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The Ultimate Guide to Bitcoin™

Book Description

The Ultimate Guide to Bitcoin covers all aspects of the Bitcoin phenomenon, explaining how virtual currency works, how it differs from and compares to traditional currency, the history of Bitcoin, how to purchase and pay with bitcoins, where and how one can obtain and manage a Bitcoin wallet, how to become a Bitcoin minor, and more. In addition, this book presents information about competing virtual currencies, and compares them to Bitcoin. Readers will also learn to judge the relative value and safety of the Bitcoin currency, and determine whether the rewards outweigh the risks.

Bitcoin is the virtual currency of the Internet, a distributed, worldwide, decentralized digital money. It's the most popular of several current cryptocurrencies, devised in 2009 by programmer Satoshi Nakamoto.(Although that's probably not his real name...)

The unit of currency in the Bitcoin system is called a bitcoin, or BTC. A bitcoin is not a physical currency, such as a dollar bill or nickel, but rather just a number associated with a Bitcoin Address. Unlike traditional currencies, Bitcoin is not issued from or managed by any central government bank or organization. With Bitcoin, users become their own banks – and assume all the risks inherent in that proposal. As such, the value of a bitcoin is not pegged to any traditional real-world currency. Over the currency's relatively short life, the dollar value of a bitcoin has fluctuated from 14 cents (actually, zero at inception) to more than $1,2000. (Today a bitcoin is worth approximately 800 US dollars.)

Bitcoin exists on a peer-to-peer network, much like BitTorrent. Users on the P2P network, called miners, enable their PCs to be used to host and manage bitcoin transactions. To use Bitcoin, a user must sign up with an online wallet service, through which all transactions are managed. This digital wallet is typically stored on the P2P servers, with all transactions secured via public-key encryption. The public key is used to encode all payments, which can then be retrieved only with the use of the user's private key.

One can earn bitcoins by providing goods or services to other users or by participating in the mining process. Users can also purchase bitcoins with traditional currency from one of several Bitcoin Exchanges. Bitcoins can then be spent on other goods and services available over the Internet.

Table of Contents

  1. About This eBook
  2. Title Page
  3. Copyright Page
  4. Contents at a Glance
  5. Table of Contents
  6. About the Author
  7. Dedication
  8. Acknowledgments
  9. We Want to Hear from You!
  10. Reader Services
  11. Introduction
    1. What You Need to Know to Use This Book
    2. Learn More...
  12. 1. Bitcoin: The Future of Currency?
    1. Bitcoin in the News
    2. What Is Bitcoin?
    3. No, Really, What Is Bitcoin?
    4. What Famous People Are Saying About Bitcoin
    5. Does Bitcoin Really Matter to You?
  13. 2. Understanding Virtual Currency
    1. What Is Currency?
    2. What Is Virtual Currency?
    3. What Are Digital Currency and Cryptocurrency?
    4. Is Bitcoin a Virtual Currency?
  14. 3. A Short History of Bitcoin
    1. Virtual Currency Before Bitcoin
    2. Then Came Bitcoin
    3. Bitcoin Today
  15. 4. How Bitcoin Works
    1. Understanding Bitcoins
    2. Walking Through Some Typical Bitcoin Transactions
    3. Managing Bitcoin Transactions
    4. Understanding Bitcoin Denominations
    5. Verifying Transactions and Creating New Bitcoins
    6. Understanding Bitcoin Encryption
  16. 5. Determining Bitcoin Value
    1. Does Bitcoin Have Value?
    2. Who (or What) Decides How Much a Bitcoin Is Worth?
    3. How Much Is a Bitcoin Worth, Anyway?
    4. How Has Bitcoin’s Value Changed Over Time?
    5. Where Can You Find the Current Value of Bitcoin?
  17. 6. Should You Use Bitcoin?
    1. Who Bitcoin Was Originally Designed For
    2. Who Uses Bitcoin Today—and Why
    3. Is Bitcoin for You?
    4. What Next?
  18. 7. Trading on Bitcoin Exchanges
    1. How Bitcoin Exchanges Work
    2. How to Choose the Right Exchange
    3. Exploring the Big Five Bitcoin Exchanges
    4. Discovering Other Popular Exchanges
    5. Making a Trade
  19. 8. Storing Bitcoins with a Bitcoin Wallet
    1. Understanding Bitcoin Wallets
    2. Examining Different Types of Bitcoin Wallets
    3. Using a Bitcoin Wallet
    4. Securing Your Bitcoin Wallet
  20. 9. Spending Bitcoins
    1. Who Accepts Bitcoin Payments?
    2. Paying with Bitcoin
    3. Converting Bitcoin to Gift Cards
    4. Using Bitcoin ATMs
  21. 10. Accepting Bitcoin Payments
    1. Should You Accept Bitcoin Payments?
    2. Evaluating Bitcoin Payment Processors
    3. Accepting Bitcoin on Etsy
  22. 11. Mining Bitcoins
    1. What Is Bitcoin Mining?
    2. How Bitcoin Mining Works
    3. Can You Be a Bitcoin Miner?
    4. Joining a Bitcoin Mining Pool
    5. Making Money Mining—Or Not
  23. 12. Speculating in Bitcoin
    1. How to Speculate in Bitcoin
    2. Speculating Is Risky
    3. Speculating Can Pay Big Rewards
    4. Should You Speculate in Bitcoin?
    5. Five Tips for Speculating in Bitcoin
  24. 13. The Many Risks of Using Bitcoin
    1. It’s Not Legal Tender
    2. It’s Not Backed by Anything or Anybody
    3. It’s Not Regulated or Insured
    4. You Can’t Get Your Money Back
    5. It’s Not Completely Secure
    6. It’s Extremely Volatile
    7. Some of the Players Are Less Than Upstanding
    8. It’s Not Widely Accepted
    9. It’s Not Understood
    10. Powerful People Don’t Like It
    11. It’s an Experiment
    12. Bottom Line: You Could Lose Your Money
  25. 14. Exploring Other Virtual Currencies
    1. Why Do We Need Even More Virtual Currencies?
    2. Evaluating Alternative Virtual Currencies
    3. Where Can You Trade All These Virtual Currencies?
  26. 15. Peering into the Future of Bitcoin
    1. Scenario #1: Everything Is Awesome!
    2. Scenario #2: Realizing Potential
    3. Scenario #3: More of the Same
    4. Scenario #4: It’s Marginalized
    5. Scenario #5: Hell in a Handbasket
    6. Which Future Will It Be?
  27. A. Glossary
  28. B. Resources
    1. Information and Advocacy
    2. Pricing and Charts
    3. Feeds, Forums, and Message Boards
    4. Exchanges
    5. Wallets
    6. Payment Processors
    7. Mining Hardware
    8. Mining Software
    9. Mining Pools
    10. Other Virtual Currencies
  29. C. How to Read Bitcoin Charts
    1. Line Pricing Charts
    2. Candlestick Pricing Charts
    3. Column Volume Charts
    4. Combination Charts
    5. Trend Lines and Channels
  30. D. Donating (and Accepting) Bitcoins for Charity
    1. Giving with Bitcoin
    2. Accepting Bitcoins for Your Charity
  31. E. Creating an Unhackable Paper Bitcoin Wallet
    1. Understanding Paper Wallets
    2. Creating a Paper Wallet
  32. F. Why Prices Go Down
  33. G. Bitcoin and Apple Pay
  34. Index