BITCOINS BASICS 101

1 BITCOINS BASICS101 DAVID DODGE&BRIAN DIXONA dditional Content on the OF CONTENTS:The Birth and Evolution of Bitcoin3 CHAPTER 1:General Information You Should Know about Bitcoin5 What is Bitcoin?5 Bitcoin Exclusives5 How Does Bitcoin Work?7 The BASICS You Need to Understand7 How to Obtain Bitcoin8 Step One: Get a Bitcoin Wallet8 Bitcoin Exchanges9 Face to Face / Over the Counter Trades10 Bitcoin Mining11 Bitcoin investment trust12 Bitcoin ATMs12 Acquiring BITCOINS Not Super Easy12 Bitcoin Rewards14 CHAPTER 2:Bitcoin and the Economy16 What is The Value Of Bitcoin17 Bitcoin Deflation And Economic Activity20 Bitcoin Strengths and Weaknesses24 CHAPTER 3:Advice and Tips for Bitcoin28 Conclusion30 Glossary312 INTRODUCTIONTHE BIRTH AND EVOLUTION OF BITCOINT heideaofBitcoinwascreatedbyananonymouspr ogrammerwhogoesbythename SatoshiNakamoto.

2 Theideacametothispersonbackin2008,whenth eworldeconomywas currencythatheldontothegoodpointsofprevi ouscurrencies- divisibility,portability, durability, uniformity, quality and - ,he ,2008,decidingtokeepthecodeopen ,evenmakingtheirown when it comes to the direction the software behind Bitcoin is ,2009, ,butBitcoindidn' , , inOctoberof2009,exchangeratesforbitcoins werepublishedbyNewLibertyStandard.

3 Theylistedthevalueat1, $ startinganewcurrency, BITCOINS were created, this gave the new currency scarcity, which helped it ,2009, thistimewerecomputerprogrammers,buttheya ctuallybegantotradeBTCbackandforthfor ,thefirstBitcoinExchangewasestablishedon line, allowingpeopletobuy, ,MtGox,what would become one of the largest BTC marketplaces, was ,Bitcoinwouldbecomeevenmorepopular,reach ingmany theUSdollaronFebruary9, , ,butitwasstillwellunderthe21 million to be ,Bitcoinwasslowlybut ,the ,2011,theexchangeratefor bitcoinsreached$10 USDperBTC, thevaluewouldholdaround$10,butthiswasn't thecaseasbitcoinsbecameevenmore popular - and , ,2012,a ,000 BTCwerepilferedafterasecuritybreachat ,thiswouldn'tbetheonlytheftofBTCduringit slifetime,butitwasthe largest up to that point.

4 And one that made a lot of people notice Bitcoin for the first ,theBitcoinFoundationwasset- takenplaceovertheprevioustwoyears,butthe BitcoinFoundationwasformedto standardize, lookathowyoucangetinvolvedwithBitcoinasw ellaswhatthefutureholdsfor cryptocurrency around the 1 GENERAL INFORMATION YOU SHOULD KNOW ABOUT BITCOINWHAT IS BITCOIN?Bitcoiniscalledvirtualcurrency, , solve complex math problems with their computers. In many senses, it is truly to- peernetworkthatencompasses 'talotofrulesregardingBitcoin,thereareso me,andthis helps with making BITCOINS a genuine currency that works like "normal money.

5 "BITCOIN EXCLUSIVESNext,we'regoingtotakealookatso meofthewaysthatBitcoinisdifferentthantra ditional ' ,corporationorgovernment 'ttheonlydifference,however,solet'stakea lookat some things that are exclusive to vs. Conventional currencies1. Bitcoin is DecentralizedUnliketraditionalcurrency,w hichiscontrolledbyacentralauthority- usuallyanarmofthe government- to- peernetwork,all transactions and verification of transactions are done by various people in the Bitcoin is Virtual CurrencyTheotherthingthatsetsBitcoinapar tfromtraditionalcurrencyisthefactthatit' istosaycoinsandpapermoneyaren' ,allbitcoins ' peoplehavecreatedunofficialphysicalrepre sentationsofbitcoins,butfirstandforemost , Bitcoin is Bitcoin has ScarcityBecauseonly21millionbitcoinswill becreated,BTChasscarcity.

