Introduction: Bitcoins: the Complete Guide
In this tutorial, we will cover everything you need to know about bitcoins.
The tutorial starts off with the basics of installing the computer software to make bitcoins work, but moves into the more advanced parts very quickly. After reading this Instructable, you will have learned all the basics for starting your work with bitcoins. Whether you know what bitcoins are, or if you're just here to start making free money by doing almost nothing, you've come to the right place.
Read on to learn what bitcoins are, and how they can be used in a everyday computer-person life.
Step 1: Understanding Bitcoins
However, after reading on about them, I learned that they are a type of currency that is 100% virtual. There is no government that regulates the currency, like almost every other single currency in the world. Instead, it is all virtual. The bitcoins that you own are stored on your computer. You can sell these bitcoins for real US or Canadian dollars.
Below is a YouTube video explaining the whole concept of bitcoins. While good for visual learners, some like to read to learn.
Bitcoins are a virtual currency. The currency is stored locally between peers. The currency (bitcoins) is transferred from computer to computer. Every transaction (transfer of bitcoins from one computer to another) is verified by "mining" for bitcoins.
When first learning about bitcoins, you learn that bitcoins are stored directly on your computer. So, does that mean that by doing a bit of computer hacking you can give yourself thousands of dollars worth of bitcoins? The answer to this is NO! The system is worked out so well that hackers cannot do this. The reason is because for bitcoins to be transferred from computer to computer, the transaction has to be verified. This verification is done by "mining." Mining is a process where everyday people like you and I install some software onto their computer This software is very advanced and hard to understand, but basically it does some high-level computing (SHA256 decoding) to verify transfers of bitcoins.
The next question that often comes up is: Why would anyone want to just give up their computer to help decode these encryption things? Well, the answer is that you get paid to do it. Well, you don't get paid, but you get free bitcoins for letting your computer work for you. This is almost the same as being paid, as you will learn in later steps. This is the ONLY way that new bitcoins are created. They can't just come from nowhere, making the system hacker-proof.
Mining can be very simple, but it can also be very complicated. By following this Instructable, you will learn one of the easiest ways to mine bitcoins and gain money.
For more information, check out the Wikipedia Article, as well as the Official Bitcoin Website.
Step 2: Setting Up a Wallet
This step walks you through the process of installing the "Wallet" software. This software functions as a real wallet: it stores all of your currency, which in this case are bitcoins.
The first part of this step is to download the software. Go to the Official Bitcoin Website. In a box at the top of the page, click the software version that applies to your given OS. The steps are the same for both Mac and Windows users, other than installing different software. Open the file and follow onscreen instructions.
When it is done, open up the software from the Start Menu. It will take a few hours to download all blocks to your computer. You must just sit and wait during this time (see pictures).
When it is done downloading the blocks (don't worry about what this means; it's not important), go over to the "Receive coins" tab up at the top. Right-click on the one existing list item, and click "Edit". Give it the label "Main" and hit OK. Right-click on it again and click "Copy Address". This is the unique address that your wallet was given. It is where you receive coins in later steps.
The next step tests out your bitcoin wallet and shows you what a transaction looks like.
Step 3: Test Your New Bitcoin Wallet
This step is for testing purposes only. Go to Daily Bitcoins (www.dailybitcoins.org). Near the middle of the page, paste your bitcoin address that you copied earlier. Uncheck the "Delay payment to minimize transaction fees" check box. It is to trick people. Enter the captcha (they are very simple ones on this website), and click Send. It will tell you that it was successful. If it didn't, reenter the captcha properly.
Wait ten minutes and then open up the Bitcoin Wallet software again. Go to the "Transactions" tab up at the top. In the list, it should have a single transaction of 0.00001 bitcoins (approx...This value goes up and down). You now have gained a small amount of bitcoins. The general conversion of bitcoins to USD is times 10, meaning that one bitcoins is ten US dollars (easy for mental math; this number varies greatly over time). Congrats! You just made one tenth of a cent!
This is a valid way to gain money. However, you can only get coins sent once every hour, so it is very slow. You won't make any money fast with this method.
Step 4: Understanding the Types of Mining
Now that we understand what bitcoins are, have a wallet set up to store them, and have made a small amount of bitcoins to test our wallet, we're set to start making some real amounts of bitcoins.
The way we do this is by mining for them. Mining, as stated before, is a way of verifying bitcoin transactions made by other people in return for new bitcoins (given right to your wallet).
There are two main types of mining: solo and pool. Solo mining is done on your own. With the hardware of an everyday person, it would take years to get earn acutal bitcoins. But once you succeed, you get 50 bitcoins (worth about 500 US dollars). This takes too long, so in this Instructable, we are not going to cover this method.
The method we are going to use is called pool mining. It involves signing up for an account with any one of many different companies. Using their own software and hardware, they group together the mining efforts of lots of people's computers. Every person gets a small number of bitcoins (quite often decimals of a bitcoin). As a person with a modest computer, this is the only way to go.
