What is bitcoin?
Bitcoin is the first digital currency to eliminate the middleman. By avoiding banks and payment processors, Bitcoin has become a decentralized, worldwide market that requires only an Internet connection to participate. Here is how you can get started using Bitcoin.
Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middle men – meaning, no banks! There are no transaction fees and no need to give your real name. More merchants are beginning to accept them: You can buy webhosting services, pizza or even manicures.
Some things you need to know
If you are about to explore Bitcoin, there are a few things you should know. Bitcoin lets you exchange money in a different way than with usual banks. As such, you should take time to inform yourself before using Bitcoin for any serious transaction. Bitcoin should be treated with the same care as your regular wallet, or even more in some cases!
Securing your wallet
Like in real life, your wallet must be secured. Bitcoin makes it possible to transfer value anywhere in a very easy way and it allows you to be in control of your money. Such great features also come with great security concerns. At the same time, Bitcoin can provide very high levels of security if used correctly. Always remember that it is your responsibility to adopt good practices in order to protect your money.
Bitcoin price is volatile
The price of a bitcoin can unpredictably increase or decrease over a short period of time due to its young economy, novel nature, and sometimes illiquid markets. Consequently, keeping your savings with Bitcoin is not recommended at this point. Bitcoin should be seen like a high risk asset, and you should never store money that you cannot afford to lose with Bitcoin. If you receive payments with Bitcoin, many service providers can convert them to your local currency.
Bitcoin payments are irreversible
Any transaction issued with Bitcoin cannot be reversed, they can only be refunded by the person receiving the funds. That means you should take care to do business with people and organizations you know and trust, or who have an established reputation. For their part, businesses need to keep control of the payment requests they are displaying to their customers. Bitcoin can detect typos and usually won't let you send money to an invalid address by mistake. Additional services might exist in the future to provide more choice and protection for the consumer.
Bitcoin is not anonymous
Some effort is required to protect your privacy with Bitcoin. All Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances. This is one reason why Bitcoin addresses should only be used once. Always remember that it is your responsibility to adopt good practices in order to protect your privacy.
Unconfirmed transactions aren't secure
Transactions don't start out as irreversible. Instead, they get a confirmation score that indicates how hard it is to reverse them (see table). Each confirmation takes between a few seconds and 90 minutes, with 10 minutes being the average. If the transaction pays too low a fee or is otherwise atypical, getting the first confirmation can take much longer.
|Confirmations||Lightweight wallets||Bitcoin Core|
|0||Only safe if you trust the person paying you|
|1||Somewhat reliable||Mostly reliable|
|3||Mostly reliable||Highly reliable|
|6||Minimum recommendation for high-value bitcoin transfers|
|30||Recommendation during emergencies to allow human intervention|
Bitcoin is still experimental
Bitcoin is an experimental new currency that is in active development. Each improvement makes Bitcoin more appealing but also reveals new challenges as Bitcoin adoption grows. During these growing pains you might encounter increased fees, slower confirmations, or even more severe issues. Be prepared for problems and consult a technical expert before making any major investments, but keep in mind that nobody can predict Bitcoin's future.
Government taxes and regulations
Bitcoin is not an official currency. That said, most jurisdictions still require you to pay income, sales, payroll, and capital gains taxes on anything that has value, including bitcoins. It is your responsibility to ensure that you adhere to tax and other legal or regulatory mandates issued by your government and/or local municipalities.
- 1Get some bitcoins with any of these methods:
- Buy small amounts of Bitcoin online. If you are buying under $2000 of Bitcoin or are new to crypto currencies try one of the combined wallet / bitcoin traders to get rolling. Examples include Coinbase and Xapo. These sites will allow you to buy a small amount of Bitcoin in exchange for an approximate 1% service charge. Like a bank, they will also store your bitcoin for you on their servers.
- Buy large amounts of Bitcoin via a trading exchange. If you are buying over $2000 of Bitcoin, you will want to take advantage of the lower commission rates offered on an exchange. These exchanges operate like a stock market with bid / ask spreads changing 24 hours a day. Creating an account at an exchange is a similar process to opening a new bank account, you will likely need to give them your real name, contact information and send them money. Different countries and currencies have different Bitcoin exchanges that are best to use in each geography:
- Take money out of a Bitcoin ATMs. Many cities around the world offer a bitcoin ATM where you can trade cash for bitcoin. These ATMs usually charge a 5-8% fee for doing the trade. An up to date list of bitcoin ATMs can be found at CoinATMradar.com.
- Buy bitcoin from a live person offline. All over the world it's possible to give someone a wad of cash and have them load some bitcoins onto your phone. Please only trade small amounts of money till you trust your trading partner. See LocalBitcoins for an offline bitcoin dealer near you.
- Earn bitcoin. Look for other companies that are willing to hire people in exchange for bitcoin. Or open a store on OpenBazaar (the bitcoin version of eBay) and sell your stuff in exchange for coins.
- Mine bitcoins. Download and run a "mining" program (CGMiner, for example) on a custom computer that turns math equations into bitcoin. While profitable mining was possible for individuals in the early days of Bitcoin, it's now in the domain of specialized companies. 
