Bitcoin (BTC): What Is It, Where to Get It, and How to Use It?

Fri, 18 Nov 2016 12:00:00 +0000

Archive article (November 2016): prices, services, and links correspond to their original date.

What is Bitcoin?

Bitcoin is a consensus network that enables a new payment system and a completely digital currency. It is the first decentralized peer-to-peer payment network powered by its users with no central authority or middlemen. From a user’s point of view, Bitcoin is like money for the Internet. Bitcoin can be the only triple-entry accounting system in existence.

Who created Bitcoin?

Bitcoin is the first implementation of a concept known as “cryptocurrency,” which was first described in 1998 by Wei Dai on the “cypherpunks” mailing list, where he proposed the idea of a new kind of money that would use cryptography to control its creation and its transactions, instead of a centralized authority doing so. The first Bitcoin protocol specification and the proof of concept were published by Satoshi Nakamoto in 2009 on a mailing list. Satoshi left the project in late 2010 without revealing much about himself. Since then, the community has grown exponentially and now counts on numerous developers working on the Bitcoin protocol.

Satoshi’s anonymity has sometimes raised unwarranted suspicions, many of them caused by a lack of understanding of the open source nature Bitcoin is based on. The Bitcoin protocol and its software are published openly, and any programmer anywhere in the world can review them or create their own modified version of the software. Just like current programmers, Satoshi’s influence has been limited to others adopting the changes he made and, therefore, he did not control Bitcoin. Thus, knowing the identity of Bitcoin’s inventor is about as relevant as knowing who invented paper.

Who controls the Bitcoin network?

In the same way that no one controls the technology behind email, Bitcoin has no owners either. Bitcoin is controlled by all Bitcoin users around the world. While programmers improve the software, they cannot force a change in the Bitcoin protocol because all other users are free to choose the software and version they want. In order to remain compatible with each other, all users need to use software that complies with the same rules. Bitcoin can only function correctly if there is consensus among all users. Therefore, all users and programmers have a strong incentive to protect that consensus.

The above quote is the shortest and most concise official definition out there. From my point of view, there is something very important to keep in mind: BTC has increased its value 1000 times in the last 7 years, and according to experts in the economic field, the trend is that it will keep going up more and more. As of today, 1 BTC = $743 USD (US dollar), but if I go back one year, exactly 1 year ago, on November 18, 2015, 1 BTC = $329 USD; that means that anyone who held 1 BTC a year ago and exchanged it today for another currency would have more than double in the equivalent of the desired currency, just for keeping their savings in BTC.

But BTC is not limited to being simply “a weird thing to invest in” nor a simple system “for saving money and waiting for it to grow”: it is just another currency, like the peso, the dollar, or the euro, and as such it can be used to pay and more, with many advantages over controlled and centralized currencies. In simple words, BTC is a kick in the balls to the traditional banking system, inflation, and the creation of fiat money out of nothing (like the Federal Reserve creating dollars “out of nothing,” watch the video at the start to understand a bit better).

Where to Get Bitcoins?

BTC is obtained through a procedure called mining, mainly with video cards (GPUs); there is more information about it on the web, so I won’t go into the how. This type of mining has become obsolete over time, since the more BTC are mined, the lower the chances of mining and the more hardware power requirements become necessary. There are cloud mining companies where you pay a fee and they do it for you, but that is a very slow way to get them and, for it to be even slightly profitable, you have to invest large amounts, which makes it not very convenient. The best way currently is to buy them. There are various “exchange houses” (exchanges) from which you can buy BTC; I’ll make a list of the ones I have used and recommend, along with other very common and reliable ones that, although I haven’t used them, I know about:

LocalBitcoins: I call it the eBay or MercadoLibre of BTC; once you register and verify your account, you contact BTC sellers (or buyers) with various payment methods, even in person with cash.
SatoshiTango: an Argentine company that also lets you get a VISA debit card, which you can top up with BTC and use at any ATM anywhere in the world where VISA is accepted.
SURBTC: currently operating in Chile and Colombia, it works directly with your bank account for buying/selling, very fast (Monday through Friday) and with the option to trade on it, complete with a platform for it and on automatic (for example, setting it up so that if Bitcoin drops to X price, buy Y amount, and if it rises to XXX, they sell themselves).
Bitnovo: one of its biggest advantages is that, besides being international, it lets you pay with VISA, MasterCard, and Maestro cards.
Wirex: formerly called E-coin, it also has a debit card, a free virtual one and a physical one, plus it has mobile apps and works as a wallet.
Ripio: another very well-known one, although personally I don’t like that by the second purchase they start asking where you got the money to buy, and have you sign an affidavit, even for small amounts of around 300 dollars.
BTC-e: similar to SURBTC but more global; it is said to handle a flow of 2.5% of all existing BTC, and it allows exchange between USD, RUB, EUR and the cryptocurrencies BTC, LTC, NMC, NVC, PPC, DSH, and ETH.
Poloniex: very similar to BTC-e, also international; both platforms are more focused on trading with BTC than on simply buying them once to hold them, although both uses are valid.
Coinbase: another very well-known and reliable international platform, it also allows trading with Ethereum (ETH).

There are many more; most require you to get verified. This is because, given the anonymous nature of BTC, these legally incorporated companies cannot lend themselves to facilitating money laundering, laundering of capital, asset laundering, or operations with funds of illicit origin or capital legitimization, whatever you prefer to call it. If readers know of any exchange they think is missing from the list, please leave a comment and I’ll add it.

How to Use BTC?

BTC, as a cryptocurrency and therefore as money, is used the same way you make an online payment with your credit card or your bank account, except that the fees are very low or almost nonexistent. A couple of years ago it was rare to find places that accepted BTC; many people thought it would disappear or lose all its value, but quite the opposite, the landscape today is different and BTC proved it is here to stay, even trading as an index on the stock exchange and gradually increasing its value.

A website that works as a directory to find out where BTC is accepted and used locally is MercadoBitcoin; personally, I have also bought games on Steam with BTC, another company that accepts them officially.

Soon I’ll do a series of articles in which I’ll expand on the information, like creating a wallet, which is where you can hold your BTC. This is the introduction to the topic in a general and short way; this is a to be continued… (article subject to revisions and updates).

Some important sites to read news and updates about BTC and cryptocurrencies are:

Bitcoin on Javier Orozco | Observer

Bitcoin (BTC): What Is It, Where to Get It, and How to Use It?

Where to Get Bitcoins?

How to Use BTC?