Using Bitcoin

What is Bitcoin good for?

A lot of people seem to ask this question, and it is a good question, but is best answered with another question: what isn't it good for? Cryptocoins like Bitcoin are capable of so much more than any other type of currency and that is why they have so much potential. The only limits on what Bitcoin can be used for is what people will accept for bitcoins. Wordpress and Reddit now accept bitcoin, and we even have a dedicated electronic super store for Bitcoin. Some people even pay their rent with Bitcoin. Also see our Shops & Services page.

Many people buy and sell all sorts of things using Bitcoin, some of the most popular items include video games, computer hardware, website hosting, and other items which are often purchased on the internet. It is even now possible to buy food and clothing products using bitcoins at several different websites and even some real world shops. Keep in mind that Bitcoin is still a relatively new technology and many people are just starting to learn about it. So while you may not be able to find a real bitcoin shop around every corner, this map of real world bitcoin shops may help you locate a nearby merchant accepting bitcoins.

There are also several auction/bidding websites where you can buy and sell all types of items using bitcoin. Ebay and PayPal work hand in hand to enforce ridiculous fees and screw people over. Try using alternative services instead of relying on these monopolistic businesses who try and control the market and write their own rules. These entities are only so huge and powerful because everyone continues to use them, even though many people are aware that they are abusing their power and cornering the market.

How do I get myself some bitcoins?

It is possible to mine bitcoins, but it's a very competitive business and most people don't bother mining their own bitcoins because it can take quite a bit of time and money. Instead one can simply purchase BTC or convert BTC into other currencies using an exchange such as BTC-e, VirWoX, Coinbase, Cryptsy, Bitstamp, CampBX, and others. Bitcoins can be printed to paper and used in the real world too. Businesses such as Coinkite are even making it possible to conduct in store transactions with plastic debit cards just like any other transaction.

Bitcoin exchanges usually have reasonably low fees compared to other types of currency exchanges, but you can always cut out the middle man by buying coins directly from someone in your area. Websites such as LocalBitcoins and #bitcoin-otc can help facilitate the process of finding trustworthy sellers/buyers near you. After you have acquired the bitcoins you should transfer them into a wallet which only you control. If you plan to hold onto the bitcoins for a long period of time you should create a "cold storage" wallet. Always make sure to protect your wallets with encryption and keep multiple backups.

How do I use the Bitcoin client?

The Bitcoin client is a software application that allows users to transfer and receive bitcoins from and to a local wallet file which is stored on their own computer. If you purchase bitcoins on an exchange you may transfer the BTC from your exchange wallet into your local wallet. This means that unless some one has access to your PC, they wont be able to access your wallet. For extra security, you can even encrypt the wallet file (newer clients have wallet encryption built in) and save it onto an external storage unit such as a thumb drive or optical disk.

First you need to download and install the Bitcoin client. The application is compatible with Windows, Mac and Linux machines. The first time you run the application you'll need to wait for the blockchain to download. This may take a anywhere from a few hours to several days depending on your connection speed. A wallet file will also automatically be created for you the first time you run the application. The GUI is fairly self explanatory and not very complicated at this point in time. However, there are other clients that offer more features, such as Armory.

Can't wait for the blockchain to download?

There are several lite Bitcoin clients that don't need to download the full blockchain or avoid downloading the blockchain all together. MultiBit is a very nice multi-platform Bitcoin client that uses Bitcoinj so the required blockchain data is dramatically reduced. Electrum is another very nice lightweight multi-platform Bitcoin client with features such as deterministic key generation, and it doesn't require you to download any part of the blockchain - instead it relies on a trusted external server to host the blockchain. Electrum comes with a default list of servers, but you can host your own Electrum server (Abe), all the code is open source.

Alternatively, you could use an eWallet: an online 3rd party wallet service such as the wallet, StrongCoin, or EasyWallet. This means you can avoid installing the Bitcoin software, but your wallet will be stored on the servers of a 3rd party entity instead of your own computer. These eWallets can be very useful but be very careful what services you use, because they may have access to your wallet - people have lost coins this way before - it's suggested that you don't store a large number of coins on these services. You also need to trust that they wont accidentally lose/delete your wallet data.

How do I know I'll get what I pay for?

As you may know by now, a Bitcoin transaction cannot be reversed, so trust becomes very important. This is an important feature of Bitcoin (non-reversible transactions), and it will not ever change. However, there are ways to make a transaction safer. The first thing you could do is check their bitcoin address on the Bitcoin Feedback website. If you still don't feel safe sending Bitcoins directly to other people, you could always use an escrow service. The Bitcoin Wiki has a small list of such services.

Useful resources:

Bitcoin Store (electronic super store)
List of sites that accept Bitcoin
Online Stores Accepting Bitcoins
Bitfreak's List of Shops & Services
Real world shops that accept Bitcoin
Bitcoin Faucet - Get free Bitcoins
Bitcoin Marketplace forum
BitBid - Bitcoin Auction House

Page last updated on: 2014-03-15 15:52:20