Where do I keep my bitcoins?

Bitcoin, Cryptocurrency

bitcoin logo

Having the power of being your own bank has become much easier with the use of modern crypto-technology and the creation of the block-chain. In time history will show the release of Bitcoin technology is the financial industries Napster moment. The financial industry is experiencing why technology in the hands of the users is disruptive.

The need for a person to have a bank account to deposit their currency in a trusted “safe” bank controlled by someone else has been eliminated. In a world where the trust of others has been a difficult state of being when dealing with money, now has a tool which eliminates the need to trust anyone (Bitcoin). Storing your money in the block chain requires the user to understand a new way to manage their money.

Since you now have the power of being your own Swiss Bank account at your fingertips, the first thing a user must understand is how to store bitcoins.

Follow these steps to becoming a full member of a new model of economic freedom.

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A few things to remember:

  • A Bitcoin Wallet is a place to store the digital keys needed to access your public bitcoin address and sign your transactions.
  • Think of bitcoin the currency as the “modern” equivalent to cash in a world which demands a better form of transaction technology. the current paper based cash or archaic credit card technology doesn’t protect.
  • Types of bitcoin wallets available:
    • mobile wallets
    • desktop wallets
    • web based wallets
    • paper wallets
    • hardware wallets

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General Grammar: Systematic Knowledge

  • Answers the questions of the who, what, where, and when of this subject.
  • Discovering and ordering facts of reality comprise basic, systematic knowledge.

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This section will define the terms needed to understand the essential elements of the types of software used to store bitcoin.

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What are Bitcoin Wallets?

Bitcoin Wallets

  • Wallets are the software tools which will allow you to make transaction with others who use the Bitcoin network.
  • Wallets store the private keys needed to access a bitcoin address to spend the your funds.

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What type of Bitcoin Wallets are used?

Types of Wallets

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What are Desktop Wallets?
  • These wallets are installed on your computer and you are 100% responsible for taking care of your bitcoins.

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What are Mobile Wallets
  • Mobile wallets give you access to your bitcoins in your pocket.
  • A mobile wallet is software which runs either on a mobile browser or an App on your smartphone.
  • Mobile wallets store the private keys for your bitcoin address.
  • Mobile wallets are not the full bitcoin client (smartphones don’t have enough memory for the block-chain)
  • Mobile wallets are designed for simplified payment verification (SPV)
    • ***Mobile wallets download a very small subset of the blockchain and then relies on other trusted nodes in the bitcoin network.***

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What are Web Wallets
  • Web based wallets will host your bitcoins.
  • Web based wallets store private keys online.
  • Web based wallets store your bitcoins on someone else’s computer.

The advantage of using a web wallet is access to your bitcoins from anywhere regardless of the device used.

The downside of a web wallet is you are not in control of your private keys. (hmmm, sounds good for daily use by not long term use).

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*Paper Wallets
  • A method for storing bitcoins offline as a physical document.
  • Paper wallets can be secured like cash or anything else of “real-world” value.
  • Paper wallets generate a bitcoin address with a public and private key QR code.

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*Hardware Wallets

A Cold Storage device

  • A dedicated device that electronically stores your public and private keys for bitcoin offline.
  • Currently Hardware wallets are limited (June 2014).
  • Hardware wallets can be used securely and interactively.

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Are Wallets Safe?

  • This depends on your new found banking skills.
  • The private keys stored in your wallet are the only way to access the transaction data stored in a bitcoin address.
  • The key to bitcoin safety is to become aware of your transactions and once you scan and complete the transaction there is no getting the bitcoins back.

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Are Bitcoin wallets anonymous?

  • Well yes and no. Bitcoins are considered pseudonymous.
  • No one knows what your private keys are.
  • But the entire transaction history of every bitcoin created is completely transparent.

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How to secure your wallet?

  • Encrypt your wallet with a strong password
  • Back it up
  • Backing up makes copies of your private keys
  • Back up the entire wallet
  • Create a scheme
  • Take your wallet offline
  • Cold storage

Paper Wallets: wallets that create a QR code and store your bitcoins offline.

  • The idea is to store the majority of your bitcoins in cold storage and sweep some to your hot wallets when you are wanting to make transactions.
    • This technique will protect you the most from losing your bitcoins.
    • Most wallets feature a cold storage option.
    • Creating a paper wallet and going physical with the offline security of your bitcoins.

Why you should use bitcoin

Bitcoin, Cryptocurrency

bitcoin logo

At this moment the world is going through a paradigm shift so great that we can’t truly comprehend how trans-formative it is. I have never had the opportunity of being aware of being on the ground floor of a historical moment. As grandiose as these two sentences sound, I believe every word I am saying.

  1. A new form of trust has been created.
  2. A new form of performing transactions for the goods and services has been created.
  3. A new form of economic freedom has been created for everyone on this planet to voluntarily participate in Freely.

