Bitcoin was launched as a private initiative in
2009. Unlike traditional currencies, such as
the Euro, Sterling and Dollar, it is not
controlled by a central monetary authority.
Instead, it is underpinned by a peer-to-peer
network of its users' computers. This is
similar to how Skype, a video chat service,
The basic unit of value is the bitcoin. However
each bitcoin can be subdivided into
satoshies. One satoshi is equal to one
hundred millionth of a bitcoin (ie, a bitcoin
divided to eight decimal places).
Bitcoins and satoshies can be
transferred from one internet user
to another in order to pay for
goods or services at virtually zero
cost. This allows you to make
international transfers without
having to mess around with
exchange rates and onerous bank
charges. Bitcoins can be bought
and sold for traditional cash at
In order to use Bitcoin, you need a wallet, a
special piece of software in which you store,
send and receive bitcoins. There are three
kinds of wallets, software wallets, mobile
wallets and web wallets.
Software wallets are installed on your computer
and they give you full control over your wallet.
Mobile wallets are installed in your
smartphone or tablet and allow you to use
Bitcoin for daily transactions in shops and
supermarkets by scanning a quick response
(QR) code. Web wallets are located on the
World Wide Web, ie they are a form of cloud
Payments using bitcoins are super easy. They
can be made from wallets on your computer or
smartphone just by entering the receiver's
address, the amount and then pressing send.
Smartphones can also obtain a receiver's
address by scanning a QR code or by bringing
two phones that contain near-fieldcommunication (NFC) technology, a form of
radio communication, close to each other.
Receiving payments is just as easy... all you have
to do is give the payer your bitcoin address.
Protecting your wallet
A bitcoin wallet is like a wallet full of cash. To reduce the risk of
loss, you should keep only small amounts of bitcoins in your
computer or smartphone and keep the bulk of your bitcoins
in a safer environment, such as an offline wallet. Provided
your wallet has been encrypted, an offline back-up will allow
you to recover your wallet, should your computer or
smartphone be stolen.
Encrypting your wallet allows you to set a password that must
be input before funds can be withdrawn. However,
recovering a bitcoin password is impossible if it is lost. That
is why you need to be absolutely sure you can remember
your password. If the value of your bitcoins is significant, you
could store the password in a bank vault or wherever you
store important papers.
In order to be as secure as possible, you should
store off-line back-ups in several locations
using various media such as USB flash drives
Because bitcoin runs on software you download
to your computer (PC or laptop) or
smartphone, you need to update this software
regularly in order to keep your wallets and
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