Tuesday, November 12, 2013

Fun With Bitcoin For Beginners

Let me start with this:

1P11zA1GaJcyjc7oVt1jVQvWcPoW12sv5R

(You do not have to send me any money, but feel free if you would like, I would encourage anyone so inclined to send me a really small but unusual amount, say 0.00173 Bitcoin for example and email me the information if you would like, particularly if you would like to mentioned (or not) here at my blog)

That is a genuine Bitcoin wallet, in which you can send me a rough equivalent of money.  At least if you know how.  And in this article I hope to tell all of you just enough to get started on the Bitcoin Trail.

It's a complicated topic, but Bitcoins ("BTC" for short) are a type of digital encrypted currency, this is one part of what deep-thinkers call "money", BTC does serve as a "Medium of Exchange" (one of the three roles of money). Germany in August 2013 (in the wikipedia article referenced below) declared BTC to also be a "Unit of Account" (the second attribute of "money").  No one has yet said that BTC would be the their role of "money ("Store of Value", gold is probably the best Store of Value there is).  BTC's price are extremely volatile, in the past year or two the price per Bitcoin has varied from around $5.00 each to about $365 (now).  So, buying or holding should be viewed as speculative, unless you are doing immediate transactions (buying or selling stuff, donating, etc.) or experimenting with the system (like I am).

Bitcoin is "safe" in one important sense: it is essentially impossible to decrypt (and so, steal) them.  But, BTC are NOT completely anonymous, in the screenshot further below, BTC creation is tracked by country, this is "sort of" public knowledge.

***

Here's a place where you can see how much a Bitcoin is worth, along with some other monetary instruments:

http://ounce.me

I donated 0.01 BTC to this site, although I was unable to put in a screenshot below.  In case YOU want to donate (as I did, hah!), here is their BTC wallet:

1ozMe81f5oUjCbtJUrFNfSHUfrmBGdedo

You should go check the site yourselves, I could not get a useful screenshot, but the site shows several handy (for many of my readers anyway) handy quotations ($-value of BTC, as well as the four US-traded precious metals (Au, Ag, Pt, Pd), crude oil (W Texas Intermediate) and the US 10-Year Bond Yield.  It also shows the price of gold and silver in BTC.

To bad I could not get the screenshot in, it is close to elegant, take a look!

***

Bitcoin was invented in 2008 (at least the concept) by "Satoshi Nakamoto" (they say) and involves a very complicated and hard-to-crack encryption system., reference: http://en.wikipedia.org/wiki/Bitcoin.  Wikipedia also had this nice little item re Paul Krugman, who does not like BTC...:

Economist Paul Krugman has been critical of Bitcoin, suggesting that the structure of the currency incentivizes hoarding[88] and also stating its value from the expectation that others will accept it as payment.[89] Krugman considers it wasteful to spend real resources, such as electric power, on the creation of Bitcoins.[90]

I am not a fan of Paul Krugman, in fact I usually "take the other side of the bet" (assume he is lying), so his distaste for BTC might actually be a positive...  Mr. Krugman!  Doesn't printing money use up real resources as well?

***

I was given 0.11 BTC (worth, roughly, $35!) by a guy whom I will call the "Original Donor"or O.D. for short.  He gave them to me, sent to my Bitcoin wallet at the top of this article.  He told me to go forth and "do things" (my words) and then write it up.  This has encouraged me to look into a number of interesting little niches, that technophiles will likely enjoy.  Because BTCs are divisible to eight digits (meaning you can give tiny quantities), 0.11 is more than it sounds.

O.D. also helped me to set up my BTC wallet (account) set up, I went looking for people who would accept a free gift of BTC!  I expected Zero Hedge would be a good hunting ground for Bitcoin recipients, went into the Zero Hedge "Chat Room" and inquired if anyone wanted free BTC.  Within about 15 seconds "qqqqtrader" put his wallet number out, so he (she?) was the first recipient, I sent 0.01 BTC (worth about $3.50).  I wound up giving similar amounts to two others as well as the the lucky "Atm0sphere" who got 0.019, I will get to that in a little while.

