How to Use Bitcoin
Bitcoins are a form of electronic money, but they aren’t something you can stick in your pocket. So, how do you use them?
Understanding Bitcoin Addresses
The first thing you're going to need is a bitcoin address. Sadly, these are the unfriendliest things you’ve ever seen. They’re long strings of alphanumeric characters, generated entirely at random.
What will stop thieves stealing any bitcoins sent to my bitcoin address?
There's where the private key comes in. Each bitcoin address has a private digital key to access it. It needs this to restrict access just to the owner so that no one else can start sending bitcoins from that bitcoin address. You must keep this private key to yourself, otherwise, your bitcoins will probably be stolen. That private key is yet another long string of gibberish.
All this gibberish is hard to remember! It’s not the kind of thing you’d really want to keep in your head. Luckily, bitcoin wallets are designed to keep track of all your addresses, so that you don’t have to write them down in a list somewhere.
You’d need a bitcoin wallet anyway, because when you send someone bitcoins, you must tell the rest of the bitcoin network about it for it to happen. That requires a software program.
The only way that the bitcoin network knows that your address has some unspent bitcoins is because everyone on the bitcoin network agrees that you do.
The status of the entire bitcoin network is held in a giant ledger, called the blockchain.
The blockchain is a large file that everyone on the network shares. It contains a record of which bitcoins were sent where, and when, going all the way back to the very first bitcoin transaction.
Your bitcoin wallet tells the network to update that ledger, showing that bitcoins have been sent from one of your addresses to another address.
All the other bitcoin software on the network then confirms that this happened, and it gets written into the ledger.
You can download a bitcoin wallet for free, and it will handle all of your bitcoin addresses for you, while also allowing you to make payments to others.
Some bitcoin wallets force you to cut and paste a bitcoin address if you want to send bitcoins to it. Others will let you scan a bitcoin address if it is displayed as a QR code. These square, blocky codes are like barcodes on steroids, and can be used to visually encode an entire bitcoin address. they can be scanned with a bitcoin wallet running on a smartphone camera.
There are different kinds of bitcoin wallet. Some wallets run only on desktop computers like your Mac or PC, and they store your bitcoin addresses and the private keys to access them on your hard drive.
Many bitcoin wallets are now available in a smartphone version. When you get the bill at a local coffee shop that supports bitcoins, you can point the camera at the QR code displayed on it, hit the ‘scan’ button, and the software will turn it into a bitcoin address. Then all you have to do is click ‘send’ to pay the coffee shop.
You can also use online wallets.
These wallets are services running on the Internet, which store your wallets there. The advantage of these wallets is that if they’re set up properly, they can protect your bitcoin addresses and public keys from being lost to a hard drive crash or a misplaced phone. The downside to these wallets is that, if set up incorrectly, they could themselves be hacked and your bitcoins stolen.
Make sure you know how to protect your bitcoins with more secure wallets.