Bitcoin Baby Steps – A Guide to help you enter Bitcoin World

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Welcome to the world of bitcoin!

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Lately there are enough people who ask me for bitcoin. Two years ago I was taken as a joke by most of the people I know and most of the negative comments I received came from ignorance. Today I notice that there is a more mature interest.

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Graph of interest for the term “bitcoin” in google

Probably due to the media hype that has had, its price increase, plus some technical events that have generated news.

The idea with this publication is to clarify most of the doubts that they ask me.

Is Bitcoin money really?

Yes, it’s real money. When there is a community of people who are willing to provide products and services for a common currency this is real money and in this case that community is already big enough.

Can I buy things with bitcoin?

Yes, there are several ways to buy things with bitcoin.

Companies that directly accept bitcoin as a means of payment

Steam, Itch.io, Tesla, Overstock, Lamborgini, Microsoft are some examples.

Buying amazon giftcards, starbucks, etc

You can buy amazon giftcards or other retail by bitcoin on various websites like localbitcoins , egifter and even bitcoin wallets like copay and then use those giftcards to buy what you want.

Selling your bitcoin for Chilean pesos

You can do it using an exchange that changes bitcoin to Chilean peso like SurBTC, using services like Yaykuy that offer you a price in exchange for your bitcoins or putting you in agreement with someone in localbitcoins.

What happens if the creator of the bitcoin keeps all the bitcoins?

That is impossible to happen because:

  • The “creator” of bitcoin only created the platform. The bitcoins do not belong to him. Also, it is impossible for you to transfer money from other people because to do it you need a cryptographic key that only the owner has.
  • The code is open source. This means that anyone can check that the system is not cheating or has shortcuts made by the creator.
  • The movement of bitcoins depends on the network. The one that follows the rules established by the bitcoin code is accepted and the one that is not, is ignored and its fraudulent transactions are not going to be accepted.

What is the difference between Bitcoin and Second Life money, or World of Warcraft gold? Is not that virtual money too?

2Yes, it is actually virtual money. In fact , 92% of the money in the world is virtual . Nobody is paid their salary in a briefcase with bills. Most of the money you have is what the bank says according to your database.

The difference with those currencies or the bank’s money is that bitcoin is the first decentralized virtual currency .

What does that mean and why is it important?

It means that it works like the internet. Nobody can turn off the internet, because it does not depend on a centralized entity. There is no bitcoin company or the central bank of bitcoins or the country that controls the amount of bitcoins that are in circulation.

It is a system where anyone can receive and transfer money to anyone whenever they want, from and to any part of the world without having to register or deliver personal data. It’s like the money internet.

It is a monetary system where my money does not depend on what a bank or any institution says. The money belongs to you and nobody else. No one can take it away from you while you alone have access to the cryptographic key of your money.

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Via Cryptograffiti

If there is no central bank, who defines the price of bitcoin?

As with precious metals such as gold, the price is determined by the market. When there are more people willing to get rid (sell) of their bitcoin than the willing to buy bitcoins, the price goes down. When there are more people willing to buy bitcoin than the one who is willing to sell, the price goes up. It’s that simple

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Since bitcoin is a relatively small market (small market cap) in comparison to the dollar, it changes its price quickly (high volatility), which puts the nerves on edge that it invests for the first time.

Why the price of bitcoin rises so much?

The price of bitcoin is due to many reasons but the general upward trend is mainly due to its limited resources.

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Price of 1 bitcoin since it was created until today

Bitcoin is generated by emulating the precious metals mining industry. Every 4 years the bitcoin that is created is halved in an event called halving ( I already published on that previously ) establishing with this a maximum limit of bitcoins that can exist: 21,000,000.

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Amount of bitcoins in circulation and halving points ( source )

This makes it a deflationary currency, that is, it increases in value over time and as more people use it.

The bank’s money is inflationary, that is, it loses its value over time. It is because of the inflation that 1 kg of bread in 1998 was worth $ 300 and today it is worth about $ 1000 while a can of coca-cola was worth 1 bitcoin in 2011 and today’s price is worth 0.000013 bitcoin.

Where can I buy and sell bitcoin for Pakistani Rupees?

Buying bitcoins in Pakistan is very easy. There are several websites that are associated in buying and purchasing bitcoins in Pakistani rupees.

See links:

https://localbitcoins.com/country/PK

https://www.bitcoinpk.com

How do I receive and send my bitcoins?

Using a bitcoin wallet. For portability, ease of use and security my favorite is Copay / Bitpay but there are many other options .

