November 18, 2014—Been putting off learning about bitcoin? Sooner or later, you’re going to wish you had some handy. Now is a great time to get comfortable with this new technology.
Bitcoin is an open-source cryptographic currency that uses peer-to-peer technology, rendering central banks like the Federal Reserve essentially useless. Because central authorities do not own or control bitcoin, its value is determined subjectively by individuals who voluntarily decide to use and exchange bitcoin, as opposed to the whim of some controller. Unlike fiat currencies, bitcoin is limited in supply and is not debt-based. Sound interesting? Here are five simple steps that you can take to start using bitcoin.
1. Educate yourself.
There are some important things that you should know about bitcoin before you start using it. These include securing your bitcoin wallet, protecting your privacy, and understanding risks while debunking the myths.
Securing your bitcoin wallet is no more important than it is to secure one’s personal wallet or purse. When you create a bitcoin wallet, a file is created on your computer or cell phone. You should copy this file onto other devices, like CD roms and USB drives. Individuals can even print their wallet on paper or store an encrypted backup online.
When a user creates a bitcoin wallet, whether on a smart phone or desktop computer, there is often the option of encrypting the wallet. Encrypting the bitcoin wallet with a strong password will ensure that a thief cannot access the contents of your wallet if they steal it. What encryption is to bitcoin, a safe is to gold.
Protecting your privacy requires that you understand the traceability of bitcoin. Bitcoin is not anonymous, but there are steps that individuals can take to become more anonymous. Some of these methods include exchanging bitcoin over the Tor anonymity network, using coin-mixing services, and creating a new bitcoin address for each transaction.
Understanding the risks and debunking the myths are also essential before one should consider using bitcoin. As bitcoin is still in its early stages, the price of a bitcoin is volatile. The currency is still experimental, which is why one should keep their bitcoin software updated.
Some suggest that the value of bitcoin is determined by how much electricity is used by computers to mine from the limited supply. On the contrary to the labor theory of value, bitcoin derive their value subjectively by individuals. Another common myth or misunderstanding is that individuals must purchase at least one bitcoin, but the price of one bitcoin can be expensive. Bitcoins, however, are divisible down to eight decimal places, so fractions of a bitcoin can be acquired.
Bitcoin offers a wiki that sets straight other common misconceptions, which can be viewed here. Click through to the next steps…