What is Bitcoin?
Bitcoin is a digital currency or, we might say, electronic cash that uses peer-to-peer technology for transactions. Here peer-to-peer means it is not managed by any central authority. Normal currencies are managed by a central bank but Bitcoin is managed collectively by the network. The Bitcoin software was developed by Satoshi Nakamoto and it is based on open source cryptographic protocol. Each Bitcoin is subdivided down to eight decimal places, forming 100 million smaller units called satoshis. In simple terms, it is a SHA-256 hash in a hexadecimal format.
Interesting facts about Bitcoin:
Bitcoin is a digital currency.
Because it is digital, you can literally backup your money, so, when properly cared for, it can’t be:
Frozen or seized.
Allows a direct and immediate transfer of value between two people anywhere in the world.
No banks, governments, or organizations control or influence it.
Cannot be counterfeited, inflated, printed, or devalued over time.
A peer-to-peer network functions as a distributed authority to record transactions.
Bitcoin operates on free, open-source software on any computer or smart phone.
There are no start-up, transaction, or usage fees.
Purchases can be completely anonymous.
Transactions cannot be reversed.
Privacy is enhanced with Bitcoin and it reduces identity theft.
Bitcoins can be exchanged in open markets for any other currency.
Bitcoin Storage Media
We already know that Bitcoin is digital currency and we are not able cash it out. In our world we handle our cash in our wallet or keep it in the bank. Here we do the same: We stored the Bitcoins in a Bitwallet. We can download the Bitwallet client software from http://bitcoin.org . This client software is compatible with Windows, MAC, and Linux operating systems. We can see the look of Bitwallet client software.
We can see the overview of Bitcoin wallet in the figure above. Our balance is showing 0.00BTC, which means we have nothing right now. We also see few options in upper side bar: send coins, receive coins, transactions, address book, and export. Now we can see in the figure below, in the Receive coins option, a long alphanumeric string under the address tab. This is our Bitcoin address, which is used for transactions, mainly for receiving Bitcoins in the form of payments. It is more like a bank account number which is used for sending or receiving money. It is a cryptographic public key in human-readable strings and it consists of alphanumeric characters, for example, 17zMBU1enmZALpbDPeo5UGXFYBWbAg7MdR
Next we are moving to the Send coins option; here we can see that there is an option for sending coins by adding their Bitcoin address in the Pay To section, then giving the Bitcoin in the Amount section, and clicking on Send to transfer it to the destination address.
Next we will see how to use the Bitcoin online wallet. We can create an online wallet account from the following link https://blockchain.info/wallet/. Here is a snapshot of my online wallet account that I created.
We can see what our online wallet it looks like in our client software. We have our Bitcoin address and we can see the account balance also, which is zero. And the same options are available here from the Bitcoin client software: Send Money, Receive Money, My transactions, and import/Export.
How to Acquire Bitcoins?
Acquiring Bitcoins is like the two sides of a coin. One side is very easy and other side is tough. There are two methods for earning Bitcoins. First is the easy method, purchasing online, and the second is by mining from online servers. We will cover both topics in this article.
There are many online vendors who are trading in Bitcoins, such as BIPS, Bitbox, MtGox, bitNZ, Bitstamp, BTC-E, VertEx, etc. Here we are going to show you how to purchase Bitcoin from these vendors; for example, we are using MtGox for purchasing. Go to the following website https://mtgox.com/ and sign up for an account. We can see in the figure below how it looks after signing in.
We can see in the above figure that there are two main options: Buy bitcoins and Sell bitcoins. If you want to buy, just give the number of Bitcoins in the Amount of BTC to BUY section and we can see that the price per coins is 122.00001 US dollar. Suppose we are buying 50 BTC; let us see how much USD we have to spend.
We can see that we have to spend 6100 USD for purchasing 50 BTC. So we see here that purchasing Bitcoins is not a big deal, just we have to invest money for it. Now we will show you the tough and interesting part of earning Bitcoins from mining from online server.
Mining Bitcoins is a process in which we run Bitcoin mining software, which solves complex mathematical equations in a mining server. If we are able to solve one of these equations, we will get paid in Bitcoins. Now we have to join a pool mining server. A pool is a group that combines their computing power to make more Bitcoins. We can’t mine alone in a server because these coins are awarded in blocks, usually 50 at a time. In this block you are given smaller and easier algorithms to solve and all of your combined work will solve the bigger algorithms. The earned Bitcoins are shared according to how much work you as an individual miner have contributed.
All the features you’ll expect a Bitcoin pool to have, including instant pay per share.
- Merged mining; get bonus Namecoins to improve profits or register .bit domains.
- Best in the industry graphs, statistics, and monitoring.
- Mining teams for competitions, charity, or just to organize your mining farms.
- Statistics page for viewing average shares, estimated earnings per block, hashrate and more.
- Forgot password feature.
- Dashboard with balance, average speed, shares and stale viewing, instant payout to Bitcoin address, worker creation and statistics for each worker.
- API for both user and total pool.
- Fully customizable.
The pool in which I am involved in is called BitMinter.
I will show you how to join this pool server. Follow the link https://bitminter.com and sign up for account.
In above figure we can see that the signup form asks for Worker name and password. Basically, for every miner that you have running, you will need to have a worker ID so the pool can keep track of your contributions. You can also see this worker after creating the account by going to MY ACCOUNT> Workers and here we can see our worker name, craker, is showing.
Now that our pool account is ready, what we need Bitcoin mining software.
First we have to install Bitcoin mining client software. There are many software programs available, such as BitMinter, 50Miner, Bit Moose, GUIMiner etc. We can use any one of these for mining but we are using here Bit Minter, which can be downloaded from this link https://bitminter.com/.
We can see the BitMinter client software in the above figure. In the top left side it shows my CPU processor name and below that is my GPU name, GeForce GT 620M. In the status panel we can see it showing the message “Found 1 OpenCL-compatible GPU,” which means my GPU card is detected by this software. Now we can start our mining process. Run the program and click on the play button and then it will ask for your pool server account details which we already created. Give the details and then click on Proceed.
Now we can see that our process is running and we can see our GPU mining speed in the speedometer. The speed which we are getting here is 12.97Mhps, which is not very fast. If we are using two or more expensive graphic cards with a high GPU core, we will get a higher speed. We are not using our CPU power because it will not give much speed but it will burn our system by getting overheated. GPU is always better than CPU for this purpose. A CPU is an executive and a GPU is a laborer. A CPU is designed primarily to be an executive and make decisions, as directed by the software. A GPU is very different. Yes, a GPU can do math, and can also do “this” and “that” based on specific conditions. GPUs have large numbers of ALUs, more so than CPUs. As a result, they can do large amounts of bulky mathematical labor in a greater quantity than CPUs.
Let us see the mining status. For this go to Tools>Mining status. Here is our status:
Now go to the account details option and there you will find your cash out settings. Add your Bitcoin address there; once you have earned Bitcoins, you can transfer them into your wallet via that address.
What to Do with Bitcoins?
Bitcoins work the same as paper money with some key differences. The Bitcoin price fluctuates so, if you invest wisely, you can make a decent amount of money by selling and buying them. Several business accept Bitcoin as a form of payment for services like Internet and mobile services, design, web hosting, email services, and VOIP/SMS services, as well as gambling sites. So Bitcoin can be used in many services as a made of payment. For example, we can see in the figure below that a security service allows Bitcoin as form of payment.