Alex Bosworth's Weblog

developing software, living the expat life in beijing, other fun stuff!

previous projects: alchemy, swik, open source stuff, now adylitica.

How To Use Bitcoin

I’ve been interested in Bitcoin for almost two years now, and it’s something that I’d really like to succeed. It has the potential to disrupt a lot of industries by radically improving the efficiency of commerce.

If you don’t know what bitcoin is: it’s a system of conducting transactions where all transactions are secured by a decentralized network of computers working together over the internet.

At the core, payment processors and banks are profiting from a position of trust that they have spent a lot of time and money to attain. Bitcoin flips this model on its head: instead of amassing capital and spending a long time to establish a reputation of trustworthiness, bitcoin offers full transparency and mathematical proofs of why users can rely that their transactions and currency are safe.

Of course just flipping things around only gets you so far. Many problems that the big transaction processing players have spent centuries mastering are still in a slow process of being solved in the bitcoin world. Name awareness. Security from theft and fraud. Ease of exchange. Speed of exchange. General trust building. Software and apps. Merchant signups.

That doesn’t mean it’s not very usable today however. Right now, for bitcoin to succeed, people will have to find ways to use it in a sustained, ongoing way. For a few months now, I’ve been working on finding ways to use bitcoin in my daily life, and I’ve found a lot of very cool ways it can be useful. Since the start of September, I’ve carried out over 100 transactions, sending and receiving in total about $570.

How To Use Bitcoins

  1. First: get a wallet. Like everything bitcoin related, this is more complicated and technical than it should be, but it’s getting easier and better as the community grows. By far the best option at the moment is the wallet software at blockchain.info. They have apps for iOS and Android, which makes it a true wallet you can carry around with you and use everywhere.
  2. Next: get bitcoins. This can be more complicated than it seems. Most transaction processors allow for rollbacks of their transaction. You can cancel Paypal and credit card transactions for a long time after you have sent them. This makes trading them for bitcoins problematic, since it only takes about 10 minutes for the bitcoin transaction to be quite securely complete. There are still many ways to purchase bitcoins however, even using paypal and bank cards. Personally I favor bitcoinary.com which is something like an ebay currency exchange market for bitcoin.
  3. Another great way to get into bitcoins is through advertising. Online advertising is essentially trading links around, and bitcoins make a great medium for facilitating those trades. Bitcoin advertising can pay out within 24 hours, it doesn’t require a check or connecting a bank account, and even if you make just a few pennies, consider that you can also buy advertising for just a few pennies. I’d say I’ve made about $10/month from advertising, and I’ve also spent a lot of that on advertising in turn. A good option here is anonymousads.com - akin to an extremely simplistic Google Adsense. Buying and selling retweets is an option at feedzebirds.com
  4. Get someone to buy you coffee or lunch. One problem that I have on a daily basis is splitting the check at lunch. More often than not, someone doesn’t have exact change, so we have to figure out how to get the correct change back, or remember to pay someone back, etc. My main use of bitcoin is just trading them back and forth, essentially as chips or tokens: I’ll buy lunch today, you buy lunch tomorrow. Or not. Or for someone else. Bitcoins make for a lot of very useful flexibility in this situation. Via my iPhone, I can also typically send bitcoins to settle a bill faster than we can pay in cash.
  5. Gamble, take some risk. Of course even playing with bitcoin is risky: the price goes up and down, there is no central backer to try and stabilize its value, there is no tax authority that will accept it as payment. But risk is also fun. You can easily try gambling bitcoin, even small amounts. And the payouts can be provably fair, paying out a very high percentage of the time: running a bitcoin betting program is a very low maintenance operation that does not require the house to win a lot of the time. Given gambler’s ruin, we might even see a 100% fair, no house edge bitcoin casino created. Blockchain.info has betting built into it. Another fun option is betsofbitcoin
  6. Tell people your address. Mine is 15rqWE4mYsUAHHvVewKdcJrgoSAtwrjKr2 - like your phone number, once people have your address saved, it’s a lot easier to use in the future. People can get very creative with the currency and although currently bitcoin still is not very usable, it’s getting better all the time as people come up with innovative ways to use it. Tip someone on a popular forum or bulletin board for a great post. Send a small donation to a great cause or for disaster relief. Pay what you want for software or digital goods. Quickly send a small loan to a friend in a far away country. 

Bitcoin is still not a stable currency. It may never be stable versus the dollar, there is no reason it will be and other commodity types such as gold certainly have not been. It will certainly go up and down versus the dollar, unpredictably.

But that doesn’t mean it’s not a usable currency, and I’d expect it to grow more and more useful as time goes by, until finally it or something like it can gain mainstream use.

It took Linux/Open Source unix over 20 years, but it now dominates the server market and completely owns the smartphone and mobile device markets. Why? Because it represents a better idea than what came before. A new model that despite having all the disadvantages of not having powerful backing or ease of use has many clear advantages in many use cases, and it is a free community and open source project that grows in strength as people and companies exploit it for their own purposes.

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