The general public, businesses and even traditional financial institutions are all taking an increasing interest in the world of crytocurrency.
The benefits are becoming better understand and therefore it is growing in popularity. Not least as the early adopters – who seized early manifestations of Bitcoin – are now beginning to report fortunes made.
However, Bitcoin is rising in usage not just due to potential investment opportunities. It is also an increasingly favoured method for buying and selling goods and services online. Impossible to counterfeit, it is also a universal currency system throughout the world. Transactions can be completed in real time, without fees or delays.
Perhaps the biggest advantage is that it is a currency that needs no “middle man” or physical process. Bitcoin is impossible to lose or steal.
All of this is going to ensure that Bitcoin and other cryptocurrencies gain even more ground.
Other blogs in this series provide easy to follow summaries and more information about what Bitcoin actually is, and how to acquire it.
This overview is designed to answer questions you may have about how to use Bitcoin, for a growing range of financial transactions.
Setting up to use Bitcoin
The other two things you need in order to use Bitcoin are an internet connection and the initial capital to start to use this decentralised and worldwide payment and sales method.
As covered in more detail in a previous blog, you first need to buy Bitcoin by any one of a number of means. This includes purchasing them from a trusted Bitcoin Cash exchange. Sometimes, this involves paying a trader a small service charge to provide you with an initial start-up amount. They will also ensure it is stored digitally for you.
Larger amounts can be purchased through a trading exchange. It is straightforward to open an account with a chosen Bitcoin trading exchange, just as you would with a bank.
There are also Bitcoin ATMS – places you can convert cash into Bitcoins. These are increasingly available in city locations throughout the world.
You could buy Bitcoin for someone else via the internet or offline, though it is imperative to check the credentials of anyone you deal with, just as you would with any other financial service provider.
It is becoming increasingly possible to earn Bitcoin as part of an employment contract too. And of course, you could offer products or services in exchange for payment in Bitcoin.
Incidentally, you may come across the term “mining Bitcoin” and hear of people converting complex computer programmes and mathematical equations to create new Bitcoins. In the early days, this was more common. It is now something only highly specialist companies with complex mining hardware tend to do, not least as there are considerable risks involved.
Mining is also sometimes used to refer to the processing of Bitcoin transactions.
How to use a Bitcoin wallet
However you choose to acquire your Bitcoin, you are going to need somewhere to keep it.
Some people simply keep Bitcoin in the account where it was created. However, for security and ease of use, many more prefer to transfer it to their own personal control and storage system. This involves having a Bitcoin “virtual” wallet.
The form this wallet takes depends on your own preferences and likely usage. There are various options and it all comes down to what you think would work best for you.
A wallet is a personalised storage system for Bitcoin that can sit on your mobile or computer. It is therefore based on a mobile app or web software. These options are usually free to download.
What is a Bitcoin public address?
From your chosen software, you will generate an individual security code for your wallet – a public Bitcoin address. This is a string of characters that are unique to you and that provide you with a colossal amount of security. It is similar to the concept of an email address but far longer and more random-looking, with around 30 distinct symbols.
You may also hear this referred to as your Bitcoin “signature”, or even as a “key”. It provides you with a digital identity, but not one that carries with it any method to trace your actual contact details. In other words, with a Bitcoin address, you are contactable but also totally anonymous.
This address is also your mechanism to spend Bitcoin and a place other people can send cryptocurrency to you.
You could send an amount of Bitcoin to your public address, from your wallet. Once there, you have the option to “send” or “withdraw” your Bitcoin.
One of the reasons you have this public address is that one of the pivotal features of Bitcoin is that all transactions are stored transparently and permanently on the internet. Anyone who wants to check the validity and movement of Bitcoin can access digital records of its history and movement.
Ready to use Bitcoin?
Having got to this stage, you are now in a position to spend, donate or invest your cryptocurrency. Remember, this is an instant and global transaction system. No matter where you are in the world, you can use Bitcoin wherever they are accepted.
There are numerous exciting developments in the acquisition and use of cryptocurrency. This includes the fact that the methodology for spending it is embracing an increasing number of innovations.
One option is to purchase a Bitcoin debit card (third parties charge a fee for this method of spending your cryptocurrency). This could be loaded with Bitcoin funds for you to use as you would any other debit card. Which means that in this context, you can use Bitcoin to buy almost anything you can afford.
Otherwise, much of your use of Bitcoin will be for online transactions.
When you make a Bitcoin transaction, including purchasing goods or services, this will appear on the peer-to-peer computer network. This is where it will be confirmed before it is finalised. In this way, measures are in place to ensure that the cryptocurrency you use is unique and that it is a bona fide sale.
