The bitcoin system is one of the first types of crypto-currency which has existed in the market since January 2009. What makes bitcoin different from regular currencies is the fact that bitcoin uses cryptography to monitor and control the creation and transfer of the currency between different parties. For a general overview of Bitcoin, read our Introduction to Bitcoins post.
Bitcoins are generated over time at a diminishing rate, and the maximum amount of bitcoins in the market will be 21 million units. Since transactions are performed by computers operating on instructions in the bitcoin transaction, using bitcoin eliminates the need for a third party bank to complete online transactions.
Bitcoin is Decentralized
What makes bitcoin different from other online currency systems like Paypal is that the currency is decentralized. This means that no group or organization has control over it. This is unlike typical currencies such as Euros or Dollars that are monitored by central authorities such as governments or banks. Typical currency is controlled in terms of the printing and distribution of coins and notes to the public. Compared to other online payment systems, there are little to zero charges to transfer bitcoins (actually the large number of transactions have pushed the transaction price up in the last 6 months). Using bitcoins will be especially useful for businesses which carry out a majority of its transactions online.
To start using bitcoins, all you need is a bitcoin wallet. Since bitcoin is a virtual currency, you cannot hold it physically, unless you exchange it for goods and services. Your e-wallet is where your bitcoins are kept secure. E-wallets are convenient and easy to use. You can find many bitcoin wallet providers like My Wallet from blockchain.info. If you are buying or selling bitcoin through an exchange such as Coinbase or Bittrex, they handle your e-wallet for you as described in the Where to Buy Bitcoin post.
More information describing the wallet’s part in a Bitcoin transaction can be found on our How a Bitcoin Transactions Work post.
Smartphone Wallet Apps
Your bitcoin wallet can also be stored as an app on your smartphone. Having a smartphone will enable you to sell and buy bitcoins wherever you are. Apple now allows bitcoin wallet apps such as Blockchain.info and if you are an Android user, many mobile apps are available for you to buy and sell with bitcoins.
If you feel that your bitcoin wallet is unsafe, you will want to have desktop clients to store actual bitcoins onto your laptop or PC. When you start a wallet, remember to save the file on the computer and back up the file. Make multiple backups if you feel insecure. Using bitcoins give users a sense of safety, as they are not relying on other parties like banks to take care of their funds. Most users will prefer to use the original software which has been around since the inception of bitcoins – the Satoshi Client.
The best alternative for the security conscious is a hardware wallet such as Trezor, Keepkey or CryptoCacheKey. These wallets store the private key separately from your computer. All of these are more secure because they need a login PIN and require acknowledging any transaction with a button press. Since the button press requires a finger press, the hacker is not able to transfer bitcoin without physical contact.
After creating your wallet, you are on the way to selling and buying bitcoins. There are many ways that you can obtain this online currency. The methods include buying it from various sellers, receiving it in the form of product sales, doing actions and fulfilling conditions to obtain free bitcoins and also by mining bitcoins – only for advanced users. Bitcoin is a growing currency and will most definitely be one of the top items in the online world in the near future. For more information about bitcoins and bitcoin wallet, feel free to search the Internet for more information. With the usage of bitcoins, you will be able to earn extra income and you will have an additional way to receive and make virtual payments.