Since early 2012 I’ve been fascinated with the concept of Bitcoin. At the time, I was into the CBS TV series “The Good Wife”, and was engrossed in the episode “Bitcoin for Dummies.” It was a memorable episode that gave me a crash course into the world of Bitcoin. That particular episode was not only compelling, educational, and entertaining — it was also the first time that a TV show ever featured the notion of digital currency.
With so much Bitcoin in the global limelight lately, I am considering accepting Bitcoin for my services. It appears relatively easy for most companies to accept Bitcoin. Recently, Dell became the biggest company to accept Bitcoin internationally. Dish Network, Expedia, Tesla, WordPress, Etsy, and Overstock.com also allow their customers to purchase products and services with Bitcoin. Since all these companies accept Bitcoin, I’d like to test the waters later this year.
A Little Bitcoin History
Bitcoin was developed in 2008 and introduced via a Bitcoin design paper (sent to an obscure cryptography listserv) by Satoshi Nakamoto (in October of the same year). In August 2008, the domain: bitcoin.org was registered and in that same year, the Bitcoin Project opened at SourceForge.net.
It is assumed that Satoshi is a pseudonym, since nobody has heard from this person (or group) since mid-2010, and Satoshi’s identity still remains unknown. For all the mystery behind the creator of Bitcoin: Motherboard declared in 2013 that Satoshi became the first Bitcoin billionaire.
According to the e-book (Seaman, 2013, The Bitcoin Primer, Para. 8-9) it’s an origin story worthy of a comic book plot. A mysterious cryptography genius develops a brand new currency capable of altering the global financial landscape, publishes a paper that explains the technology, and disappears from the discussion altogether as it begins to gain acceptance.
Wired Magazine said in The Rise and Fall of Bitcoin that “…while Nakamoto himself may have been a puzzle, his creation cracked a problem that had stumped cryptographers for decades. The idea of digital money—convenient and untraceable, liberated from the oversight of governments and banks—had been a hot topic since the birth of the Internet.”
(Seaman, 2013, The Bitcoin Primer, Para. 8-9) states that Bitcoin is a peer-to-peer decentralized digital currency that makes use of advanced elliptic curve mathmatics and cryptography, as well as a globally replicated public ledger called the blockchain (a history of all transactions). In simpler terms: Bitcoin is a digital currency that the bearer has complete control over, that is, until it is given to another party. When the other party receives Bitcoin (the receiver), the transaction becomes irreversible.
Education is vital before immersing yourself into the Bitcoin scene. Resources such as CoinDesk offer an awesome beginner’s guide. Udemy provides a free community-built course on Bitcoin, that is quite comprehensive. WeUseCoins offers a simple primer on how to get started with Bitcoin. If you are looking for something that is a bit more complex: check out the KhanAcademy 8-part Bitcoin Series. Let’s Talk Bitcoin is another Internet gem that also features Bitcoin podcasts. Google search and Amazon are also great resources that can spiff up your Bitcoin knowledgebase.
Bitcoins are stored in a Bitcoin wallet. This wallet consists of a public key (your wallet address) and a private key. The public key houses your wallet address and this is how people are able to send bitcoin to you. Your private key enables you to send bitcoin to other people. In essence: a public key is like a glass safe deposit box where the other party can view the contents of the box and your private key is like the key that you use to open the glass safe deposit box. The lesson to be learned when using a Bitcoin wallet is that you should always *keep full control of your private key(s), and always back-up your wallet.
Bitcoin wallets also come in six flavors:
- Desktop wallet – If you must use a Desktop wallet, choose one that offers two-factor authentication. Only use to store small amounts of Bitcoin.
- Offline wallet [cold storage] – A very safe wallet that is not connected to the network.
- Hardware wallet – A device that simply stores your wallet and offers back-up. No software can be installed. Make sure that the device has the ability to sign transactions.
- Mobile wallet – Choose an app that is not new; that allows control over your money; a secure environment; and simplified validation.
- Online wallet – This is a web-based third-party service.
- Paper wallet – 100 percent ownership of private keys [you have full control].
You can review the various options for most of the wallets listed above at bitcoin.org.
Secure Your Wallet
Securing your wallet is of primary importance. My preference is with either an offline or paper wallet. I am wary of using online and desktop wallets, both are vulnerable to hackers. Since a desktop wallet is run by software and hard-drive-based, this type of wallet could become a sitting duck for keyboard loggers, malware, and hardware failure. I am also leery of using mobile apps — many apps have centralized validation and too much control over your money. I also discovered that most mobile wallet apps have weak privacy — they spy on you, disclose information to third-parties, and have the capability to out your real identity.
I do have a few Bitcoin wallets, but they only contain tiny amounts of Bitcoin. It’s a start though!
*Control Your Private Keys
Make sure that you always maintain control of your private keys — do not leave all the control to Bitcoin exchanges or apps. In other words, if you do not control your private keys — you do not control your Bitcoins It is safer to try and steer clear of using online wallets and apps that give you minimal control.
Bitcoin Exchange Failures
Examples of past failures include Mt Gox’s $460 million dollar collapse, and quite recently the hacker-forced closure of the Canadian Bitcoin exchange Cavirtex. Since both exchanges were susceptible to cyber-attacks, other online exchanges may also be subject to these type of attacks.
Bitcoin Is Not Entirely Anonymous
Bitcoin.org states that all Bitcoin transactions are stored publicly and permanently on the network, so anyone can review the balance and transactions of any Bitcoin address. If you want to stay as close to anonymity as possible, you will need to adopt good practices in order to protect your privacy. Bitcoin.org provides further advice on how to do this, and says that “Bitcoin is often perceived as an anonymous payment network. But in reality, Bitcoin is probably the most transparent payment network in the world. At the same time, Bitcoin can provide acceptable levels of privacy when used correctly.”
7 Bitcoin Notions That Are Revolutionary
- The system is decentralized: It is a distributed network with no central entity controlling or regulating it.
- The system is finite: There is a limit of 21 million Bitcoins to be produced.
- The system offers privacy protection: If you adopt good practices.
- The system offers ease of use: Bitcoin is sent to an electronic address and there is a public history of transactions [blockchain].
- The system offers rapid transfers: Transactions are processed and dispersed within 10-30 minutes.
- The system offers no chargebacks: Bitcoin transactions are irrevocable.
- The system does not allow counterfeit digital currency – Unlike gold and cash, there are no fake Bitcoins.
The Bitcoin network is a decentralized peer-to-peer system that has no central authority or middlemen. The number of bitcoins will never exceed 21 million. The total Bitcoins in circulation (as of this writing) is currently 13,864,275 million, and is expected to top out by the middle of next century. Though the system does offer different levels of privacy — it is dependent on how educated the user is in the realm of:
- Not revealing their public address.
- Bitcoin wallet selection.
- Not subscribing to a Bitcoin service that is subject to a subpoena.
If you are interested in getting started with Bitcoin, The Bitcoin Page has myriad resources to get you up to snuff.
Do you have any Bitcoin notions that are revolutionary that you can add to the above list? Please feel free to leave a comment at my blog and share your thoughts.
This post was written as part of the Dell Insight Partners program, which provides news and analysis about the evolving world of tech. To learn more about tech news and analysis visit TechPageOne. Dell sponsored this article, but the opinions are my own and don’t necessarily represent Dell’s positions or strategies.