When people talk about Bitcoin on TV, they often talk about its more nefarious uses. From buying drugs online to laundering money, Bitcoin is being made out to be a scary, terrifying device used to keep the world’s evildoers in power.
Yet Bitcoin isn’t as scary as people think it is. Sure, it’s anonymous and can be used for some shady stuff, but so can any currency. Plus, it has some amazing benefits that prevent counterfeiting or other illegal activities that criminals and banks alike have conducted for decades.
In fact, if you buy everyday products with Bitcoin, you could end up saving money in the short- and long-term. But where do you even start with Bitcoin, and how do you get your hands on some?
As it turns out, it’s much easier than you think. To use Bitcoin, however, you have to know a few things about it first.
Bitcoin is a universal digital currency. It is not tied to any single government or country’s economy.
Bitcoin is purely digital, meaning there are no physical paper or coin currencies to carry around. Unlike the Forex market, Bitcoin changes in value 24/7, and is not tied to the U.S. dollar or any single foreign currency. The value of a bitcoin is determined by supply and demand, and supply is based on factors like the creation of bitcoins through “mining rigs,” or complex computers that can generate bitcoins. Also, you don’t have to buy full bitcoins either, and can buy small percentages of them instead.
Essentially, Bitcoin is just like any foreign currency. However, you can’t counterfeit it, you can’t trace it once you spent it, and it can change rapidly in price when other currencies cannot.
To use, buy, or sell bitcoins, you need a Bitcoin wallet.
Bitcoin wallets safely hold your bitcoins until you want to spend or sell them. They let you buy more bitcoins (usually for a small added fee), sell your bitcoins (also for a small fee), or send them to another Bitcoin wallet (for free).
Coinbase is the most accessible Bitcoin wallet, and one I personally use for keeping my bitcoins. Right now, I have .00994 bitcoins. Lets say this is amount is worth $9.49. If I wanted to sell the bitcoins and transfer them to my bank account, Coinbase would take a small percentage from the $9.49 before it’s deposited in my account. Right now, however, I’m going to buy something using these bitcoins and bitcoins I need to purchase.
Newegg is one of many online retailers who accept Bitcoin as payment.
Let’s say I want to buy this PlayStation Store gift card. It costs exactly $20, or a hypothetical .020987 bitcoin. If the price of Bitcoin goes up later, this gift card will cost less in Bitcoin. If the price of Bitcoin goes down, however, the amount of bitcoins needed to buy this will go up. Newegg will always charge whatever the bitcoin equivalent of $20 is for this item.
Instead of paying with a credit card at checkout, you can pay with Bitcoin.
This requires getting an exact “address” from Newegg. This address is like a web address, but with a string of numbers and letters. (Since these addresses are crucial to the financial transactions, I’ve blurred it out in these examples.)
Unfortunately, I don’t have enough bitcoins to pay for the item, so I had to buy some more.
I decided to add $12 to my bitcoin wallet, which will give me a hypothetical .01257062 more bitcoins. Coinbase adds a fee on top of the $12 for their services of converting U.S. Dollars to Bitcoin, just like any currency exchange would. Since I’m in good standing with Coinbase, my bitcoins will arrive instantly into my wallet.
Using Coinbase, I’m going to send .020987 bitcoins to Newegg’s address.
Once I send my bitcoins to the address, Newegg will confirm the transaction, send me a receipt, and ship my product to my delivery address. That’s all there is to it!
The point of paying in Bitcoin is to spend less on the bitcoins themselves, watch them grow in value, and eventually spend them. Say I bought .020987 bitcoins a while back when they were worth $12 USD. Now that the price of Bitcoin went up and I’m paying .020987 for a $20 item, I’ve essentially saved $8 USD on your purchase.
Unfortunately, my purchase is not so anonymous, since it’s being sent to an address through a registered account. Yet if you want to pay for something in-store anonymously or subscribe to a service without a paper trail, Bitcoin is the way to go. It’s a secure alternative to buying something in U.S. dollars, and it could end up saving you money in the long run.