Bitcoin simplified. http://bitcoinsimplified.org Fri, 09 Jun 2017 05:32:06 +0000 en-US hourly 1 https://wordpress.org/?v=4.7.5 51082549 Anonymity http://bitcoinsimplified.org/learn-more/anonymity/ Mon, 05 Aug 2013 16:33:26 +0000 http://bitcoinsimplified.org/?page_id=337 Bitcoin is often described as an anonymous currency because it is possible to send and receive bitcoins without giving any personally identifying information. However, achieving reasonable anonymity with Bitcoin can be quite complicated and perfect anonymity may be impossible.

Bitcoin is pseudonymous. Sending and receiving bitcoins is like writing under a pseudonym. If an author’s pseudonym is ever linked to their identity, everything they ever wrote under that pseudonym will now be linked to them. In Bitcoin, your pseudonym is the address to which you receive Bitcoin. Every transaction involving that address is stored forever in the blockchain. If your address is ever linked to your identity, every transaction will be linked to you.

In the original Satoshi whitepaper, it was recommended that Bitcoin users use a new address for each transaction to avoid the transactions being linked to a common owner. This would be the equivalent of writing many books under different pseudonyms. Although this remains a best practice, it is not enough to guarantee full anonymity due to multi-input transactions.

Multi-Input Transactions

A multi-input transaction occurs when you receive payments to your wallet to different addresses, but then you send a payment out of your wallet which pulls bitcoins from multiple addresses. The outgoing transaction will include multiple addresses as inputs, proving that they are in the same wallet and belong to the same entity. If your identity is ever linked to any of these addresses, none of the addresses will maintain their anonymity. For example, in the transaction displayed below, some of the bitcoins came from address 12TBGSTqd1how9cpYKWTm4VUYw3QDDWMoB and some came from the address 19t1HyYqe254NxiTAGLrAR4gPJAZCkSXJY. This means that those two addresses are in the same wallet and belong to the same user.

multi-input

Multiple Wallets

One way to increase your anonymity is to use multiple wallets. This is like maintaining multiple separate identities. The easiest way to maintain multiple wallets is to use MultiBit. MultiBit is a simple and lightweight software wallet for Windows, MacOS, and Linux that allows you to manage multiple wallets from one program.

Mixing Services

A mixing service is an entity that offers to trade out your bitcoins for ones with a different history. To do this, they essential take your bitcoins and put them in a big pot with bitcoins from many other users. They then send back out the bitcoins randomly to make it impossible to tell which inputs connect to which outputs. While this is effective in theory, to do this with complete anonymity generally requires you to trust an anonymous third party to give you back your bitcoins and not keep records of the transactions that flow through them. There is nothing to keep a mixing service from running away with the coins.

eWallets or Online Wallets

Web hosted wallets can be used as an effective way of masking the original owner of bitcoins. Many web-based wallet services will lump the bitcoins in their service together, thus often giving you different bitcoins when you withdraw. This only works if this is an active service with other active withdrawals and if you do not make up a significant portion (less than 10%) of the service’s Bitcoin balance. Most web wallets also maintain records of incoming and outgoing coins, so any anonymity gained is fully dependent upon the service provider.

In this article, we attempted to outline why Bitcoin is not inherently anonymous as well as lay out a few ways to increase your anonymity when using Bitcoin. We are preparing a more advanced guide that explains anonymity methods that are both more complicated and more secure. Sign up for our mailing list or subscribe to our feeds (RSS2/Atom) to know about it before anyone else.

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Definitions http://bitcoinsimplified.org/definitions/ Fri, 19 Jul 2013 22:59:57 +0000 http://bitcoinsimplified.org/?page_id=314 Address ~ A Bitcoin address is a unique string of 27-34 alphanumeric characters.  An address can be created freely with the use of a wallet and always starts with a 1 or a 3.

Alternate Currencies ~ There are many different alternative currency that have sprung up based off of the idea and/or basic code of Bitcoin.  A few of the more notable ones are litecoin, namecoin, PPCoin, and Ripple.  To learn more about these, please visit our alternate currencies page.