Step 5: Setting Up a Mining Account
After trying a few different mining pools, the one that I really liked was BitMinter. It is, by far, the easiest to use. It comes with its own software, making things so much easier. Below are the few parts that involve the creation and setup of your account.
1) Open up a web browser and navigate to the BitMinter log in (https://bitminter.com/login).
2) Choose your account you'd like to link with BitMinter. Log in with this account. BitMinter uses a log in service called OpenID, which is a futuristic way of logging in with an already-existing account to eliminate the need to remember yet another password.
3) Set the main settings as according to the picture:
- Set your email address.
- Set your auto cash out threshold to a reasonable amount. Mine is set to 1 BTC (approx. $10). This means that when I mine 1 BTC, I will receive it into my bitcoin wallet, just like the test, but with a higher number of bitcoins.
- Set your "Pay to address" to the address that we used in the Step 3 to test the wallet. This is the address that all of your bitcoins are sent to, in case you haven't figured that out yet.
Step 6: Setting Up the Workers
Each computer needs its own worker to connect to on the BitMinter server. The software (in the next step) on each computer will each be set up to a different worker so that the BitMinter server doesn't have trouble transmitting and receiving mining work.
While still logged into the BitMinter website, hover over "My Account" at the top of the page. Then click on "Workers".
Near the bottom of the page, there are two fields under the "Name" and "Password" headers. Give your new worker a name like "Laptop", or "New Dell". Create a short password. Remember the password for the worker. Then click "Add".
Click "Home" in the navigation bar at the top of the page.
Step 7: Install Java
Most people already have Java installed, but if you don't, follow this step.
1) Go to www.java.com/download.
2) Click "Free Java Download".
3) Click "Agree and Start Free Download".
4) Depending on your opperating system, a different version of the file will download.
5) Follow the onscreen instructions to continue installing the software.
6) Click finish and be done installing. Continue on to the next step to set up a miner.
Step 8: Set Up a Miner
Go back to the BitMinter homepage. Click on the "Engine Start" button. This will download a Java Web Starter, which will download the actual program and install it.
Use this file to start the program in the future. When it starts, you will see a program that looks like the first picture.
Set up the software by linking it to your worker created in Step 7. "Click Settings" > "Account...". Beside "User Name:" use the username you created when creating the BitMinter account. Beside "Worker Name:" and "Worker Password:" enter the worker name and worker password you created in Step 6.
If the window is small, click the button in the bottom right corner of the screen. Then click the "Engine Start" button beside each of the devices you want to use. For reference, I get about 65 Mhps (million hashes per second). 1000 Khps = 1 Mhps. Test all of your devices, but you should really only bother running devices that get you 25 Mhps or above.
You will also want to change a few settings regarding automation. I leave my computer on all day and all night. I normally turn off the mining as soon as I get home from work (around 6:00) and have the miner start on its own at night incase I forget to start it when I'm done with my computer.
Go to Settings > Options to change these settings. Look at the fourth picture to set it up like how I have it set up. The picture has expainations.
Automated devices are a list of devices that you set so that you can start them on their own automatically when the software starts. I have selected one of my devices as automated so that when the software starts, only that device starts. See fourth picture for more details.
Step 9: Mine!
Let your computer run while it mines! Running it at night is a good idea as it will double the amount of money you make. Good luck making money!
Step 10: Spend Your Bitcoins
What good is a currency if you can't spend it? The answer is it's not. There are lots of things you can do. Below is a list:
- And many more
- Buy various merchandise
- Some online vendors are starting to accept bitcoins as a way of purchasing items
- Buy Coffee (http://bitcoincoffee.com/)
- Trade it for PayPal money
- Mt. Gox Bitcoin Exchange
The last one I want to talk about it Mt. Gox. It is the most common website used to trade (buy or sell) bitcoins for dollars or any other national currency. You can receive this money through PayPal or many other online currency transfer services. I am not going to go through the details of this, but to send bitcoins to anyone or any service, follow the instructions in the next step.
Step 11: Send Bitcoins to Someone
To use bitcoins, you must send bitcoins to another address. To send bitcoins, the service will give you a specific address to send bitcoins to.
Copy this address. Open up your bitcoin wallet. Click on the "Send coins" tab.
Enter the address you want to send the coins to in the "Pay to" field. If you are going to send coins to this person or group multiple times, you can enter a label for this person so that you can find them in your address book again. Enter the amount in the next field (for easy math, remember that 1 BTC is $10). Click send when you are done.
If you just want to practice sending bitcoins to someone, you can test sending them to me. Just send 0.01 BTC to me (approx. 10 cents). Good luck!
Step 12: Done!
And that is just about all the basic information about bitcoins. If you have any questions, or there is something really obvious and important that I had missed, drop me a comment. I'll try to respond as quickly as possible. If you want to donate, send me a bitcoin or two at 16bVf7XX3dKN2zW6ut8FRSQaGZZBHAFYZt. Any donations, no matter how big or small, will be appreciated.