1MZoWrZRqmX4Uu1XN6Hsgqk7pA44NnUksM   -- qqqqtrader

13hxDqmZCdWixu2ydAciyVH5CbBtyjQ3Ym   -- WAMBACHUMBA

1FcuSYzb7EZREsBvAmQ298z6DDpxfwQZam   -- OldE_Ant

19GZ1VKUbK6TQYwzqd92ewRuE42rNRF6xo   -- Atm0sphere

(I also sent 0.01 BTC to my O.D. to continue my testing)

All of the above received (except Atm0sphere) received the same 0.01 amount.  The first three received theirs within about 30 seconds or so.  The next evening, Atm0sphere wanted a donation, so I sent him 0.01 as well.  But, this one did not go through in seconds like the others did...  I waited a few minutes, looked at my Multibit Client and tried to see what was going on.  The transaction was not being confirmed.  Ahh.  So, I told (ZH Chat) that I would try again, but with just 0.005 BTC, as my account was (and is) being drained...  Still, the two transactions were hung-up somewhere there in Cyberspace, so after a few more minutes, I tried again, but with 0.004 BTC.  Total: 0.019.  Just then he told me that the BTC had finally landed into his wallet, I then went to my Multibit account, and saw, yes indeed the BTC were transferred OK.

Lesson learned:  If you send out BTC, wait half an hour so before sending any more!

Since then, I have sent BTC (0.01 in each case) to the O.D., as well as to two interesting websites (ounce.me) and the interesting site mentioned recently by Zero Hedge.  Here is a most interesting screenshot that Andrew Hodel sent me of his http://fiatleak.com website (click on the image for a better view, I would strongly encourage everyone to go have a look at fiatleak.com, as when you seem the streaming content, some of what you see below becomes clearer...)::


There is a lot going on the above (again, please go to the site yourself!).  First, note that service shows near-real-time of BTC transactions around the world.  That big green number (+4888.1 BTC = approx. $1,784,000) refers to the amount of BTC sent from when you started looking at it that session (that is, it refreshes the screen from "zero" each time you go).  I would guesstimate that it took perhaps 60 - 90 minutes from when Andrew opened his session until he took that screen shot.

The red letters refer to currency, each is the local one used there.  USD is in US dollars, CNY is Chinese Yuan.  The little red number under USD (561649.48) means that $561,649.48 was converted from dollars into BTC.  In some 60 - 90 minutes...  The little green number under the 561649.48 refers to the number of BTC being generated (here: 1641.93 BTC).  China has even more impressive numbers (again, here): 4,635,429.7 Chinese Yuan (approx. $760,000) with a 2936.02 BTC.  China and the USA are by far the biggest users of BTC, here approximately 93.5% of the world total!

I will mention a three other features of the fiatleak screenshot above.  First, the little orange circles with a "B" in them are Bitcoins being created from local cash (left arc represents the past several seconds of US BTC creation), the two to the right are Chinese, and the one "over Italy" is in the Eurozone. Second, the little gold dots running along just above the currency symbols are BTCs being made.  The higher the little dot, the greater the amount.  If the amount is enough, the vertical green numbers appear, you can see a pair of BTC creations of about 48.5 BTCs ($17,700 each) each towards the left ("under Baja California" and "left of Peru").

I would strongly urge any of you who "do" BTCs to donate to Mr. Hodel, here is his BTC wallet:

1DUtwZkDZTy4ZDNzE7mDZ4r9QRZc2D8kCC

I sent him 0.01 BTC!

***

Results of my own (non-scientific) investigations among acquaintances regarding use of BTC were disappointing.

a)  I asked ALL of my Facebook friends (74) if any of them wanted any free (0.01) BTC.  Results?  0 /74

b)  I asked ALL members of my Joke List (about 52 members) if they wanted the same.  Results: 0 / 52

c)  I asked three members (a friend, an AT&T cellphone store and a Starbucks cashier) if they had even HEARD of BTC.  Results: 0 / 3

d)  I asked ALL members at pmbug.com (a gold-oriented forum-style website, 565 members signed up (so let's call it 250 active members), everyone should check it out as well).  Results: 0 wanted any BTC

So, among those I know (there is a fair amount of duplication in the above), Total:

74 + 52 + 250 = 376 people had their chance to get free money, NONE wanted it.

3 people I talked  with: 0 of them had even heard of BTC...

***

Bitcoin is very technical...

First I had to find a Bitcoin client-side program, my O.D. suggested Multibit 0.5.14, so I went to download it.  The download went fine until my computer then told me I needed to download Java (owned by Oracle now, it is some kind of computer language that can be run on many types of devices).  OK, OK, I downloaded Java as well.