ASIC ~ Application-specific Integrated Circuit, an ASIC is the current ‘top of the line’ technology used in Bitcoin mining.  It is able to generate orders of magnitude more hashes per watt of power than the next best technology.  For greater detail, please see the hardware page.

Block ~ A block is a unit of the code the comprises the bockchain.  It is the record of transactions that have occurred since the last block was created and a confirmation to previous transactions.  Each block links to the block before it, thus creating a full chain back to the original or “genesis” block.

Blockchain ~ the public record of all bitcoin transactions.  The blockchain may be viewed by anyone and can be used to determine how many bitcoins were attached to any one address at a given time.  One place to be able to easily view this information is blockchain.info

Cold Storage ~ This is the process of moving your bitcoins to an offline wallet.  The benefit of this is that no one can hack into your computer and steal your private keys if your computer is not connected to a network.  Bitcoins will need to be brought back out of cold storage to be spent or transferred again.

Difficulty ~ this is the measure of how hard it is to generate a new block in the blockchain.  The difficulty is designed to adjust every 2,016 blocks (roughly 2 weeks) to balance out the rate at which blocks are created.  The difficulty has an absolute minimum of 1, but not such limit exists for the maximum.

Encryption ~ the process by which information is protected from others and only accessible to those who have authorization.  That is not to say that authorization may not be gained through unintended ways, but that is all dependent on the quality of the encryption.

FinCEN ~ The Financial Crimes & Enforcement Network functions under the authority of The United States Department of the Treasury.  FinCEN is the portion of the agency charged with combatting money laundering and other illicit financial practices.  They are currently one of the lead agencies trying to figure out how to regulate and monitor the flow of Bitcoin.

FPGA ~ Field Programmable Gate Array, an FPGA is the former king of the Bitcoin mining world.  An FPGA is an integrated circuit whos function can be changed as it can be reprogrammed.  This makes if more versatile than an ASIC, but far less efficient in its ability.  They enjoyed a short time between GPUs and ASICs as the most efficient way to mine.  For further details, please see our hardware page.

Genesis Block ~ This is the very first block that was created and the beginning of the blockchain.

GPU ~ Graphical Processing Unit, a GPU (or commonly just referred to as a graphics card) was previously the dominant way of Bitcoin mining.  It was way beyond the efficiency of a CPU and plenty common among computer users to gain widespread adoption.  With the increase in the difficulty it has recently become too inefficient for most to continue mining with GPUs as their electric bills now compete with the value they generate.  For futher details, please see our hardware page.

Hash (Rate) ~ A hash is the output of a hash function and, as it relates to Bitcoin, the Hash Rate is the speed at which a compute is completing an operation in the Bitcoin code.  A higher hash rate is better when mining as it increases your opportunity of finding the next block and receiving the reward.

Mining ~ This is the process by which new blocks are created and all Bitcoin transactions are verified.  Mining is actually a poor name for the process taking place, but caught on due to the hope of completing a block and winning the attached Bitcoin reward.

Private Key ~ This is the part of data that you keep secret in your Bitcoin wallet.  Every Bitcoin address has a unique private key attached.  Possession of this key is what allows you to maintain control of those bitcoins.  If someone else is able to obtain your key, they also have control of your bitcoins.

Transaction Fees ~ This is a small, optional fee attached to a Bitcoin transfer.  Upon the completion of all 21 million bitcoins being created, these fees will provide the reward to encourage miner to continue mining and verifying the network transactions.

Wallet ~ a program in which one stores the private keys to which their bitcoins are attached.

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Mobile Apps http://bitcoinsimplified.org/mobile-apps/ Sat, 06 Jul 2013 02:11:00 +0000 http://btcgear.com/?page_id=282 One of the best ways to use Bitcoin is through your smartphone. Let’s face it, Bitcoin works a lot better if you can take it with you and use it in person just as easily as if you were sitting on your computer at home. Well, you’re in luck. Thanks to some awesome developers and these cool apps they have created, not only is it do-able, it may very well be the easiest way to use your Bitcoins.