The new technological tool to economic freedom is Bitcoins blockchain technology and below are a few reasons as to Why you should be using Bitcoin.

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Making transactions in Warp drive.

  • The speed of the bitcoin payment network is extremely fast for making transactions.
  • When you send money using the bitcoin network the transaction is instantly there.
  • The time period for a bitcoin transaction to occur is between instant and 10 minutes.
  • The current banking payment processing networks take extremely long to process.
  • If you deposit a check from another bank into your account; the bank often holds the check because it can’t trust if the funds are available.
  • Another example is making an international wire transfer; the company making the transfer charges the user an extremely high fee to send their money using their private payment network.

The price when you use Bitcoin is cheap. C’mon now, who doesn’t like this four letter word!

  • Imagine every time you use your credit/debit card to pay for your Iced Latte the merchant has to pay a transaction fee.
  • The merchant isn’t going to simply pay this transaction fee freely, the merchant will forward the fee’s they have to pay by charging you, the valued consumer of their goods and services, more money.
  • With Bitcoin the transaction fees are voluntary on the part of the person making the bitcoin transaction.
  • As the person attempting to make a transaction can include any fee or none at all in the transaction.
    • Hmmmm, total voluntary freedom to use a payment network and not have to pay a fee for using this tool sounds like freedom to me.
  • Unlike when you use the current centralized banking payment networks every time you swipe your card a bank charges a fee.
  • Every time a fee is charged diminishes the amount of money you can actually use towards your purchases.

Central governments can’t take your bitcoins away!

Does this need any further explanation?

If you cherish the lack of control over your financial freedom then the traditional banking system is for you.

If you feel the need of having access to your wealth controlled by a third party institution then the traditional banking system is made especially for you.

Here are a few examples of how governments use your money for the greater good:

Bitcoin is not controlled by a central authority.

This is a huge benefit for people who are losing trust in the “traditional” banking systems.

With Bitcoin there are no chargebacks.

    Using bitcoin technology will free you from someone calling their credit card company or bank to reverse a payment on a purchase. This type of technology makes it very difficult to commit fraud.

Bitcoin technology keeps your personal information is safe from identity thieves.

    People can’t steal your information from merchants.

    A few examples of old technology being abused in a modern connected world:

    With bitcoin no personal information is needed.

    With bitcoin a public key (cryptographic long random number generated) and a private key (an even longer random number generated) are the only things needed for proof a transaction occurred from you.

    Warning: never publish your private keys, these are the keys to unlock access to your public keys)

Bitcoin isn’t inflationary

    When a bank wants to increase money circulation they just print more fiat currency.

    When a government adds more money to the market, the overall value of the money is decreased.

    • ex: a gallon of milk cost $3.25 one year and if you wait a while the same gallon of milk could cost you $6.50.

    Inflation of your currency means a decrease in your personal wealth and a decrease in purchasing power.

    • Bitcoin can’t be controlled or manipulated by any central authority.
    • Bitcoin can’t be created by any government to inject more money in the economy.
    • Bitcoin is created by computers working to solve a complex mathematical problem.
    • Bitcoin’s are created every 10 minutes by miners. there will only be 21 million bitcoins ever generated by 2140.

When you use Bitcoin, you can be as private as you want to be.

    This one is another no brainer.

    Do you want the world to know about your personal purchases made?

    Do you want people to know about the organizations you support?

    Currently every transaction made can tell the world about every interesting thing you’ve done.

    • Bitcoin payment network is relatively private.
    • Bitcoin is completely transparent because of the blockchain public ledger.
    • Everyone can see how much a bitcoin address is worth.
    • Everyone knows where the bitcoin transaction came from and where the transaction was sent.
    • But, unlike current payment networks (insert all the money, credit, debit cards), with bitcoin no one knows who holds a particular bitcoin address.
      example of a public key address and a private key address: “3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy”

      ****Make a note: anyone who uses a bitcoin address over and over again or combines counts from multiple addresses into one single address, risk making it easier to Identify them online.****

The need to trust anyone is no longer necessary.

    The concept of a trust-less currency is a tough one to digest.

    1. Current banking system: you “have” to trust people to handle your money properly along the way.
    2. Currently you have to trust the bank
    3. Currently you have to trust a third party payment processor.
    4. And on top of all these outside parties, you have to trust the merchant you are using.

    All these groups demand sensitive information from you.

    1. Because bitcoin is a decentralized payment network, you don’t need to trust anyone.
    2. With bitcoin you send your transaction, it’s then digitally confirmed and secured by some unknown miner anywhere in the world who verifies your transaction.
    3. Now that we have a trust-less payment network, the merchant knows they will receive their money, regardless of who you are.
    4. Now the need for a merchant or anyone to know each other isn’t even necessary, unless you choose to do so (insert fear propaganda from government).

You are your Bank, and know you own it.

    Every electronic cash system is owned by someone else.

    Bitcoin is owned by the users (we the people of the planet earth) of the technology (insert hearts for open source software).

