What is Bitcoin? What are The Ways to Secure Bitcoins
By Johan Curtis 10 minutes
Every country has their own currency. For example, France, Germany, and Spain have Euros, USA has US dollars, and India has Indian rupees. We all exchange money at our local banks or at foreign exchange centers, transfer it to our relative in other parts of the world or invest it. With the evolving technology, it is safer to say that most money transfers are being conducted via the internet. So is it really surprising to see an online currency like Bitcoin in the market? Of course not.
A growing number of people are now becoming interested in Bitcoin due to the rise in its value. People often ask us “what’s the story behind this Bitcoin”, honestly, no one actually has a clue about who created it. However, what we do know is in 2009, an unknown programmer Satoshi Nakamoto proposed a new form of digital currency called cryptocurrency. It functions similar to regular currency, using a means of exchange, a store of value, and a unit of account. Cryptocurrency has a huge demand for it and a marketplace just like other resources. The thing that makes bitcoin as the most popular cryptocurrency right now is its tangibility. It’s a digital cash – meaning it is stored and exchanged virtually within a peer-to-peer network rather than using hand cash transactions.
How to Get Bitcoins
After knowing what Bitcoin is and how it works, most people become interested in getting a few Bitcoins for themselves. But how?
When bitcoin actually came into the market, it was easily available through the mining process. However, before you jump on the bandwagon, you should know that bitcoin mining has become increasingly difficult due to its growing popularity. As powerful mining devices are being introduced and the decrease in the number of bitcoins that can be mined, it has become almost impossible for an average person to get bitcoins.
Apart from bitcoin mining, you can actually earn bitcoins just like you earn any other currency. You can provide goods or services in exchange for bitcoins. There are numerous classified sites that list offer of jobs that pay in bitcoins. Or you can ask your current employer to pay you the salary in bitcoins. This can be a great option for international freelancers particularly.
There are many other options you can try to buy bitcoins. You can buy bitcoins in exchange for cash or other digital cash currencies, buy using your credit cards through online services, or buy through PayPal or other online payment services. In some countries, you can buy bitcoins from a bitcoin ATM as well. There are many other options as well, but before you start buying for yourself, you need to do more research on how you can easily buy bitcoin in your country since, in most countries, bitcoin or any other cryptocurrency is banned.
How to Use Bitcoin
Since it is a new and unique technology, using bitcoin can turn out to be a really exciting experience. It can be used to buy just about anything. You can buy a brand new Audi A4, buy a luxurious house, or use them in a bitcoin casino.
You can also buy a bitcoin debit card that will enable you to load your debit card with funds through bitcoins.
There are many bitcoin merchants online that you can go to and buy gift cards in exchange for bitcoins. You can use these gift cards to shop at many different stores you may have used before.
To make the best use of your bitcoin is by purchasing VPN services to keep your system – in which you log in with your bitcoin credentials – secure and private. VPN has many other amazing benefits and you should buy a reliable VPN service to protect your bitcoins.
How Bitcoin Works
The reality of bitcoin is really confusing in terms of technology since it can be accessed via the internet and the chances of scam are very high, but if you know how the digital currency works, it would be almost impossible for a scammer to steal bitcoins from you.
Bitcoin uses blockchain technology at the basic level which is why it is much more safe and transparent than other cryptocurrencies. The blockchain keeps records of your transactions and then they can be used anywhere like in banking. It keeps the users anonymous and verifies every transaction at initiator’s end.
Blockchain puts data in batches or blocks, and these blocks get validated cryptographically so that can be linked together and for a chain.
Classifications of Bitcoin Transactions
In reality, there are no physical or digital bitcoins but only the bitcoin transactions that we make. They don’t exist, even on a system. For instance, you have bought bitcoins, but when you look at each bitcoin address, you will find no digital bitcoins inside, the same way you don’t find dollars or pounds in your bank account. You can’t point to a physical object or even a file and label them as bitcoin.
You will see only records of digital transactions between two or more addresses, with an amount that goes up and down. Every transaction that every happened is stored in the blockchain. If you want to run calculations on any bitcoin transaction, you may not find the data at the address, you will have to reconstruct the transaction by looking at the blockchain.
Bitcoin transactions can be done between one bitcoin wallet to another, and they are digitally signed to make them secure. Every user on the network becomes aware of a transaction, and the history of each transaction can be traced back to the time when the bitcoins were initially produced.