In bitcoin you do not have a user account or login or password. You only have your wallet ( wallet ) that generates one or several bitcoin addresses ( bitcoin address ).

Bitcoin Address

bitcoin address is a sequence of numbers and letters that symbolize a virtual safe . This bitcoin address is the only thing that someone who wants to transfer bitcoin needs. It’s something like the current account number that you have to give to another so you know where to deposit.

The bitcoin addresses can be displayed publicly without any type of risk.

Private Key

Each bitcoin address has its corresponding private key which is also a sequence of numbers and letters but these allow to transfer the bitcoin that are deposited in that address to another address . It is something like the key to this virtual safe that allows you to get the money out of there.

Private key of an address

The private keys SHOULD NOT BE PUBLICLY DISPLAY FOR ANY REASON .

Generally for security the bitcoin wallets do not show the private key unless you enter the preferences and look for it there directly.

QR

In general, both the bitcoin addresses and the private keys are accompanied by their QR code representation so that a smartphone can scan them quickly with the camera.

What happens if my bitcoin is stolen? Who is responsible?

No one. If you have your bitcoin in a bitcoin wallet, only you are responsible for your money unless you trust a financial institution that holds your bitcoins for you. History has shown once , again and again that it is not a good idea to do that.

Many people have lost their bitcoin for theft, for leaving them in an exchange that is declared bankrupt or simply by carelessness, so it is very important to know how to keep your money safely and have backups of your wallet.

What is the safest way to have my bitcoin?

Never in an exchange. As long as you have your bitcoins in an exchange, the money is not yours. IT’S THE EXCHANGE . Unless you actively engage in trading and know what you are doing, do not keep your bitcoin in an exchange. It has already happened several times that the exchange closes and the people who had their money there lose it .

Remember, bitcoins stored in an address are those that have access to the private key of that address and nobody else.

Beware that under that definition neither coinbase nor xapo are a bitcoin wallet that gives you access to your private key , they are only an intermediary that keeps the money for you. The money is theirs, not yours.

The safest way to keep your money is by using a bitcoin wallet that gives you access to your private key . There are different types, depending on what you want to do. These two options are what I recommend:

If you have little money and you intend to use it often (more practical but less safe)

The safest thing is to keep them in a wallet on your cell phone and / or computer. My favorite bitcoin wallet is Copay / Bitpay . It is available for iOS, Android, Windows Mobile, Windows, OSX, Linux and as an extension of Chrome.

When you start, copay will show you a passphrase so you can back up your wallet. It is very important that you write down those words on a physical paper and keep it safe. With those words you can generate the private keythat controls your bitcoins and it is the only way you can recover your wallet in case it is lost or you lose the device in which you have them.

Passphrase example

If you have a lot of money and you want to keep it there for a long time (less practical but safer)

The safest way in this case is a paperwallet. A paperwallet is a bitcoin public address plus its corresponding private cryptographic key printed on a paper . Outside the internet.

You can make a paperwallet in:

  • https://bitcoinpaperwallet.com/
  • https://walletgenerator.net/

For greater security you can generate your paperwallet offline from the internet . This way you reassure yourself that there is no one watching what you do in your operating system. Remember to disconnect from the internet and any network once you have loaded the page.

Example of paperwallet. This includes a public address and its corresponding private key.

With a printed paperwallet you just have to keep your public address in a photo on your cell phone or in a computer so you can go depositing your bitcoins to that address.

For no reason keep your private key on your computer, in a photograph or digitized in any way. Just keep your paperwallet in a safe physical place where only you have access.

When the time comes to spend that money you should only import your paper wallet using your private key to a standard bitcoin wallet like electrum , blockchain.info or bitcoin core and use your bitcoin.

Warnings

Risk

Always keep in mind that an investment means taking a risk and in this case it is quite high. Nobody assures you that your money will increase. Bitcoin is a relatively small currency which makes it quite volatile. You can climb as fast as you can go down.

Do not make a trade if you do not know

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Seeing the volatility of bitcoin and other cryptocurrencies, many people are tempted to trade in an exchange without really knowing the basics.

In trading there are patterns, technical analysis tools. Indicators. We must pay attention to the news that may influence the price (fundamental analysis). You have to invest a lot of time to understand the new improvements and features of each cryptomoney.

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Trying to sell expensive and buy cheap you can earn a lot of money the problem is that there are people who are professionally dedicated to that and you would enter to compete with them. Being new is more likely to lose you win.

 

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Rava Desk

Rava is an online news portal providing recent news, editorials, opinions and advice on day to day happenings in Pakistan.

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