How I got started with Bitcoins

My second Popforms assignment told me to free-write for 5 minutes, but I think I can do a little better.

First experience with bitcoins

I’d like to talk about how I got started with bitcoins a couple of months ago. The first time I heard about bitcoins, they were trading at just around $2. It seemed like an awesome idea, I quickly set up a wallet and a miner to start generating them. I mined a couple of them and read through the protocol documentation and code. Then I completely forgot about them, since at the time there were no applications or uses other than circle-drooling about them at meetups.

Big mistake

The next time I looked, they were trading at $1000 a piece. Unfortunately, by that time I lost my digital wallet, and along with it the chance to use the balance for a luxury month-long vacation to East Asia. I’m pretty sure many have experienced a similar face-palm moment. One interesting point to mention, is that when a bitcoin wallet is lost, whatever balance was on it is unrecoverable, that chunk of currency being forever lost and taken out of the maximum of 21 million coins that can exist (based on the protocol).

Getting re-started

A couple of months ago, I gave it another try. The last big crash just happened and the price was down to ~$500 a pop, so I bought in. The easiest way I found to do this was to register with Coinbase. They are a web-based wallet which fully manages whatever bitcoins you own, and allows you to receive and send coins anywhere you want. My first big qualm was that the security of my money was guaranteed by a startup, and given the frequent and recent bitcoin thefts and hacks, I was not fully confidence that one day everything doesn’t go poof. My other concern was their verification process. They required a multitude of bank accounts, credit cards, and address verification in order to let me purchase a small amount of coin. Wasn’t the idea that it was an anonymous currency? Sounds more like they have an integrated API with the NSA and IRS.

Running the Bitcoin Core

It almost feels like a conspiracy, but eventually we will all use web wallets. This is primarily to the effort needed to run your own bitcoin client and wallet on your PC. See, when you install the bitcoin core, it needs to sync with the network and obtain the list of ALL previous transactions made and verified through the bitcoin network, in order to work properly. At this point in time, your machine will need to download around 20GB of data in order to be in sync. This number will grow exponentially, and soon will be unattainable by the common man wanting to run the “core”. The alternative, using web wallets, means that we already forfeit any anonymity.

It took me a good day and a half to sync up my Bitcoin Core client with the network. After that was done, I password encrypted my wallet, and transferred everything I bought on Coinbase to my local wallet. Finally, my coins were safe. Just as safe as the cash in my pocket, meaning it can still be destroyed, lost, or stolen – but at least now its in my hands! As a bonus, I can now pay for things semi-anonymously, as the fact that I own a specific wallet would be very difficult to prove.

Transacting

I shopped on several sites using my bitcoin wallet, and found the experience to be pretty pleasant. On purchase, all you have to do is send the required amount to the provided address, and in several minutes to an hour, the transaction is verified and completed. Voila. Easier than typing in your credit card info I would say.

How do I feel about all this? I support the vision of an open currency, with verifiable transactions, and less bureaucracy. I also see all the exploits and scams, and how certain people are just gaming the market for their own benefit. We shall see whether it holds out. Meanwhile, I would recommend everyone to figure out how bitcoins work, how to buy/sell them, its good for you!