How to Use Bitcoin

Bitcoin is the first digital currency to cut out the need for the middleman. By avoiding banks or payment processors, Bitcoin is a decentralized worldwide market that only requires you have an Internet connection to participate. While it's still experimental and expanding, Bitcoin is considered by many to be the wave of the future. To get started, either as an individual or as a business, see Step 1 for more information about Bitcoins.

EditSteps

EditUsing Bitcoin as an Individual

1. Set up your wallet. Like regular money, you've got to have a place to keep your digital money. Wallets are basically programs that sort and track your digital currency via your account settings. There are a variety of options available, depending on your intentions for using Bitcoin.
   
   • Mobile Wallets are bitcoin wallets that run on your mobile device making them portable and practical for in-store use. Mobile devices also tend to be less prone to malicious software than desktop and laptop computers - making them a more secure environment for your bitcoins. Some of the best Mobile Wallets are:
     • Airbitz
     • Mycelium
   • Software wallets don't run on a third-party service after download. These wallets are operated from your computer, where you'll have to run a local blockchain to keep your transactions anonymous. This is the wallet for which the Bitcoin was originally conceived. Software wallets include:
     • BitcoinQT - No longer recommended
     • Armory - Advanced
     • Multibit
   • Web wallets are always available online, making them probably the most convenient and user-friendly. All you need to do is set up an account and log in. They are, however, potentially somewhat less secure than hardware wallets, though each of these is also compatible with most Mobile phone providers. Web wallet options include:
     • Blockchain
     • Coinbase (Hosted Wallet)
     • Coinjar
     • EasyWallet
2. Get some Bitcoin. Now that you've got everything set up, great, but how do you get bit coins to spend? There are several options available to grow your wallet and acquire more Bitcoin to spend. While the system is somewhat unpredictable and still experimental, they seem to be appreciating in value, making Bitcoins a unique opportunity. You can earn Bitcoin in several ways.
   
   • To purchase Bitcoin, it's helpful to visit a database of Bitcoin marketplaces. You'll simply complete a transaction at most marketplaces, in which your currency in converted into Bitcoin. You can also convert cash into Bitcoin using a similar process.
   • To mine Bitcoin you can download and run a miner like CGMiner on a custom CPU that can theoretically turn a profit without doing much of anything at all. While you used to be able to do this on your home desktop, it's not much of a practical possibility anymore. You'll spend more on electricity keeping the computer running than you will turning a profit.^[1]
   • To trade Bitcoin, look for other people participating in Bitcoin interested in transactions. You can find them at trading sites. In addition, if you sell goods or services, consider offering Bitcoin as a method for accepting payment.
3. Secure your wallet. Now that you've actually got some coins in your purse, you want to make sure they're protected. Unfortunately, older Bitcoin clients won't encrypt the wallet.dat file, which means that anyone who can access it could theoretically swipe your Bitcoin. The good news is you can secure your wallet to ensure that this won't happen.^[2]
   
   • If you want, you can run a file encryption program. Click the menu option “Settings” -> “Encrypt Wallet”.
   • It's also a good idea to try to keep two different wallets, one account for daily use and making transactions and a separate savings account, offline, where you might consider storing the bulk of your Bitcoin.
4. Find merchants that accept Bitcoin. How do you use Bitcoins? The simple answer is that you can use Bitcoin in the same basic way that you use regular currency on a credit or debit card, the trick is to find merchants that will accept them. You might visit a database of local merchants that accept Bitcoin as a way of learning where you might use them, and what you might use them for. Click here for a local directory.
   
5. Shop at the Bitcoin Store. The Bitcoin store is a constantly updated marketplace that sells electronics like laptops, desktops, and home appliances on the ever-sliding scale of the Bitcoin exchange rate. For up-to-the-second accurate transactions, you can use your Bitcoins to buy valuable items securely and safely using the Bitcoin store.
   
6. Convert your Bitcoin into a gift card. One easy way around the hassle of finding places that will accept Bitcoin directly is to use your Bitcoin currency to purchase a gift card online that you can then use with a particular vendor more easily. Many big companies, from Amazon to Sears, have gift cards available via Gyft, an online marketplace amenable to Bitcoin transaction.
   
7. Convert Bitcoin currency into gold or silver. One popular use for Bitcoin currency is to convert it back into a more stable and unregulated standard, like gold or silver. Because the Bitcoin market fluctuates, it's a popular option. In early 2014, one Bitcoin is worth approximately $462.50 in US dollars, making it a decent investment in savings management.
   

EditUsing Bitcoin as a Merchant

1. Learn how to accept Bitcoin. Follow the basic steps of setting up a secure wallet and preparing for transactions as you would for an individual account, and then explore your payment processing options to make your business Bitcoin-friendly. There are a variety of Bitcoin services designed for vendors to facilitate transactions and work alongside businesses to make Bitcoin use simple and safe. Some have small transaction fees associated with them, while others are free. ^[3]
   
   • Blockchain is free and semi-complex, but requires no account or set-up.
   • Coinbox is basically the Bitcoin equivalent of Square, a mobile app that lots of small businesses use to process card payments quickly and affordably.
   • BitPagos is an international service that processes both Bitcoin and credit card transactions.
2. Understand the Bitcoin rate and accommodate for it. Lots of Bitcoin providers will automatically translate Bitcoin into your local currency for you, though for others this will be a necessary step, extending the length of some transactions. You need to be able to translate the price into the sliding scale of the Bitcoin quickly and effectively at your place of business. Given the unpredictable fluctuations of the value of the Bitcoin, and the length of time (sometimes up to 10 minutes) for a single payment to be confirmed, transactions in person can be a dodgy proposition at times.
   
3. Advertise your business as a Bitcoin merchant. Given that people all over have the same interest in participating in Bitcoin exchanges, it's a great idea to advertise your business as being Bitcoin friendly. Work it into any advertising materials and register with Bitcoin databases online to attract customers.
   
4. Exercise caution. Bitcoin is innovative, exciting, and full of possibilities. It's also experimental and volatile. It's important to know that Bitcoin payments are irreversible. So, if you get scammed by someone trying to exploit Double Payment loopholes, it'll be impossible to get your money back. Try to work a series of safeguard protocols into every Bitcoin transaction. Keep in mind the following concerns if you're going to start accepting Bitcoin at your place of business, especially in terms of what client to use for transactions:
   
   • How are the funds converted? How are they received?
   • How is the exchange rate calculated?
   • How fast are payments approved?
   • What risk is associated with the exchange?
   • Are there any fees involved?
5. Confirm all payments. Bitcoin transactions--even "instant" ones--are delayed by a few seconds, and can take up to 10 minutes to process completely. During that transaction period, it would be easy for a merchant to give a customer the "ok" during a window in which the transaction could still be reversed. Bitcoin itself recommends that merchants complete up to 6 separate confirmations or more on larger transactions to reduce the possibility of taking a hit.
   
6. Develop a tax strategy in regard to Bitcoin. While Bitcoin is unregulated and unofficial as a form of currency, most tax regulations require you to pay tax on anything that has value, including Bitcoin. Unfortunately, the IRS has recently ruled that you're also liable for profits accrued from the trade of Bitcoins.^[4]
   

EditVideo

EditTips

• This is known as peer-to-peer currency. It is an open source project.
• Transactions in Bitcoins are increasing daily, with about USD$30,000 being traded daily as at April 2011.^[5]

EditRelated wikiHows

• Profit from Peer to Peer Lending
• Use Peer to Peer Lending
• Have a Successful Open Source Project
• Install Open Source Software
• Enter Information About a Local Merchant on Citisbest.Com

EditSources and Citations

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