The Bitcoin Economy

So, you heard about Bitcoins and now you want to try buying, selling, or just investing, but maybe you're not sure where to start. Or, maybe you've already dipped your toes in the water and want to learn more. This page is here to help!

To be clear: I am not a Bitcoin expert. I'm still learning, but I'm not completely new either. Time permitting, this page will be updated as I learn more, or as things in the Bitcoin economy change. Given that I and my site are both in the United States, I won't cover things I believe are probably illegal in the US or in the state where I live. This includes online gambling — if you want to gamble with your Bitcoin balance, I can't help you with that.

What is one Bitcoin (1 BTC) worth in US dollars? Like any currency, the exchange rate fluctuates. This banner shows a recent BTC / USD rate quote:

NOTE: There are two things to keep in mind about links on this page. First, Bitcoin is a bit of a "Wild West" thing right now, with frequent and often-unpredictable changes. Thus, the links aren't guaranteed to still be valid and useful. Second, some links are shortened through CoinURL, and for those you will see an ad before you see the actual page. In that case you can click "Skip ad" in the upper right of the new window/tab. If you sign up for CoinURL, you can earn funds using shortened links like these.

Getting Started in Three Easy Steps

1. Get a "starter" Bitcoin wallet (updated)

For simplicity – not security or reliability! – you can get started with a Web-based wallet. Go to blockchain.info and fill out the new wallet form. You should only store small amounts in an online wallet, and regularly empty accumulated funds into an offline wallet (see below).

2. Get some free Bitcoin funds for your wallet

First, you must know a Bitcoin address that will receive funds into your wallet. Go to the "Wallet Home" of your online wallet, then select and copy to your clipboard the long string of letters and numbers under the "This Is Your Bitcoin Address" heading.

It used to be easier to get some free funds to play around with, but as with all things Bitcoin, that has changed too. The problem is, the free funds came in the form of "dust" (technically, tiny fractions of a coin), but the transaction fees — discussed below — on micropayments could be more than the amount being sent. If you get a bunch of "dust" in your wallet, it can be a problem when you want to spend your BTC funds. One way around this is with a service like CoinBox that accumulates "dust" into a larger payment.

To get some free funds that way, go to CoinBox.me and take a look at the list of sites. Click to one (e.g., GreenCoins.org), paste in your Bitcoin address, solve the CAPTCHA, and submit the form. This will add some money to your CoinBox balance. Go back to CoinBox and go to another site to repeat the process. You're not going to get rich quick this way, but eventually CoinBox will send the money to your wallet.

To get even more funds, see the other More Free Funds sites below.

3. Find things to buy with your Bitcoin funds

After you have accumulated some funds (see "More Free Funds" below to make that process go faster), you will want to try sending some funds to something. Here's how that works:

1. Get the Bitcoin address for the recipient. (If you want a quick test & to "tip" me for helping you get started, use 199o3nDvUAhBY1u7VKSpnWwbEq9fwaSHhY for the address.) Select and copy the address to your clipboard to make sure it's accurate.
2. Go to your online wallet and click the "Send Money" tab.
3. Paste the address into the "To" box.
4. Type the amount to send and click the "Send Payment" button.

More Free Funds

There are many sites offering free funds in tiny amounts that can gradually build up to something modestly useful. The links below to sites offering micropayments will open in a new window/tab.

Free for the asking...

• Moon Bitcoin
• Daily Bitcoins
• Bitcoiner

Visit sites and/or watch videos...

• BitVisitor
• BitcoinGet
• Earn Free Bitcoins

Do you run a site that offers micropayments and would you like your site listed here? Do you want your site removed from this page? Did one of these links lead to a 404 error or other problem? If so, please Contact Me (see link on the left) and let me know.

More to Learn

Wallets and Addresses

Your online wallet at blockchain.info is convenient but you should have an offline wallet for storing any significant funds. First, it helps to understand a bit more about wallets and Bitcoin addresses. As you've seen with your online wallet, you have an address to receive funds and you can send funds to someone by using their address. However, unlike a postal address or email address, you can have many addresses that all point to the same wallet. An address does not need to be re-used, you can create a new address for each transaction. In fact, this is encouraged! Likewise, when you send funds to someone using a certain address, that address may also be a one-time address, so you should not use it again unless the recipient has said that is OK. Each wallet can have many addresses, and you can transfer funds from one wallet to another by simply sending funds to a receiving address for the destination wallet.

Once you have a Bitcoin balance large enough that you would really hate to lose it, it's time to shift your funds to a more secure wallet. A couple options to consider are the original Bitcoin client (Bitcoin-Qt) and the Electrum client. They take very different approaches. I haven't used Electrum as much as the original client, but I think you will find it easier and faster to get started with.

Getting Funds Faster

It would take you a prohibitively long time to "earn" enough micropayments to have sufficient funds to do something big like pay your rent or buy a car. Of course, neither of those is likely using Bitcoin yet anyway! However, there are ways to increase your Bitcoin balance faster than "collecting dust." These include the following:

Buying

The simplest way to increase your Bitcoin balance is to buy Bitcoins. This means converting funds from one currency (e.g., US dollars) into Bitcoins. As with any currency exchange, there are fees and risks associated with this, and you have to have the funds available in the origin currency. I have not done this, so I can't provide any extra insights here.

Selling Goods & Services

As with any currency, you can sell goods and services to increase your Bitcoin balance. Options for this are limited, but they do exist. I experimented with accepting BTC payments for my books, and I may do more of that in the future.

Request Donations

If you provide a service that people find valuable, you could ask them to help support you with donations. Obviously I've done that on this page, and I also do that on my online ROT13/ROT47 encoder. Or, you could just beg (i.e., ask for donations without providing anything in return).

Mining

The number of Bitcoins in circulation will continue increasing for awhile, via "mining." There are in-depth references online that you can find to better understand how mining works, but in a nutshell it means using specialized hardware to perform some difficult calculations, with a reward for mining new "blocks." While this was once feasible using a desktop computer, it's now beyond the range of general-purpose devices. To avoid needing to continue updating this page with the latest mining news, I will instead direct your attention to a site all about Bitcoin mining.

Transaction Fees

Perhaps the most puzzling (and thus irritating aspect) of the Bitcoin economy is the issue of transaction fees. Unlike when you hand a fiver to your friend, sending BTC funds to your friend will incur a transaction fee. Unlike paying with a credit card, the transaction fee is paid directly by you and it's not consistent. Sending a certain amount more than once can incur transaction fees that are substantially different each time (perhaps 10 times more, or more). Understanding why these fees vary, and what they are for, is one of the challenges of the Bitcoin learning curve. In brief, the amount you send is connected with amounts you have received in the past in a way that adds data overhead, which you can think of as "weight." Like the difference between paying your electric bill with a check versus paying it in pennies, a heavy transaction costs more to move, even though the transaction amount is the same. The problem is that you don't know what the overhead is, so a transaction fee can be surprisingly high when there is more than you realize. I won't claim to know all the nuances of transaction fees, but it's an important topic to touch on here.

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