It has definitely been way too long since I posted here. One of the things that has happened since my last post is that I am kind of a “Bitcoin expert” now… Honestly, I feel that there is so much that I still don’t know about it, BUT I do know a lot more than a lot of average people. I was even on an internet radio show/podcast, to talk about it because it had been in the news and they didn’t know anyone else who can talk enough about it. There have also been a few requests to do a talk at some local conference, so I thought I would right this and at least get some things out with maybe less alcohol involved than that show.
I’ve dabbled in Bitcoin and other cypto-currencies since it was still possible to find blocks of 50 Bitcoins with a CPU, and I did find one… Those coins are long gone though. I really had no idea they would be worth as much as they had been or even as they are now. At that point in time $5 each seemed like a lot for them, and that price had been pretty stable. I cashed out the 32 I had left with Mt. Gox and lost 1/3 of the money in bank transfer fees.
Before I get into more about my experiences with Bitcoin, I should probably explain what it is. Bitcoin is a virtual currency that can be split into amounts of basically any size. All the transactions are public and not reversible. The owners of the sending and receiving accounts may be unknown to someone looking at the transaction details, but the sending account, receiving account, amount, and any associated message, will be publicly visible. You can also see the current balance of any account because you would know all the transactions to and from the account. The massive ledger of all Bitcoin transactions is referred to as the Blockchain. There is even a website that allows you to browse the Blockchain. In order to send and receive Bitcoins, you will also need a copy of the Blockchain. The most common way to do this, would be to install a wallet on your computer and let that download it. With the amount of transactions, it could take days to download, and a few GB of space on your machine… You could also trust a cloud wallet, but they could just close up, leaving you with nothing. That ended up being the case with Mt. Gox and people who trusted them. There is also malware that is designed to steal Bitcoins from the wallet on your computer, so you need to encrypt that wallet, if you have one.
Bitcoin mining is hard…really hard… Some sort of computing device or devices try to find a block of Bitcoins. Blocks started at 50 Bitcoins, and are currently at 25. The size will cut in half every few years. The block reward amount also includes transaction fees that were added to the transactions that were processed. Blocks are found around every 10 minutes, and the difficulty changes every two weeks, to account for changes in the computational power of the network. The difficulty is so high right now that people need to be working with other people, who all are using hardware that is made to ONLY MINE BITCOIN (and will probably be obsolete in 6-12 months). I wouldn’t recommend mining Bitcoins, unless you have hundreds or thousands of dollars lying around that you would be fine with losing.
Many different companies accept Bitcoin now. Most of them go through a company like Bitpay or Coinbase, to accept Bitcoin, but convert it to another currency right away. Usually transactions need to be verified at least a couple times before they consider the funds to be transferred. Each verification happens when a new block is found (so, around every 10 minutes). Some other currencies were designed to decrease that time, but none are as widely used as Bitcoin.
Since I’m not sure who (if anyone) will read this, I’ll just explain that much right now. I can explain more, if anyone has questions.