    This means you now have the power of being your own bank.

    Currently a bank or a payment system can decide to freeze your account for any particular reason without consulting you.

    This isn’t good for you since we need money to function freely in the world (another reason why so many organizations are disturbed about the bitcoin technology).

    Enter Bitcoin technology: you are the only person who owns the public and private keys to a bitcoin address.

    1. No one can ever take your economic freedom away.
    2. No one can ever seize your assets.
    3. But like all great powers comes great responsibilities.
      If you ever lose these keys to your wealth, then you loose all your wealth.

One more thing: You can create your own.

And now shit just got really weird.

  • All governments discourage you to produce your own version of the currency they print (aka counterfeiting if you are a single person) or money creation process if you are a part of the cool kids in the Federal Banking Systems.
  • Since bitcoin is a decentralized software that requires the users (we the people- lame I know!) to create your own bitcoin through mining if you happen to have enough computing power.
  • Mining is “straightforward.” All it means is leaving your computer and the software running.

And now you have joined the money creation racket of the world.

The Newbies Guide Through the Galaxy of Bitcoin

Bitcoin, Cryptocurrency

7 Attributes of Bitcoin (blockchain technology):

  1. Bitcoin is decentralized.
    • the bitcoin network isn’t controlled by one central authority.
    • all machines that mine bitcoins and process transactions are part of the network of machines working together to form the peer to peer network of bitcoin.
    • this attribute is important because, technically, no one central authority has the ability to create monetary policy and cause the currency to devalue. Like the collapse of the Argentinian Peso in 2014.
    • also no central bank can take take peoples bitcoins away from them, like the Central European Bank did in Cyprus in 2013.
    • if part of the bitcoin network were to ever go offline for some “strange” reason, the flow of money wouldn’t be stopped.
  2. Bitcoin is easy for anyone to set up.
    • conventional banks make it very difficult to open a bank account.
    • current financial systems make setting up a merchant account for a business even a bigger hassle.
    • you can set up a bitcoin address in no time. No one will hassle you for any information to set one up a bitcoin address. No one will make you pay any ridiculous fees to use your money.
  3. Bitcoin is pseudonymous (almost anonymous).
    • you can have multiple bitcoin addresses.
    • No bitcoin address is linked to a name and addresses, or any other form of personal information.
  4. Bitcoin is transparent.
    • every detail of all transactions ever made on the bitcoin network is stored in a public ledger (aka a blockchain).
    • the blockchain displays all bitcoin public addresses.
    • anyone can look to see how many bitcoins are stored on any address.
    • but no one knows who the address belongs too.
  5. Bitcoin Transaction fees are almost insignificant.
    • a conventional bank charges you a fee every time you utilize their service.
    • the miners (the backbone for the bitcoin network) of the bitcoin payment network might charge you a transaction fee from 40 cents to free for utilizing the service.
  6. The Bitcoin Network is really fast.
    • money can be sent anywhere and it will arrive in minutes (as soon as the bitcoin network processes it).
  7. Bitcoin is non-repudiable (crypto talk here)
    • once you send bitcoins, there is no one to call to refund (charge back) your money.
    • unless the person receiving them sends them back to you.
    • Remember when the bitcoin is sent, it is gone for good.

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What is Bitcoin?

  • a form of digital currency.
  • a payment network.
  • bitcoins are not printed by a central bank, unlike the dollar or euro, or any other national currency.
  • bitcoins are produced by “we the people,” running computer software around the world, trying to solve a mathematical problem.

What makes bitcoin different from fiat currency?

  • bitcoin is decentralized.
  • no single institution controls the bitcoin network.
  • the people who use the bitcoin network become their own bank.
  • unlike the normal currency which one central bank controls their money.

Who created bitcoin?

  • a person or a group of people using the name Satoshi Nakamoto.
  • Satoshi released the first bitcoin software in 2009 open source.

Who prints Bitcoins?

  • nobody does.
  • bitcoin is created digitally by the community of people that is open for anyone to join freely.
  • bitcoins are mined with the computing power in a distributed network.
  • the bitcoin network also processes the transactions made with the virtual currency.
  • this makes the bitcoin network a payment network as well.

Can you hack bitcoin and create an unlimited amount?

  • nope.
  • the bitcoin protocol (rules that make bitcoin work) will only create 21 million bitcoins by the miners, ever.
  • but bitcoins can be divided into smaller and smaller units.

What is Bitcoin backed by?

  • conventional currency once was backed by gold. Currently currency is backed by a promise by the government to support it.
  • bitcoin isn’t backed by a government or gold. bitcoin is based on mathematics.
  • miners around the world are using their computers to run the software for bitcoin that follows a formula to produce bitcoins.
  • the mathematical formula is freely available for people to study, learn, copy and redistribute (aka Open Source Software).
  • being open source software means anyone can look at the code and make sure it is doing what it is supposed to do.