A Practical Guide To Getting Started With Bitcoin

Bitcoin is like cold fusion: It’s had a difficult childhood. Those few in the field are orphans, bastards at best.1

I’ve often wondered if Bitcoin would shed its thick glasses and step out into the real world, but until recently I had neither the time nor inclination to find out. However, I follow the commodities markets quite closely, and recently came across mention of it in an ETF manager’s research report. That prompted me to ask around, and what I heard back intrigued me, in an anti-groupthink sort of way.

Bitcoin will never be good for anything except buying drugs; It’s bullshit technology … smartphone games and hookup apps are where it’s at; Bitcoin can’t be used for marketing so why would I want to mess with it?

Shot down, over and over again. But it was the steadfast, verbatim answer to one question that got me thinking:

YOURS TRULY: Do you have any Bitcoin? Do you know how to get any?

EVERYONE: No. And No.

Maybe nothing had changed, and Bitcoin was still an artifice lurking on basement computers and circulating the “dark web”. However, seeing as nobody I talked to had any Bitcoin, mentioned they’d tried to acquire any Bitcoin, or seemed interested in doing so, I surmised this might just be a case of bad press, combined with the inexplicable desire of the self-professed psuedo-technorati to leverage their free time posting geo-tagged photos of their lunch plates.

Hence, I invested some otherwise scarce time to test my contrarian theory.

What follows is the quasi-organized regurgitation of an endeavor seeking out the simplest, most practical way, if any, for the layman to dip their toes in the Bitcoin waters. Cold water too, so those following wouldn’t get burned. It probably isn’t the path of least resistance – it requires a time commitment – but you will not have to spend a dime of your hard earned, government-issued currency to find a pot of gold gather some spare change.

And of course, learn something new. Like does Bitcoin have legs? Does it have any applicability to the present financial system? Can I acquire Bitcoin without meeting some cartel member in a dark alley?

But first, what is Bitcoin?

If you are technically adept I highly suggest reading the original Bitcoin white paper (PDF), authored by the enigmatic Satoshi Nakamoto, inventor of Bitcoin. For the other 99.99%: the Bank for International Settlements calls Bitcoin a digital currency with an embedded decentralised payment mechanism based on the use of a distributed ledger.

Yours truly calls it an experimental store of value, but one that trades more like a commodity for which there is but slight demand. Hence, an inordinate number of small transactions, and wide trading spreads; it lacks the liquidity of sovereign currencies. It is intangible – no paper or metallic representation exists – and it is created through encryption-based technologies and the internet (hereinafter referred to as the interwebsphere tubulesTM). It is not accepted at even as many places as American Express, hence its “value” is based less on commerce and more on perception (plus perhaps some input, like the electricity used to power the computer chips that create it).

Bitcoin may soon have its ISO 4217 currency code (XBT anyone?), but you don’t really care about that. You are just asking yourself “why bother?” Well we’ll get to that [opinion-laden screed] momentarily.

Where do I put it?

You’d think that “where do I get some?” would come next, but figuring out where to store your Bitcoin is actually more important, despite its virtual nature. Unlike your Renminbi, you can’t just stuff Bitcoin under a mattress; it exists solely on a shared ledger, and you must have access to that ledger to play with your loot. Think opening up a checking account before putting money in it, only there is no spoon there is no bank.

Can't do this with Bitcoin

Can’t do this with Bitcoin

Not to worry, as the ledger is freely available via a desktop application or through numerous online services. That access, combined with easy-to-use public-key encryption, constitutes your wallet. I suggests using a combination, i.e. multiple wallets and multiple venues, for security’s sake and so you gain a more in-depth understanding of how moving this store of value around actually works.

Desktop

While there are may options available for desktop wallets, a good starting point for those who are first and foremost interested in fulfilling curiosity is Bitcoin Core (formerly known as Bitcoin-Qt). It is the original bitcoin wallet, and requires downloading the entire bitcoin ledger onto your computer. It’s referred to in geekspeak as a full-node, meaning you are actually contributing to the stability of the bitcoin network when running it by providing a copy of the updated ledger for all the world to utilize. Want something lighter? Then you can peruse those types of clients at the same link.

desktopwallet

TIPS: If you plan on running the heavy wallet, make sure …

  1. You have at least 60 gigs of drive space, and that’s minimum just to get started as it’s guaranteed to grow;
  2. To exercise patience as the ledger is copied to your computer; depending on the speed of your internet connection and your computer, as well as how long you computer remains on during the day, this could take anywhere from several hours to several days;
  3. To open and close the application elegantly i.e. quit purposefully; don’t let your computer go to sleep while it’s running and/or just turn off your computer while it’s running, as database corruption may occur;
  4. To occasionally make a copy of the entire working ledger, preferably to removable media; if the data ever does become corrupted, say by ignoring tip #3, you’ll save a lot of re-downloading time by having said copy close by as the application is specifically designed to play catch-up with out-of-date ledger copies.

Web-based

Years back geek squads were scraping around for coinage using graphics processing units, previously discarded Linux towers, and soldering irons; it was a pain in the ass. Then bitcoin’s value in USD exploded, at which point those involved scrambled to take advantage of the newfound value … while it promptly plummeted back to earth. Meanwhile drug bazaars were busted and Mt. Gox, one of the first exchanges, started shitting lava (i.e. fell flat on it’s face, with an ample helping of hacking and fraud to keep it there). Many likely backed up their wallets (or didn’t) and pushed the idea aside.

