storage/backups, anonymity, investing, Bitcoin mining, etc. are covered under more advanced topics.

You are a Pioneer.  Early web had growing pains:  Static web pages, no search engines, no Java, everything crashed all the time, not much regulation.  Some business refused to have web page because they associated the web with pornography and criminals.

Bitcoin is Experimental.  Technology is new, Services have growing pains, Regulators don’t know what to do, Patience needed to buy bitcoins, Mistakes could result in losses.  Start slow with small amounts.  New services are starting all the time making this easier and more secure.

A Bitcoin address.  It looks like 1JoEoube3F822qAunTF1U7mv9VQmEtcupD.  Think of it like an e-mail address where you can receive e-mail, for Bitcoin once you have an address you can receive bitcoins.

A Bitcoin Wallet.  The wallet is a collection of Bitcoin addresses.  You can send or receive bitcoins from your wallet and it keeps track of the transactions.

Choosing the type of wallet.  Most new users choose a web wallet.  However, the company operating the web wallet has ultimate control over the funds.   You may also download a wallet that sits on your local computer.   However, you are responsible securing and backing up your local wallet.

2-Factor Authentication.  When logging into your web wallet you will use a password as well as a 1-time code sent your phone (or a piece of hardware that plugs into a USB port).  Many sites use Google Authenticator but there are a few different ones and  “Yubi Key” is a brand of hardware that plugs into a USB port on the computer.  This should be set up immediately to avoid “sleeper” attacks where an attacker waits until funds are deposited.

Getting bitcoins through a Bitcoin exchange.  Most users go through Bitcoin exchanges.  This requires registration and verification and usually takes several days.  Some places will link to your bank account while other places will require a bank wire transfer.

Buying bitcoins in person.  There are also web sites that allow people to meet locally and conduct in-person cash transactions.  These have worked out well for the most part but there have been instances of robberies, counterfeit money being used, etc.  Clubs and meetups are the least risky.

Buying bitcoins via Paypal, credit cards, Ebay, etc.   Most places will not sell bitcoins via credit card or Paypal because those charges can be disputed but Bitcoin transactions cannot be recovered.  The seller is often required to satisfy complex regulatory requirements.  Paypal and Ebay have policies against it but you will see it from time to time on Ebay.

Work for bitcoins.   Several web sites are popping up that offer jobs payable in bitcoins.

Bitcoin mining can no longer be done by regular computers and requires specialized equipment.  It is not practical for new users.  Buying the specialized equipment using cash and then mining bitcoins is possible but extremely complicated.  Most mining companies operate on “pre-orders.”  Many things have gone wrong and many people have lost money.

Bitcoin Denominations.  0.001 Bitcoin = 1 mBTC.  Payments will be normally done in milliBitcoin often labeled mBTC or called MillyBits.  When a Bitcoin is worth $200 a MillyBit is worth 20 cents.  Bitcoin is often labeled BTC.  However, Bitcoin exchanges are also using XBT, a proposed international standard.

Public Key/Private Key.  Each Bitcoin address actually has 2 numbers.  You can think of it like 2 account numbers, a public number used to receive the bitcoins such as 1JoEoube3F822qAunTF1U7mv9VQmEtcupD and a private number used to spend the bitcoins.  Anyone who has this private key can spend the funds either now, or in the future so keep them safe! 


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