(Posted 2017-04-20 16:51:00 -0400)
There are plenty of “introduction to bitcoin” documents out there. But I haven’t posted in a while, and some people who know me might like it if I explained it, and I didn’t have anything else to do, so here goes.
I’ve been through several versions of this, and each one ended up going too deep into the weeds of cryptographic mathematics. So here’s as succinct an intro as I think I can manage:
The best way to think of bitcoin is as a worldwide, virtual bank. Transactions (“A gives X bitcoin to B”) are recorded in a big public ledger.
Everything is done via “bitcoin addresses”, which are sort of like account numbers. They look like this: 1Xj85sCpV8jMYCW3hc2LVU3rEWq7Dhwzo (that’s one of mine).
You can have any number of bitcoin addresses. Mathematically there are a lot of them – far more than the number of stars in the known universe. It’s recommended that you use a new address for each transaction.
There’s a private key corresponding to every address. It looks like this: 5HpHagT65TZzG1PH3CSu63k8DbpvD8s5ip4nEB3kEsreBF8or94. It must be kept private, because knowing it lets anyone spend the bitcoin in the corresponding “account”. (This one is not mine.)
A bitcoin “wallet” is one or more addresses, plus (usually) software to manage them. They are sometimes online and sometimes just in software on your computer.
I use Coinbase a lot. It’s an online wallet, plus stuff to let you buy and sell bitcoin. It’s available as a website and as iPhone and Android apps.
Electrum is good too, although there’s no iPhone app.
Bitcoin prices can fluctuate a lot. It’s currently at $1,237.67 per bitcoin, and the price has gone up $130.83 (10.6%) in the last month. Next month it may go down.
Bitcoin can be subdivided to eight decimal points. In other words, you can send or spend as little as 0.000 000 01 bitcoin, worth about $0.0000123767, or 1.2 thousandths of a percent.
Each transaction (sending or spending bitcoin) has a transaction fee, because transactions need to be “processed” (verified) by the network. The fee is usually small, like 0.0002 bitcoin (currently about 25 cents), although that can vary a lot. The bigger fee you pay, the faster your transaction will be verified.
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