After all of that, Mutlibit privides a desktop icon that allows you to start using BTC immediately (assuming you have any to spend or you can get someone to send you some).  After I was ready. the O.D. sent me the 0.11 BTC and told me to go forth and use them...

And so I have.  I have 0.02 BTC in my wallet.  That may not sound like much (it is worth some $8 if I read correctly this morning), but, I can chop my donations to 0.002 or even much less...

Here is an example of Multibit Raw Transaction Details (from me to "qqqqtrader"):

ab49600e12a0d32f8377d0298d1d9363c0a66049823d7599017831671a419d63:

Seen by 4 peers. Appeared in best chain at height 268931, depth 436, work done 52894100447296009660.
       from 1P11zA1GaJcyjc7oVt1jVQvWcPoW12sv5R / ca95255e10d533385e2d741f52c1c24c5191a82f8ecfb66796b5b933bd7f3fb6:0
       to 1MZoWrZRqmX4Uu1XN6Hsgqk7pA44NnUksM 0.01 BTC
       to 1P11zA1GaJcyjc7oVt1jVQvWcPoW12sv5R 0.0899 BTC Spent by 06f2fd676764a7f139b1d5c78da6aa216ef42acabd63b201197ae186a3e786e1

***

I was asked (by Comment at Zero Hedge) by "Bindar Dundat" if BTC was suitable for investment.

At this point I would respond "No".  There is too little history of BTC and the prices of Bitcoins are hugely volatile.  "Buy BTC at your own risk!"

***

That is enough for one article on Bitcoin.  I will be exploring BTC websites as well as seek out BTC users in my city for more information and maybe to buy some more.  I really need to buy something real, that will be an important test for me (and typical people, not just people who are very knowledgeable about technology).

That will be my next article on Bitcoin...

Your comments and emails to me are extremely welcome!  This is for my education, as well as for those of any of you who would be interested.


23 comments:

  1. Wonder what happens to "old" BTC money? I had some but don't know how (if even possible) to retrieve it. I got a new address!
    1Cu53EY2kvbc6pWMi6krXMS3ouJNpboH6u

    ReplyDelete
  2. Check your wallet Rocky, I sent you 0.005 BTC sent at about 1:49 PM US ET...

    ReplyDelete
  3. Excellent article, Thanks for the service. Still, I'd rather be able to hold it in my hand and know its' reality.

    ReplyDelete
  4. Hot dang! I'm rich... er. Thanks!
    Now if I can just figger out how to reclaim my older fortune with the original BTC address. I just abandoned it long ago assuming that BTC was a passing fad. Bought some on eBay just for grins, at a very nice price as I recall.

    ReplyDelete
  5. Thanks Robert, this is the most useful article yet on the nuts and bolts of BTC, I believe is is time to play. (Except it popped over $400 today - going really nuts!)

    ReplyDelete
  6. ...

    Did you do this Rocky?

    (Details, my bolding):

    edab88c05c2c963ceff0bea5022124d624157e7ad0fe3b478b0b09c87dc40fd0: Seen by 1 peer. Appeared in best chain at height 269471, depth 59, work done 129473140007992610761.
    from 1B8xPxmHwkaAAzULkVLYiNQthXM1DuMEKt / d8405fbf70a290cc33fd33fc84c67c598b3e70e9e35aba292617e3766da6def7:1
    to 1P11zA1GaJcyjc7oVt1jVQvWcPoW12sv5R 0.0049 BTC
    to 15RWv8yRS8VAs1U8Pq4SyVByzMuDMbczRF 0.032 BTC

    I do not know who owns that wallet, it matches NONE of my other transactions...

    Well, whoever did this,

    Thank you!

    ReplyDelete
  7. Great article - here is my btw address - 1DhBiBeYD4JNZvim4EefnEoFV2WMFc7e5d - also if you need a free cold storage wallet or a vanity BTC address come to http://bitcoinwalletnetwork.com and just click on the wallet -you can import the private key to your vanity address and then people will know who sent this BTC or for a merchant it's an advertisment with a vanity BTC address - I am just starting to play with this and it's a lot of fun. I plan to put Bitcoins behind Tor to make the transactions invisible - I write a blog uscyberlabs.com about BTC and Torr - I will send you a BTC your way - once again great job... IMHO

    ReplyDelete
  8. no offense, but whenever I hear BITCOIN, coming from somebodies mouth, my reflex is "STFU MORON" and I stop listening. Nothing personal, that's just what happens to me, which made it impossible to finish the article. ;)
    Greets, AD

    ReplyDelete
  9. Devil's Advocate, hey bubba*, I am experimenting around with Bitcoin as a beginner.