6 Unliketraditionalcurrency bitcoinsbeingreleasedintotheworld,thenum berthatarecreatedby"mining"willhalfevery time,nonewbitcoinswillbecreatedandtheexi stingstockpilewillenjoythebenefitsof scarcity - becoming more Bitcoin transactions cannot be reversedInordertopreservetheblockchainof alltransactionsinsequentialorder,Bitcoin transactions ,aBitcointransactioncantaketenminutesorm oretoconfirm. Thisisdifferentthanothercurrenciesthatty picallyprocesstransactionsinsecondsandal so allow for reversing a charge to a credit or debit Bitcoin is not UbiquitousWhereveryougointheworld,you' ,you'll beabletotradeyourcountry'smoneyforbillso fthecountryyou' whereyougointheworld,you'regoingtobeable totradeyourmoneyforgoodsand ' comeasmorebusinessesbegintoacceptBitcoin forpayment,butfornowit'sadifference that matters to a lot of and Bad of BitcoinAsyoucanseefromthepointsabove.

7 Bitcoinhasalotofpositivesandnegativesatt achedto 'sdecentralizedandgenerallyhaslowfeesfor transactions,many people are starting to take notice and get excited about this and other realityisthatbecauseitusespeer- to- peertechnology,noonepersonorcorporationc anown 'srevolutionaryandexcitingto eachotherisparamounttoBitcoin' ,mostpeoplewhoareinvolvedrealize thisandhaveworkedtogethertoimprovetheBit coinsoftwareandnetworkconsiderablyinjust a few short bothgoodandbad, mightbewhat' out to be the financial system that brings the world DOES BITCOIN WORK?

8 The BASICS You Need to UnderstandLet' 'll start with the BASICS and then move into more specifics about what you'll need to get started. TheTransaction- Thefirstthingyouneedtothinkaboutwithavir tualcurrencyisthe transaction- soundsimple,inmanywaysitcanbeeasytoforge atransactiontotrytocheatthe ,transactionsarecontrolledbybankinginsti tutions which verify that they're not forged and are unique. ASerialNumber- Toavoidpeopletryingtoforgetransactionsor reusethemwith virtualcurrency,youneedawaytotieauniques erialnumbertoeachpersonand Thesehashesareusedtomakesuretransactions aren'tduplicatedinthenetworkand there's no way to cheat the system.

9 GoodbyeBanks- Currently,banksareinplacetofacilitateafi nancialtransaction up,itwasrealizedthatbankscould betakenoutofthepictureentirelyifapeer- to- peernetworkwascreatedtoverifythe of the biggest reasons so many smart people are getting excited about Bitcoin. BitcoinMining- 'stooeasyfor transactionstobevalidated,peoplecouldpro grambotstofloodthenetworkwith verifications, ,the againstthebadguyswhileatthesametimeoffer ingawaytorewardpeoplewhogive difficultenoughtomakeitimpossibletohackw hileeasyenoughtostillallowpeopleto solve in a reasonable amount of ,whenyouset- upaBitcoinWallet- akaaBitcoinclient- youwillgenerateapublicand transfer BITCOINS to other people in the ,youcancreateaBitcoinAddressifyou.

10 Youcanuse another Bitcoin address generated in order to pay for goods or transaction (by solving the math problem) and then publish details of the transaction TO OBTAIN BITCOINU nderstandinghowBitcoinworksmaybeinterest ingtosome,butyou'reprobablywantingto legallygetbitcoins- connectionandtheBitcoinsoftwareinstalled ,you'regoingtobeabletobeginusingthisvirt ual 'sactuallyfairlyeasytobegintobuildupyour BitcoinWallet if you have a little spare ,itshouldbenotedthatit'sreallydifficultt opurchasebitcoinswithacreditcardorPayPal , 'sreallyeasy reversesthecharge.