Understanding Bitcoin




Introduction: Understanding Bitcoin

About: I'm a full stack web developer focusing on security and privacy.
Bitcoin is a new form of currency that seeks to change how online business is done. This instructable seeks to not only get you to understand what bitcoin is, but how you can get started mining your own bitcoins at home! Check out this quick video for a better understanding of bitcoin.

Step 1: Why Bitcoin?

Why would you even bother using bitcoin? Isn't regular money enough? Well in some ways bitcoin can help people transfer funds easily in the digital realm.

First off Bitcoin is decentralized, there is no overarching controller of the currency, the information about the transactions are held by everyone in the network. Next bitcoin transactions are recorded anonymously. This means that people can see that bitcoins are being traded, but the recorded transaction does not have a name attached. Lastly bitcoin is a worldwide currency and has a constant rate between countries. This allows people regardless of borders to trade funds easily.

If you think you could benefit from bitcoins or just want to geek out on the next cool thing, setting up bitcoin is an easy process.

Step 2: Setting Up BitCoin

Setting up Bitcoin solo mining is pretty easy. First go to bitcoin.org, and download the right software for your platform. Bitcoin works in linux, mac and windows. 

Next just run the program, you will soon see an increase in the number of "blocks" these blocks are all of the transactions that exsist in the bitcoin world. Before you start mining your client needs to download all of these blocks. 

The main part of your bitcoin experience will be your bitcoin address, this will be what you send to people when you make transfers and vis versa. Another part will be your "wallet" which is in your settings file for bitcoin. This keeps all of your bitcoin data, so keep it safe and keep a copy of it somewhere. 

Once the blocks are downloaded, you can test bitcoin by using the bitcoin faucet. The faucet can be found here. It will send you .02 bitcoins to test your setup. You will see the transaction in your main window soon after requesting them. 

Now that you verified its working, time to make some money! Just select settings > generate coins and you're done

Sort of...

Step 3: The Big Waiting Game

To actual make bitcoins is not as simple as it sounds. Running bitcoin can be annoying because you don't see any real progress. 

This is because the way bitcoin works. With bitcoin your CPU (Central Processing Unit) or (Graphical Processing Unit, much faster) is being used to solve complex problems, once solved, you have the chance at receiving 50 bit coins. Yet it seems that this distribution of coins is few and far between so you have to keep bitcoin running for a while to work. 

If this waiting game isn't for you you may want to look into Shared Mining

Step 4: Shared Mining

Shared mining (also known as pooled mining) is a way for many miners to combine resources to get coins. The work of your GPU or CPU is instead split up between many GPUs so they can work on the problem in tandem, solve it quicker and have a higher rate of receiving a reward. 

When the reward is received, all miners get a cut. Its currently the only way i've heard of to see progress within bitcoin world.

The only problem is it's a little difficult to set up. If you're interested in Bitcoin mining, check out this site: http://btcmine.com/

Step 5: Final Thoughts

Bitcoin so far has not taken the internet by storm, but it's fun to consider alternatives to the current economic system. That said, Commerce from the beginning of time has been done through means that we can see direct results from. From the trading of sheep to the digital age, we can see progress of our monetary acquiring.

Bitcoin is very different in this way. There is, sadly, no way to have instant gratification by seeing quick results. Bitcoin takes work, and in that may turn people off from even attempting to gather coins. It seems like the best way to get coins at this point is to offer something and sell it for bitcoins.  

Also bitcoins have a huge inflation rate (as of this writing 1 bitcoin = about 10 USD), will this hurt the Bitcoin? only time will tell but one thing is for sure that the bitcoin has already created a culture of people deicated to this idea. With that i'm sure we will see some interesting things coming out of the world of Bitcoin. 

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    7 Discussions


    4 years ago

    Wow... and 1 bitcoin today is worth $427.24... Jesus, help me ?


    Reply 1 year ago

    How about $6,062.66? LOL ok, the price has been close to $20,000 before. :)

    Maker Saga
    Maker Saga

    2 years ago

    Thanks for the informative instructable.

    I am interested in blockchain tech outside of cryptocurrency. It has huge potential for decentralization, public ledgers, and privacy.

    I would totally read an instructable outlining those things with some sort of tutorial if you wrote one!

    Particularly interested in blockchain ledgers for IoT, automated free market resource allocation, and data ownership rights.

    My only concerns are the garbage in-garbage out, privacy, and the 51% flaws.

    Imagine that all of a country's citizens info is stored on a public ledger. If some person's data can be decrypted and read, then it is recipe for authoritarian control.

    On the flip side, it could go the opposite way and give people control of their private data. With smart contracts and anonymization, individuals could rescind access to their data.

    Any currency is only useful if it is recognized by enough people as a means of exchanging value for goods and services. If people lose faith in bitcoin or it cannot be used to buy goods and services, it will lose its value completely! All it would take is 51% of block chain users saying "nope, that's invalid" and the system would recognize it as invalid. the problem is that the 51% could be easily concentrated under one organization with a lot of computing power.

    What do you think?


    4 years ago

    Interesting to read this bit of history. I remember being interested but confused by bitcoin in 2011'sh it took me a bout a year to figure out how I liked the bitcoin model of economics and trust the cryptographic security. By the time I started mining, bitcoin had take things by storm and difficulty was on the rise.


    9 years ago on Introduction

    I don't know how to install it on my Ubuntu computer, and there Wiki won't help me!!

    Dr. Pepper
    Dr. Pepper

    9 years ago on Introduction

    Take a look at the video: Don't Buy Bitcoins. He brings up a really good point.