Android

bitcoin-mobile-01Bitcoin Wallet

Bitcoin Wallet is my personal favorite. It is simple, straightforward, very capable, and dependable. You can email addresses, type in manually, accept and show qr codes, or even swap addresses over NFC (near-field communication). It doesn’t take time or spae to download the entire blockchain making it very light, but it does hold your private keys locally so you do not have to trust a 3rd party. Thoe only downside to this is if you don’t have your keys backed up (which you always should) your bitcoins will be lost if you lose your device.

Google Play: Bitcoin Wallet

coinbase-mobile-01Coinbase

Coinbase is the youngest application in the group that I know of, but also the most capable. This application will function as a mobile wallet with all the basic features of the others, but also gives you the ability to buy and sell bitcoins immediately if you have a bank account linked to your coinbase account. This is the simplest way to purchase a Bitcoin that I know of. The UI is clean and the app is regularly updated and fully maintained.

Google Play: Coinbase

blockchain-mobile-01Blockchain

Blockchain is similar to Bitcoin Wallet in that it has all your general ways of sending and receiving Bitcoin aside from NFC support. What is unique about Blockchain is it’s ability to “pair” the mobile app to your Blockchain web-wallet. This makes Blockchain extremely convenient to use if you don’t mind having your Bitcoin private keys stored on their server.

Google Play: Blockchain

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Store http://www.btcgear.com#new_tab Fri, 28 Jun 2013 23:41:34 +0000 http://guide.btcgear.com/?page_id=192 192 Ask Us http://bitcoinsimplified.org/ask-us/ Fri, 28 Jun 2013 09:43:21 +0000 http://guide.btcgear.com/?page_id=149  

If you find yourself confused about anything Bitcoin-related, please ask it here. We will respond promptly and your questions will help us decide what to write about next.

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Investing http://bitcoinsimplified.org/learn-more/investing/ Mon, 03 Jun 2013 10:09:01 +0000 http://guide.btcgear.com/?page_id=103 Many individuals have used Bitcoin purely as an investment vehicle, treating it similarly to a commodity to exchange.  Like any other volatile investment, this has had mixed results, but as a whole the value of a bitcoin is up about 300% of where it was 2 years ago.

Just in the last year, some bitcoin companies have started to get the attention of silicon valley investors.  Most notably, Coinbase has raised over $6 million with such backers as Y Combinator and the FundersClub, among others.  Similarly, CoinLab of Seattle, WA and has raised over $500k from their investors including, but not limited to Lightspeed Ventures.

Recently a group of angel investors have come together to form BitAngels, a bitcoin focused investors group looking to bring small startups on to the main stage.

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History http://bitcoinsimplified.org/learn-more/history/ Mon, 03 Jun 2013 05:25:31 +0000 http://guide.btcgear.com/?page_id=87 In 2008, Satoshi Nakamoto published a paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System which outlines the fundamental concepts that Bitcoin is built upon. In January 2009, the first block was mined and the Bitcoin client was released to the public thus creating the Bitcoin network.

In 2010, the first transactions were brokered on bitcointalk.org and one user famously purchased about $25 worth of pizza for 10,000 bitcoins. The awareness of Bitcoin as well as the value of bitcoins slowly increased.

In June of 2011, with rising interest, the value of a bitcoin quickly rose to $30 USD, but then plummeted down to below $2 by October. For the rest of 2011 and most of 2012, Bitcoin began to see a significant growth in online awareness of it.

In March and April of 2012, the value of a bitcoin quickly rose from around $50 until reaching an all-time high of $266 USD per bitcoin. At $266, the value crashed down to $76 and then settled back at $160 all within about six hours.

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About http://bitcoinsimplified.org/about/ Sun, 02 Jun 2013 06:58:08 +0000 http://guide.btcgear.com/?page_id=77 Sean Cornwell

Sean is an industrial engineer who has been involved in mining, buying, selling, and trading bitcoin for three years. He and John co-founded BTC Gear in 2012.