So, how does a bitcoin transaction look like? For instance, if you send some bitcoins to your father, the transaction will contain three pieces of info:
- An input, which is the record of a bitcoin address that was used to send the bitcoins to you in the first place.
- An amount, which is the total number of bitcoins you are sending to your father.
- An output, which will be your father’s bitcoin address.
Multiple Bitcoin Wallets Might be The Best Solution for You
Since you are interested in buying some bitcoins, there is one more thing that is really crucial and important for you to know about and that is the bitcoin wallets.
The private keys that are required to access a bitcoin address are all stored in a bitcoin wallet. In general, this digital wallet will give you access to your bitcoin address and allows you to sign off on transactions, but they might differ in terms of how you access them. There are different types of bitcoin wallets that users can choose from.
Mobile wallets are accessed through apps that allows you to transact whenever you want. While “full bitcoin” client prefers downloading the entire blockchain, mobile wallets are much better when you want to use a small part of the blockchain that relies on other nodes within the system to access the required data.
A paper wallet is a type of cold wallet and an important bearer instrument. If you have a paper wallet, you will have access to both the private key and the transaction address. Basically, it more like a private key printed on a paper. Although, using a paper to hold the private key is a very different from traditional methods, there are some companies that have incorporated the key into physical coins.
Similar to a paper wallet, a bitcoin hardware wallet is a type of cold storage in which bitcoins are stored offline. They also have the same digital security as paper wallets, which means they are only vulnerable to physical theft. However, hardware wallets eliminate the need to use the private key in wallet import format that can easily be used for online scams.
Hardware wallets are divided into two parts: one is the connected device and the other one is disconnected. The connected wallet contains the public keys and does all the work of a standard wallet by selecting a transaction to sign. However, you wouldn’t be able to sign it since the offline device contains the private key.
Online bitcoin wallets are also called web wallets. An online wallet runs on your web browser just like a website.
Backup Your Wallet
Storing a backup of your digital wallet in a safe place is very important. By doing this will help protect your bitcoins against any computer failure or human mistake. If you keep your wallet encrypted, having a backup will help you recover your wallet if somehow your system or mobile gets stolen.
Bitcoin wallets contain many hidden keys and if you have only backed up the private keys, you may not be able to recover most of your funds with those visible private keys. So it is always recommended to backup your whole bitcoin wallet so that you can recover all your keys and funds without any loss.
One more thing, you should backup your digital wallet regularly to make sure all the recent new addresses and change addresses you created are backed up. However, every app will soon be using wallets that require being backed up only once.
Encrypt Online Backups
Backups you store online are highly vulnerable to thefts just like every computer that is connected to the internet is vulnerable to viruses and malware. So, if you ever think of storing your backups online, always make sure that they are encrypted and secure from scammers and thefts.
Use many Secure Locations
Using only one place for your backups is bad for your bitcoin’s digital security. If you backed up your wallets to different locations, it is less likely that you won’t be able to recover your wallet. You can also use different mediums to backup your wallets including papers, CDs, and USB keys.
Encrypt Your Wallet
By encrypting your wallet, you will be able to set a password for anyone who tries to withdraw funds from your wallet. Wallet encryption will help protect your bitcoins against scammers and thieves, though it may not be able to protect the wallet against keylogging software or hardware.
Never Forget Your Password
When you encrypt your wallet, make sure the password you set is easy for you to remember. Because if you forget your password, your funds will be lost forever. Unlike your bank account, where you can change or renew your passwords, bitcoin gives you very limited password recovery options. Keep a written copy of your password on a piece of paper inside a safe place.
Use a Strong Password
A password that includes only alphabets or recognizable word is considered weak and can easily be broken. Be it for your Facebook or for email, your password should be comprised of alphabets, numbers, signs and should consist of at least 16 characters. If you want a secure password, look out for apps and software that automatically generates unique and strong passwords. Although a strong password can be difficult to remember, you need to memorize it somehow so that you don’t lose your bitcoins.
We can easily imagine Bitcoin becoming the only payment system for the internet in future. But right now, it is still in its infancy, but the demand for it is increasing day by day. There is already a large number of bitcoin investors and individuals who are keen to invest in this virtual currency. We can say that the future of bitcoin is still unclear right now all because of its authenticity, legal uncertainty, lack of widespread adoption and unstable exchange rates. However, if it all goes to plan, Bitcoin could turn out to be a turning point in the global currency. Until then, we can just wait and watch.