    *bubba is a Southern USA term for pal...;)

    It is really true, you open your mind, you can learn something new, every day even.

    ReplyDelete
  10. Hi Robert,
    "It is really true, you open your mind, you can learn something new, every day even."
    you mean open your mind, like learning about sniffing bath salt?
    okay, seriously. I continued with your article and opend "fiatleak". I mean already the headline is already plain outright stupid "currencies flow into btc..."
    No they dont: Whenever you have a buyer, you have a seller, had always been like that and will be for the rest of time. So who's selling? Too bad the site does not answer that.
    Now I watch that animation, and hey, it turns out to be true, where the idiocracy nation is located, the US, looking at it from a broader view: going long bitcoins by shorting gold (assuming that gold is leaving the US, like everybody claims) :D

    About "btc are "safe" is the biggest fraud I can think of: btc can only be used on the internet. So while they might be "safe" on your usb stick and during transmission in the network, as soon as handled with your internet computer they are at risk of exposure to a potential trojan in your computer or at the exchange where you want to sell them. Who guarantees them? Nobody!
    Greets, AD

    ReplyDelete
  11. Actually, AD, you did lead me to find an error in the text of my article (so thanks!). If you look closely at the fiatleak graphic, what it really measures is exchange of local currencies into BTC via the exchanges (the top of the graphic lists the BTC exchanges).

    "Bath salt"? What's that?

    My understanding of the whole BTC ecosystem is that the encryption process is safe & robust. Those who have had BTC stolen had them stored at poorly run on-line websites, rather than on their own computer, or even "offline wallets" (a topic I will be looking into soon).

    Also, I have been told by two people via email that they HAVE been able to buy real goods with BTC.

    Yes, you point out various risks (eg, trojans infecting a computer) that I know little about. Note "Beginners" as part of the title of my article.

    Yes, gold is safer. I am learning about BTCs for a variety of reasons, as there are some properties that BTC has that are of great personal interest.

    ReplyDelete
  12. @ Buster Cluster, I will drop your place and check it out, thanks!

    ReplyDelete
  13. "what it really measures is exchange of local currencies into BTC via the exchanges"
    ...not really, actually it is only half of the trade, somebody IS receiving the money!!!1111 What is so hard to grasp about that? So who is selling the btc?
    Okay so what it only leaves us with, is the turnover of the included exchanges. Big deal, so what? What are those numbers supposed to state? That the turnover is relatively small compared to the total market cap of btc, which is supposingly a perfect medium of exchange? I dunno, plenty of interpretations possible.
    You say, you heard from somebody that purchases are possible....well, think again, if the turnover is so small....or you think that an enterprise that excepts btc would hoard them? No way, they will immediately exchange them back to fiat, on the point of the purchase, only using btc as an additional service. But if that would be the case, exchange volume should be much bigger. So overall, smells fishy to me.

    If somebody wants to use bitcoins, go ahead. I personally even avoid using my credit card on the internet or dubious real world places, BUT at least if somebody f*cks around with my credit card, I dont have to worry and get a full refund (sometimes even before it is charged), happend to my wife twice, obviously somebody in Thailand copied it over a terminal and went shopping in England....you think I would use a credit card if I would have to take any kind of loss? Think again....

    I have been in the computer industry for over 20yrs. probably that's why I really dont trust any kind of computer and also my online banking I only use, because it is fully guaranteed by my bank AND is much more secure than btc (at least in germany always has an additional "offline real world handle").
    Greets, AD

    P.S. The first time FOFOA entered btc I was thinking it was for theoretical educational issues. Okay, fine. The second time, I noticed that he takes that stuff serious and that was the time I realized that he is kind of nuts, from out of this world...

    ReplyDelete
  14. Hello Robert, very informative and useful article, hope I'm not getting late for the party hehe, I am also trying this, my address is 18UaZsrj5LVqSjqdfeTsqW8SEZBFk2WWey

    ReplyDelete
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