Alas times have changed; there are now plenty of online services capable of handling the Bitcoin newbie’s needs. Further, said services seemed to have learned from the mistakes of the past, mostly by forgoing some anonymity in return for greater security. Or at least an illusion of trust. Yours truly took ahold of two of them, Blockchain.info and Coinbase, with the primary goal determining ease of use. What follows is a summary …

Blockchain.info

Blockchain.info caters to both the expert and the neophyte, and generally replicates much of the functionality contained within the core desktop wallet. And then some.

+ Pluses: intuitive interface for experts; ease of generating new receipt addresses; download keys to multiple cloud storage services; ease of message signing; generate paper wallet for backup; simple smartphone application.

– Minuses: full feature set a bit daunting for the newbie; exchange services are somewhat limited; requires valid email address.

Coinbase

Coinbase caters to everyday joes, with its biggest advantage being connected to a number of traditional financial institutions.

+ Pluses: simple signup and interface; simple smartphone application; connection to numerous traditional financial institutions;

coinbasebanks

– Minuses: generating new receipt addresses not particularly intuitive; couldn’t find message signing services; requires valid email address.

There are many online wallet services out there, but the above two are mine (at least for now). Your results may vary, but again I suggest signing up for several as they are free; you can get comfortable with whichever, then transfer Bitcoin you have in the wallets you don’t like over to another you do like. Any time you like, and quite speedy like too.

iOS bitcoin wallet apps

Ask and you shall receive, regardless of wallet (Blockchain left, Coinbase right)

Getting [somewhat] free bitcoin

When bitcoin first hit the scene, nearly the only way to get it was to mine it. Then exchanges starting popping up to facilitate trading, meaning being able to buy and sell Bitcoin for other currency such as Federal Reserve Notes a.k.a USD. Later basic arbitrage began, whereby sites offered bitcoin in return for the user viewing (and sometimes clicking) a pile of ads. The premise: give away a couple hundred satoshi (1 satoshi = 0.00000001 BTC) per visit, and pocket the difference between ad revenue and the handouts. Commonly referred to as faucets, they are a grand way to pick up some Bitcoin without jumping through possibly scary hoops, like handing someone your bank account information.

Here are some faucets I used for the trial, with good (i.e. reliable) results:

bitcoin aliens

86 ’em for moola

Moon Bitcoin – well-established faucet where you can claim every five minutes, and if you keep your browser open to the page the clock (and satoshi) keep ticking;

Bitcoinker – another long-standing faucet, on a fifteen minute interval; you can grab a sure thing or take your chances on a bigger score;

Bitcoin Aliens – part of a group of faucets that offers claims at five-minute intervals and pays out weekly; claims are small, but consistent;

Weekend Bitcoin – a Bitcoin Aliens-family site, you get a solid claim once per hour, and it pays on a similar time frame as its parent.

Bonus Bitcoin – fairly new faucet with random claim amounts every fifteen minutes; averages are solid, you can request payout anytime, and it offers a bonus on existing balances once per day;

Others I found which paid consistently, through a third-party conduit called FaucetBOX, included Bibi Faucet, RazerCrypt, Blue Satoshi, Dori Faucet and Bitcoin Drips. Each allows a claim roughly once per day, but said claims are fairly sizable. And because they work through FaucetBOX, you can accumulate enough satoshi for a payout to your wallet fairly quickly.

If for no other reason, try using faucets to earn Bitcoin for transaction fees. While you can send Bitcoin to someone else without designating a fee, doing so compensates Bitcoin miners for confirming transactions. Plus the fees are relatively cheap, and do expedite confirmations. You could earn the fees for a sizable Bitcoin transaction with just a few clicks and captchas.

Now for some TIPS:

  1. If you are claiming from a faucet that uses an intermediary like FaucetBOX to distribute payments, use the same receipt address hash for all those faucets to get paid out faster;
  2. Different faucets have different time frames for claiming, so group similar ones together to optimize the number of claims you make, and faucets with timers on them can be a big help in this regard;
  3. A number of faucets allow large claims, say over 1000 satoshi, but only once or twice per day, so make sure to sweep through them before you hit the sack;
  4. And finally (and likely most importantly) …

If at all possible, use a browser you don’t normally use for work and personal financial matters for claiming from faucets. Install ad blockers, and then disable said blockers only for the faucet sites you plan on visiting frequently. For my experimentation, I used a fresh installation of Google Chrome, combined with both Ad Block Plus and Ghostery. Flash was removed long ago, and I actively rejected calls to sites I was not on using warnings from Little Snitch. Bottom line: many faucet sites are sketchy, so cover your butt. I navigated these places for several weeks without any problems, but I’ve got a laptop locked down tighter than a snare drum. Hence, I’m providing no representations and/or warranties regarding the safety of any faucet sites.

Why bother?

No. You aren’t going to get rich; in fact, you might find it a waste of time, that is unless you want a glimpse of the possible future. Positives? Sure.

First, it’s kinda fun sitting on your couch while a Kardashian does something banal on the television screen, clicking around earning something (as opposed “liking” bad selfies for zip in return). Second, you’ll find out a lot about storing this “money” and moving it around – with allowance for mistakes since it was free – in the process tooling with “accounts” designated by what seems like scribble.

Take note: the world’s banking system – centralized fractional reserve, as well as individual account and routing numbers – is little more than a hundred years old. Credit and debit cards … roughly half that, and all constructed long before the internet was even a daydream. I’m willing to bet it’ll be obsolete in a jiffy – checking accounts possibly replaced by some mumbo-jumbo called a hash – and early movers will have a distinct commercial advantage in the coming age. You could say it’s akin to being the one of the first people to get a revolving line of credit in the mail … a BankAmericard for the 21st century.

But I already did.

MG signing off (literally … 1CNfM1M3TJzicXfN9PDZ1T1nGE747tWEsC)