This is the first video in our series called “Bitcoin as a Disruptor”. Learn how Bitcoin will change the economy and level the playing field.
Source: IBM Banking
Bitcoin is going main stream globally, and Bitcoin focused start-ups are accessing venture capital, and industry commentators talk about it as an important international payment mechanism of the future.
In this video, Richard Brown, IBM Executive Architect for Banking and Financial Markets Industry Innovation, argues that Bitcoin’s true significance lies in its potential as a global digital asset register and in the lessons it teaches us for design of complex distributed systems.
He also explains why recent law enforcement action against operators of illegal websites that transacted in Bitcoin will help accelerate adoption by legitimate businesses.”
Bitcoin transfers are one of the main concerns for those taking their first steps at the crypto-currency ecosystem.
For sure you already know how the usual electronic transfer operates. There are two parties and a middle man. The two parties want to electronically move money from one side to the other. To do so they need a middle man that provides the service, call it bank, Paypal, Western Union, etc. who will almost always take a pretty relevant percentage of the money being sent.
> So, What is Different with Bitcoin Transfers?
In the first place, the middle man is now out of the equation. Transfers are made from peer to peer (P2P) using bitcoin wallets. This is digitally signed for security reasons.
> The Transaction Structure Involves 3 Pieces of Information
Those are: Input > Amount > Output
Supposing that John wants to send bitcoins to Mark, the first piece of information is the “Input”, which specifies the address from where John received bitcoins in the first place (from Peter’s address). The second piece of information is the “Amount” that John want to send to Mark, and the third is the “Output”, which will be Mark’s wallet address.
The transfer is distributed through the network and registered in a vast general ledger (public record) called block chain that validates all transactions. This means that everyone can know about transactions being made and trace its history to the point of its inception.
> Sending Bitcoins is Fairly Simple
To send bitcoin, both the address (public key) and the private key assigned to your bitcoin wallet are needed.
At the time John (from the example above) wants to send bitcoins to Mark, the private key is what he will use to sign the message that includes the input, amount and output (Mark’s address).
After the bitcoin is sent from John’s wallet into the BTC network, miners will verify the transaction, put it on a transaction block and solve it. This verification process made by miners usually take up to 10 minutes or less. The bitcoin protocol is set on that time frame to mine each block. You should wait until the process is fully confirmed, but usually some merchants will trust on you assuming that you will not try to spend the same bitcoins before the process is completed.
> Bitcoin Transactions May Involve Fees
Bitcoiners will not always have to pay transaction fees, but that doesn’t mean you shouldn’t. Wallets usually let you manually set the transaction fees. Miners usually process transactions for free as they are rewarded by the block (with bitcoin), but we might see miners starting to raise some low fees in the future, as the block reward decrease.
Sometimes there are portions of transactions that the recipient doesn’t pick up or is considered as change. This is usually considered a fee or a tip for the miner’s good job!
If you have any doubts about how bitcoin transactions work, please let us know by leaving us a comment in the comments section below.
Bitcoin wallets are the key tool to start using the digital currency. Read this straight forward overview about (1) types of wallets, (2) best wallet services and (3) basic tips to better manage your wallet.
> First of all, What is a Bitcoin Wallet?
A bitcoin wallet it’s like your physical wallet or your bank account (without all the paper work) but for the BTC network. It allows you to store, manage and control your transactions. Once created, the wallet generates two keys, one public, and one private. The public key or “address” is used to receive payments (or donations), and send payments. The private key (composed of fifty-one alphanumeric characters, starting with “5”) guarantees that you have the right to use the bitcoins in that wallet. Important: never reveal this piece of data!
> Types of Bitcoin Wallets
There are two types: software and web wallets. Software wallets can be installed on your own computer or mobile device, providing you with a certain level of autonomy since you are the only responsible of keeping it safe. On the other hand, web wallets are hosted by a third party company. In this case you need to trust that they are doing their homework at keeping high security standards to protect users’ assets.
The tools mentioned above are supposed to provide a high level of security, which is recommended for investors adopting the usage of the digital currency. Learn how bitcoin transactions work (internal link) here!
> Recommendations for New Bitcoiners
Creating your first wallet is fairly easy and fast. Here are some key points that you should consider upfront:
1- Choose a password that contains letters, numbers, and symbols (#, %, $, @) to make it as strong as possible.
2- Don’t keep your private key and password data saved on any document on your computer, email client or web based third party apps you may use.
3- Web wallets are more vulnerable to attacks. We recommend a software wallet.
4- Create more than one address to manage your transactions and have specific purposes for each, say “Investments”, “Shopping”, “Savings”.
5- Learn more about how to generate a paper wallet to better protect your assets.