Learn more about Bitcoins – it was an item in my to do list… at the bottom of it. This was till I came across this headline which got me thinking.

When a government considers something as illegal it would not auction it… so this item in the to do list slowly raised a level up in priority.

My first question was: In which countries is Bitcoin legal? This is what I found…

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Link: www.wikipedia.org

Then I asked myself, if I have Bitcoins where can I use it? and I found this…

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Link: http://coinmap.org/

 

Ok, so I realised that this is something I should not ignore learning about and the item went up a bit higher in the list.

So I went on to learn about it, and to get my hands dirty so to speak… and I reached a conclusion which I would like to share first:

It is worth keeping at least a small amount, especially for online payments.

 

This is how I reached this conclusion:

History:
It started as an idea in 2008 for a cryptographically strengthened public ledger to record transactions. (bitcoin.org/bitcoin.pdf)
A small development community turned that idea into a working system and a block of 50 Bitcoins were released. This was called a genesis block.
They built in a solution to give more bitcoins to those who lend computing power to make the system work.
This would have stayed as a toy for the geeks, and in fact it was so for almost 18 months.

 

How did it become valuable?

  1. People started accepting it in exchange for goods and services – mostly criminals as it was easy to transfer and anonymous nature.
  2. Legitimate organisations like WordPress started accepting Bitcoins.
  3. Services to buy and sell Bitcoins appeared – though some failed, some were well backed. (coinbase.com)
  4. People in countries like Cyprus where there were worries about currency stability started stocking bitcoins, driving its value up further.
  5.  There has been issues with exchanges and with fraud, but there were no basic flaws in the Bitcoin system itself.
  6. Governments tried to stop as the value started to rise.

The key point to note here is that through all of the above factors, Bitcoins have always appreciated steadily in value in contrast to real world money that surely and slowly looses value if you hold on to it for too long. (I also understood that Bitcoins are highly volatile so one has to be careful)

 

So where do I start?
To start using Bitcoin you use something called a wallet, which is just like a real wallet to keep cash and cards.

So Bitcoin Wallet – is a software where you have 2 keys: One public and One private. Public key for the public to send you money and the Private key is for using the Bitcoins.

Be careful: Anyone who has access to your Private key will be able to access and use your Bitcoins!

There are many wallets, and you can find them in bitcion.org. The Wallet I installed: Multibit (for mac) 

Inside the software you can create many wallets and each one is like a bank account. You can create as many as you want – maybe one for each purpose. You can track transactions, network messages etc. There are different and new features in offer like in all other software.

 

Buying and Selling:
There are three ways to do it:

  1. Using exchanges: cryptocoincharts.info is a site where you can see exchanges, trading details, etc. Some popular exchanges include Upbit and Justcoin.  You can use an exchange if you want to set a buy option when the price is at a certain level and wait for it to happen. Recently, many exchages have gone bust so do not leave the money in them, just buy or sell and get your money or Bitcoins out fast!
  2. Institutions: When you want to buy Bitcoins at a given price offered by the seller, there will be fees and charges. Some institutions include coinbase.com and bitcoinatm.com.
  3. Directly from individuals from sites such as localbitcoins.com.

 

The wow effect
Everything that leaves an impression has some ‘wow factor’, and in the case of Bitcoins the wow factor was to see how easy it is to request and pay using Bitcoins!!

All you need to do is to generate a QR code with your key and send it to the person who has to pay you and all the person has to do is scan this QR code and click pay!

So no wonder when someone flashed his public QR code in TV, he received thousands in donation… like in this news.

 

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Anyone can send money to this guy as long as you can scan his QR code, and it just takes few seconds.

Why this is amazing:
For the first time, two people can exchange value/money without any bank or government as an intermediary.

Advantages:

  • Excellent for internet
  • Truly international – there are no borders applicable
  • Useful for micropayments
  • There is no central authority that can fail and make it useless

Drawbacks:

  • Uncertain market based value – This is true of many currencies too
  • Limited users – a problem that could go away
  • Limited infrastructure – a problem that could go away
  • No Recourse – this is the same with cash and the cost for guarantee in credit cards are very high especially for small transactions.

 

My conclusion:

Bitcoins is something to be taken seriously, I like the concept. There needs to be caution in handling it and legal issues to be careful about as with all money, credit cards, etc..
It’s worth keeping at least a small amount, especially for online payments.