Within a few minutes, you will receive confirmation that the transaction can proceed. Each software uses a different system for your Bitcoin wallet, but each will give you a confirmation score for the transaction.
This will rank reliability. It provides you with a valuable added security feature. You should only finalise the transaction when the score indicates that this is a reliable exchange or sale – unless you know the person well and can ignore a low-reliability count.
How to spend Bitcoin
You will find that, in the coming months, increasing numbers of merchants will accept cryptocurrency as a payment for goods and services.
There are already many online stores that are early adopters of bitcoin transactions. This includes some major e-commerce and technology companies, such as Expedia. PayPal, Microsoft and Dell.
However, it is apparent that physical retail outlets are also beginning to jump on board, in order to fight for market share. This includes, for example, Subway. So you will find increasing numbers of stores in your locality who will accept Bitcoin payments.
There have been sizeable purchases made using Bitcoin in recent times, such as high-end property.
There are even basic health service providers, such as dentists, willing and able to receive Bitcoin payments. International health service providers such as specialist private hospitals also offer the option of paying in Bitcoin.
You can use your Bitcoin to purchase gift cards. Among the companies offering this service are Amazon and US firm Sears. Or, you could use the Bitcoin as a gift in itself. Giving a quantity of cryptocurrency to someone for a birthday or wedding gift, for example, still carries a novelty value and provides the recipient with an instant investment opportunity.
To give someone Bitcoin as a gift you would need their public address, and then you could transfer the required amount online.
How can you make money from Bitcoin?
Largely the answer to that lies in patience.
As there are only a limited amount of Bitcoins created, they will rise in value as more people use and exchange them. Hold on to your bitcoin, and it should become a good investment.
Once familiar with the world of cryptocurrency, it is also possible to trade Bitcoin in order to make money. There are also opportunities to invest in Bitcoin mining initiatives.
It is important to emphasise that using Bitcoin as an investment is not easy or without its perils. You need to do research and understanding its risks, choosing any partners with the greatest of care.
Using bitcoin for your business
Another important way to use Bitcoin is to add it to the ways in which customers can pay for your products and services if you are in business.
Providing this alternative payment method gives your customers another option, and looks set to be an increasingly important way to keep a competitive edge.
You would set up Bitcoin reserves, a wallet and a public address as outlined above. Then, anyone wishing to pay in cryptocurrency would be provided with your public Bitcoin address. They transfer the required amount into your wallet from their own Bitcoin wallet.
Converting bitcoin back to currency
If required, you can use Bitcoin as a way to store some of your savings, drawing on it for purchases as and when needed. You could also convert it back to cash at a later date.
This could include taking physical currency out of Bitcoin ATMs. (This may involve a fee, so check the terms of the ATM carefully)
You can also convert cryptocurrency back to cash by selling it.
The science and other notes on using Bitcoin
You may be wondering how Bitcoin works in terms of the actual mathematics and computer science.
If that was easy to understand, we could all create our own version!
In a nutshell, it is like a huge digital public ledger. This is called a blockchain. All confirmed transactions are included as ‘blocks’ of data. As each block is created, it becomes transparent on a peer-to-peer computer network of users. They validate it. The fact that the network can see it is one of the ways it has inherent security and 100% reliability. Bitcoin transactions are public, and therefore it is impossible to sell Bitcoin twice, or steal it.
When you carry out a transaction using Bitcoins, the fail-safe systems used will ask for confirmation at least once (see above for scoring reliability). You could be asked to confirm the transaction up to six times. This is to avoid transfer of cryptocurrency involuntarily or without clear agreement.
Just one other important note on the topic of how to use Bitcoins.
You need to keep in mind that cryptocurrency transactions are binding. They are impossible to undo or reverse. This means it is imperative that you only use Bitcoins to invest, spend or sell, when you are dealing with a trustworthy business or individual.
If you do use your Bitcoin and find you have been scammed or made a mistake, there is no form of help available. It is irreversible and you are “on your own”.
Remember also to back up your wallet on a regular basis. Just as with any other digital information, you need to be sure you are not leaving yourself vulnerable to its loss if you have your laptop or smartphone stolen or broken beyond repair.
It is possible to store some of your Bitcoin in an offline wallet too, so you can still access it without Wi-Fi, or if you lose your ability to connect to your online wallet for any other reason.
Another thing to keep in mind is that Bitcoin is a fast evolving entity. Though the core premise and benefits stay the same, its application and usage change rapidly, which means you need to keep checking back on this website for new tips on how to acquire and use Bitcoin and of course, for insights on how to make money from cryptocurrency investment.