John Atkinson

John is a computer engineer and web developer who was introduced to Bitcoin in early 2012. He is the chief developer of the Open Source Bitcoin OpenCart extensions hosted at Github.

About this guide

There are many useful sources of Bitcoin-related information out there, but we found most of them to be too involved for people who might be less technically inclined. We set out to create the simplest Bitcoin guide. Our long-term goal for this guide is to create a site with the comfort and navigability of a wiki, but with carefully curated, higher-quality content.

You can help us improve this site by contacting us with corrections or suggestions. We also accept donations sent to 1Mj8FcpLav2XGpAvuab2HWuCPx9HVZPesX.

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How To Use Bitcoins http://bitcoinsimplified.org/get-started/how-to-use-bitcoins/ Sun, 02 Jun 2013 06:38:04 +0000 http://guide.btcgear.com/?page_id=73 Sending bitcoins

Sending bitcoins is as easy as copying and pasting someone else’s address, choosing an amount, and clicking send. This may seem backwards to people used to supplying credit card information to purchase things online, but this method allows the sender to be in complete control of the payment process. Transactions are also irreversible. Essentially, sending a bitcoin is a lot like sending an email. You put in someone else’s address and there’s no going back after you hit send.

Feel free to practice sending bitcoins by donating to our bitcoin guide. Our donation address is that green string of letters and numbers in the sidebar.

Don’t worry if it takes a few minutes for the recipient to see the payment that you have made.  Depending on the network and on the wallet applications the two parties are using, it can take up to ten minutes for the first confirmation of the transaction. Some services require six confirmations (which can take about an hour) before they recognize the transaction.

Receiving bitcoins

To receive bitcoins, choose a receiving address from your wallet, provide it to the other party and wait for them to send payment. As mentioned above, it can take around ten minutes for the transaction to be confirmed by the Bitcoin network, and it is standard to consider transactions that have been confirmed six times to be fully confirmed.

Next Steps

Now that you know how to use bitcoins, learn more about how the Bitcoin network functions from the articles in our learn more section. Are you confused about something? Ask us anything you like.

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How To Buy Bitcoins http://bitcoinsimplified.org/get-started/how-to-buy-bitcoins/ Sun, 02 Jun 2013 06:37:30 +0000 http://guide.btcgear.com/?page_id=71 Coinbase

If you don’t mind waiting a couple of days, the easiest and cheapest way to get your hands on some bitcoins is to sign up with Coinbase and link your bank account. Coinbase charges a low 1% fee and you receive your bitcoins as soon as the transfer from your bank account clears. Coinbase doubles as a web wallet with a mobile Android app. This allows you to easily purchase and sell bitcoins from your office, on the go, or from the comfort of your own home.

LocalBitcoins.com

Another great way to get bitcoins today is LocalBitcoins.com. It operates like a craigslist for bitcoins allowing buyers and sellers in the same geographical areas to find each other and trade bitcoins for cash. While this can be very simple and quick, we recommend taking the same precautions you should take whenever meeting a stranger from the internet. LocalBitcoins.com has a rating system that should help you find a trustworthy buyer or seller, but maybe don’t meet them in a dark alley or under a bridge.

Online Bitcoin Exchanges

Bitcoin exchanges enable you to store both dollars and bitcoins in your account and then buy and sell bitcoins instantly at the market rate. This enables you to trade bitcoins the way you might trade a stock. The main downside of exchanges is that it can be difficult to fund your account with dollars in the first place or transfer your dollars out after selling coins.

Mt.Gox

Mt.Gox was the largest Bitcoin exchange and now all their old users are in a class action lawsuit against them.  Coinbase is a much better option.

Other Exchanges

As Bitcoin is a currency without borders, there are many other exchanges that can be used internationally. We have had some success with Russia-based BTC-e despite their clunky interface. European Union-based Bitstamp is well regarded.

Next Steps

Now that you have some bitcoins, it’s time to learn how to use them.

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