- 2Set up your first Bitcoin wallet. If you don't feel technically competent, it's perfectly acceptable to ignore the next few steps and just leave your bitcoin in the account where you bought them. In fact, most bitcoin holders do just that. But the beauty of bitcoin is that it's money that no third party needs to control for you. In addition, since exchanges store hundreds of millions of dollars of bitcoin, they are a very attractive target for hackers. So unlike stuffing dollars in your mattress, it's actually safer to store your bitcoins on your own rather than trusting them to an exchange. All the wallets listed here will not give any third-party access to your bitcoins:
- Mobile Wallets are Bitcoin wallets that run on your mobile device. Such wallets are portable and practical for in-store use. Mobile devices tend to be less prone to malicious software than are computers, creating a reasonably secure environment for small amount of bitcoin. Some of the best mobile wallets are:
- Web wallets are convenient and user-friendly, because they are always available online. All you need to do is set up an account and log in. The most popular web wallet is:
- Hardware wallets are highly secure and mostly foolproof. If you are new to bitcoin and want to store a lot of bitcoin safely, you'd be smart to invest in a hardware wallet. Popular hardware wallets include:
- Paper wallets are very secure for long term storage. While paper wallets are highly hacker resistant, they are cumbersome when it comes time to spend your bitcoins.
- Advanced wallets are not a great starting place for beginners. This is the type of wallet for which Bitcoin was originally conceived. You'll have to run a local copy of the blockchain to keep your transactions anonymous. The better known software wallets include:
- 3Create a public Bitcoin address. Use the wallet you created in the above step to create a public address for you. Think of a public address like an email address in that you can share it with anyone you want to send you email or in this case Bitcoin.
- A public bitcoin address will be a long string of seemingly random letters and digits like 16BPS8xb5k36MeNLWmfZ1zpjCqbDhgyaHg.
- 4Send a small amount of bitcoin to the public address you created above using the "withdraw" or "send" function in the place you bought your bitcoin. You may need to wait 10-20 minutes for a confirmation, but if you did everything correctly you should now see the small amount of bitcoin you sent in your personal wallet. Congratulations! You have successfully moved bitcoin to a wallet that you and only you control!
- 5Use your bitcoin to invest, shop, donate or give away. The list of things you can do with bitcoin is endless. Here are some ideas to get you moving
- Invest. Since there are only 21 million bitcoins that will ever be created, each bitcoin should rise in value over time as long as more and more people continue to use them. To be a bitcoin investor, simply hold your bitcoin and wait.
- Buy stuff by finding merchants who accept Bitcoin. Many online stores (such as Overstock.com, Expedia, Dell, and many others) accept bitcoin in the same way they accept credit cards. Depending on where you live you may also have a store near you that accepts bitcoin.
- Convert your Bitcoin into gift cards. One easy way to use Bitcoin is to purchase online gift cards from various vendors. Many big companies, including Amazon and Sears, offer gift cards via Gyft, an online marketplace that supports Bitcoin.
- Donate it. Many charities including Wikipedia accept bitcoin.
- Give some away. One of the joys of bitcoin is giving some to a friend and teaching them how to use it. Now that you have successfully moved bitcoin to your own wallet, you are a bitcoin expert! Grab your friends phone, install a wallet for them and send them a tiny amount of bitcoin to get them started.
Why would anyone buy Bitcoins?
Today people (including myself) buy or choose to earn it instead of their local currency, as a speculation on the future value. Some of us don't ever want to trade it back for a local currency one day; we just want to use it in a world that it is the #1 currency, overtaking the dollar and all others as the most widely accepted.
The odds aren't as bad as you seem to think.
First of all, I'm sorry to hear you were cryptolocked. I haven't had that displeasure yet, but I make backups of all my important apps and folders in real time so I don't think I'll need to pay them if they come for me. That's the plan at least.
Thankfully, at least with the Torrentlocker variation, 98.6% of TorrentLocker Victims Refuse to Pay Bitcoin Ransom so it is not likely that these scammers will find this strategy worthwhile to continue for the 1.4% of victims. That's a whole lot of risk & work for them to get rewards so rarely.
Bitcoin Security is taking a huge jump this year with the mainstreaming of both Multisignature wallets and Hardware wallets, so the hacking of bitcoins in general is soon to have just as dismal a success rate as the torrentlocker scam does.
About money laundering, you really should put that in perspective. Mainstream media might love to mention laundering as "one of the scary things about bitcoin," but it's still more risky than laundering cash by far because every transaction is recorded on the blockchain. Big crooks will never use bitcoin to launder, and not because they won't think they can't get away with it today... But because they know that the blockchain is an immortal record of their crime that will be around forever and one day someone might be able to backtrace it to them.
Remember, dollars are constantly laundered in amounts that sound like national GDPs. Here are just the fines paid on recent money laundering cases, all amounts are typically less than 10% of the amount laundered:
When all the biggest banks are annually laundering dollars far more than most countries GDP's, calling bitcoin a medium of money laundering is a bit like a turtle criticizing a formula-1 racecar for going too slow.
So why would bitcoin seem to have such a bright future to us that we'd believe it could be the #1 currency one day?
Because it's SO much more than a currency... The bitcoin blockchain has begun to enable a revolution in just about every industry, across the board. One day it's pretty much assured that all business and important records will be done on the bitcoin blockchain, period.
Here are my two favorite vids on this: