Bitcoin for beginners
A primer on the currency that you can neither see nor hold.
Way back when the web was a place for geeks and early adopters, a CEO I was interviewing looked at the email address on my business card and shook his head.
“I can’t imagine a day when everyone on our staff would need their own email address,” he said.
Flash forward to today and there’s a new tech trend that’s eliciting a similar response: Bitcoin.
There are those heralding the cryptocurrency as the most disruptive technology since the Internet and one we’ll all soon embrace. They see it as having the potential to transform payment systems around the globe.
Others see it as a bubble, soon to burst. Like the email skeptic, their view is “Don’t bother — it’s not here to stay and it certainly won’t become ubiquitous.” No question Bitcoin’s relatively brief history has been mercurial. Most recently, denial- of- service attacks and reports of software bugs saw some exchanges put a halt on transactions and sent the currency plummeting to its lowest value in two months. This week, the Canadian government served notice in its budget that Bitcoin will come under stepped- up regulation, saying it plans to “introduce anti- money laundering and anti- terrorist financing regulations for virtual currencies, such as Bitcoin.”
Regardless of which Bitcoin prediction you espouse, there is a common theme among many consumers who discover Bitcoin only when they stop by their favourite coffee shop or order contact lenses online and find there’s now an option to pay in the digital currency. They’re confused and don’t know where to start.
As the creator of the popular music website Backstage Rider, Mikala Taylor is certainly no Luddite. But even she has trouble wrapping her head around a currency that you neither see nor hold, with a value that can bounce up and down by hundreds of dollars in the space of days or even hours.
“Confuses the hell out of me,” Taylor tweeted in response to a Vancouver Sun story about ClearlyContacts. ca becoming the first major Canadian ecommerce retailer to accept Bitcoin as payment.
For Taylor and others who are trying to figure out just what Bitcoin is all about and how to use it, here’s our primer: Bitcoin for Beginners.
You might wonder what people are doing when they are Bitcoin mining, and your eyes may glaze over at talk of algorithms, but don’t worry — you don’t need to know all that to use Bitcoin.
Mike Yeung is the founder and president of the Simon Fraser Bitcoin club and an organizer of the Meetup group Bitcoin Vancouver. He has seen the bewildered looks and heard the curious questions. His conclusion? People don’t necessarily want to learn the complexities of cryptocurrency — they just want to know how to use it and why they should bother.
Y eung uses his 65- year- old mom as an example. “Everybody, including my own mom, they don’t get it in the beginning, but once I show them how a transaction works, how quick and easy it is to set up, they get it,” he said. “It’s hard to get a person to wrap their head around it but if you show them a practical use for it, they understand.
“It’s all about efficiency. Once people see how efficient Bitcoin is, it’s like sending email — you may not know how it works but you know it’s useful.”
Yeung’s mom went from being a skeptic to an active Bitcoiner.
“She never paid much attention, but since the unveiling of the ATM, she started to buy a little bit and as of today she has made close to five figures from buying Bitcoin and trading it. She’s a trader and she’s 65,” Yeung said.
“Now she emails me 10 times a day with the latest things she’s learned about Bitcoin.”
This is Bitcoin for beginners — you can try it out and play around with currency for very little money. Maybe get $ 10 or $ 20 worth of Bitcoin and buy a T- shirt or a toy for your dog on the BC SPCA’s shopping site just to see how it works.
And remember, there’s no calling the B. C. Securities Commission or Canada’s consumer affairs office if you buy Bitcoin only to see it plummet in value.
Details of the Canadian federal government’s stepped- up regulation affecting Bitcoin remain to be seen, but so far there has been no mention from the feds of consumer protection measures around the new currency.
While there are uncertainties surrounding Bitcoin, there is a certainty you can count on: Taxes. The Canada Revenue Agency has noted that when digital currency is used “to pay for goods or services, the rules for barter transactions apply.”
Gains and losses are also covered by tax law, and could be considered taxable income or capital. And not reporting income, whether domestic or international, is illegal — no matter what the currency.
Best to take Yeung’s advice: “Don’t put any more money or time into Bitcoin than you are willing to lose.”
The ‘ virtual wallet’
Bitcoin is a virtual currency, so if you’re looking for something like a credit card to put in your wallet, forget it. Your Bitcoin wallet shows transactions between different Bitcoin addresses and tracks the balance.
There are a number of online services in which your wallet is only on the web, which is the easiest for the casual user to set up. Two of the top ones are Coinbase and Blockchain, although there are many other options.
Using Blockchain, for example, is simple and doesn’t require an email account, although you can use one if you want to have an email link to your new wallet sent to you. Go to Blockchain. info, click on wallet at the top of the screen and follow the directions for “create a new wallet.”
There was a Blockchain app available for the iPhone until Apple pulled it from its app store. It wasn’t the first instance of Apple blocking virtual payment apps, leading to speculation that the company has a mobile payments plan itself and doesn’t want competitors in its app store.
Buying Bitcoins
Now you have a online wallet— so how do you fill it? There are a number of different ways to acquire Bitcoins — you could be like the Vancouver woman who advertised her car on Craigslist for Bitcoins. Or Vancouver blogger Esther Tung, who accepts Bitcoins for freelance work through her blog at esthertung.com.
Or you can simply buy Bitcoin. You can do that through exchanges, from individuals, or if you’re in Vancouver — home to the world’s first Bitcoin ATM — you can go to the ATM and load up on Bitcoin currency as easily as stopping at your local bank machine.
The ATM, located downtown at Waves Coffee House on Howe Street at Smithe , has an attendant from 9 a. m. to 9 p. m. weekdays and 9- 5 weekends, who will help set up an online wallet and walk you through the process.
Once you’ve set up your wallet, you can use cash to buy Bitcoin through the ATM, or if you already have Bitcoins in your wallet, exchange them for cash.
“The best way to explain it is to show somebody,” said Mitchell Demeter, cofounder of Bitcoiniacs, which brought the ATM to Vancouver and plans to install them in other Canadian cities.
The company plans to open offices with ATMs in Calgary and Toronto this month, and in London and Singapore in March.
Bitcoiniacs also has an online trading site — Cointrader.net — that lets you link directly to your Canadian bank account. It takes two to three days for the money to show up in your Cointrader account when you transfer from your bank account and you can then use the money to buy Bitcoin. You also can do the reverse, selling Bitcoin and transferring the Canadian dollars directly to your account.
You’ll soon be able to send funds directly from your online bank account to Bitcoiniacs by adding the company as a payee in your online bill payments, Demeter said. The service is expected to first be available to BMO customers, with other banks to follow, according to Demeter.
A Toronto- based company QuickBT lets you buy Bitcoin using Interac through its website at quickbt.com. Yeung’s recommendation for Canadians buying Bitcoins online is cavirtex. com. If you want to find individuals nearby who are buying or selling Bitcoin, check out localbitcoins.com.
And to learn more, join Vancouver’s CoinFest on Saturday and Sunday, bringing together Bitcoin experts and aficionados with demonstrations, a currency and commodity exchange and other events. For details, check online at coinfest. org.
Buying with Bitcoin
You can use Bitcoin to do something as simple as sending money home — a use that may be worrying for companies that charge fees for transferring money.
While intermediaries such as traders take a fee and merchants pay a small fee to take payments and turn them into the currency of their country, any fees associated with Bitcoin are low compared to credit card fees.
Bitcoin transactions on their own can be done with no fees, although you can opt to pay a tiny fee to speed up the transaction.
To send money to someone from your Bitcoin wallet, use your smartphone to scan a QR code giving you the Bitcoin address of the recipient, or enter it on the screen. A Bitcoin address is the public part of the transaction; a private key is secret and proves your ownership of Bitcoins.
For example, I went to the BC SPCA’s shopping site and ordered a dog chew toy at $ 4.99. Payment options at the online checkout included PayPal, credit cards and Bitcoin.
With Bitcoin trading around the equivalent of $ 880 Cdn at the time, the $ 4.99 chew toy plus tax costs only a fraction of a Bitcoin — at the point of purchase .0063 Bitcoin and so only that amount is sent from my Bitcoin wallet. It’s a little like ordering an item from a U. S. website and having the site automatically generate the equivalent Canadian price.