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Introduction by Gordon Geeko
Mr. Mix is a regular commentator on Zero Hedge, the financial news and analysis site with a distinctly libertarian edge. Bitcoin-related articles which run there frequently divide commentators into those who distrust Bitcoin’s virtual, even “imaginary” nature, and those who admire its relative independence from central bank / state control. A single non-polarising exception was found in the response to Paul Krugman’s latest set of arguments against Bitcoin, in which it was widely agreed that nothing could possibly be worse than Paul Krugman.
Unlike many who seemed motivated more by ideology than the facts, Mr. Mix decided to conduct his own research before choosing his side of the “discussion.” In fact, it could be better called an argument, as the ZH comment section is known as Fight Club for good reason.
As a businessman who conducts international trade in machine parts, Mr. Mix approached Bitcoin in a serious-minded way. First seeking the advice of experts, he then tackled the initial hurdle of acquiring Bitcoin before testing out the Bitcoin market for precious metals. He covers all these aspect in detail in a series of articles, republished from his personal blog with his kind permission. In later installments, Mr. Mix delves into some of the mathematic and cryptographic aspects of Bitcoin.
Apart from being a good tutorial and an interesting read for their own sake, I believe that Bitcoin merchants, service providers – really anyone seeking to expand the economy – will benefit from this series of articles by Mr. Mix. They provide a great example of the questions, concerns and tests with which new entrants approach the Bitcoin economy.
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Fun With Bitcoin For Beginners by Robert Mix
(first published on Tuesday the 12th of November, 2013)
Let me start with this:
1P11zA1GaJcyjc7oVt1jVQvWcPoW12sv5R
(You do not have to send me any money, but feel free if you would like. I would encourage anyone so inclined to send me a really small but unusual amount, say 0.00173 Bitcoin for example and email me the information if you would like, particularly if you would like to mentioned (or not) here at my blog)
That is a genuine Bitcoin wallet, in which you can send me a rough equivalent of money. At least if you know how. And in this article I hope to tell all of you just enough to get started on the Bitcoin Trail.
What is Bitcoin?
It’s a complicated topic, but Bitcoins (“BTC” for short) are a type of digital encrypted currency, this is one part of what deep-thinkers call “money”, BTC does serve as a “Medium of Exchange” (one of the three roles of money). Germany in August 2013 (in the wikipedia article referenced below) declared BTC to also be a “Unit of Account” (the second attribute of “money”). No one has yet said that BTC would be the their role of “money (“Store of Value”, gold is probably the best Store of Value there is). BTC’s price is extremely volatile, in the past year or two the price per Bitcoin has varied from around $5.00 each to about $365 (now). So, buying or holding should be viewed as speculative, unless you are doing immediate transactions (buying or selling stuff, donating, etc.) or experimenting with the system (like I am).
Bitcoin is “safe” in one important sense: it is essentially impossible to decrypt (and so, steal) them. But, BTC are NOT completely anonymous, in the screenshot further below, BTC creation is tracked by country, this is “sort of” public knowledge.
What is Bitcoin Worth?
Here’s a place where you can see how much a Bitcoin is worth, along with some other monetary instruments:
http://ounce.me
I donated 0.01 BTC to this site, although I was unable to put in a screenshot below. In case YOU want to donate (as I did, hah!), here is their BTC wallet:
1ozMe81f5oUjCbtJUrFNfSHUfrmBGdedo
You should go check the site yourselves, I could not get a useful screenshot, but the site shows several handy (for many of my readers anyway) quotations ($-value of BTC, as well as the four US-traded precious metals (Au, Ag, Pt, Pd), crude oil (W Texas Intermediate) and the US 10-Year Bond Yield. It also shows the price of gold and silver in BTC.
Too bad I could not get the screenshot in, it is close to elegant, take a look!
Who Invented It?
Bitcoin was invented in 2008 (at least the concept) by “Satoshi Nakamoto” (they say) and involves a very complicated and hard-to-crack encryption system, reference: http://en.wikipedia.org/wiki/Bitcoin. Wikipedia also had this nice little item re Paul Krugman, who does not like BTC:
Economist Paul Krugman has been critical of Bitcoin, suggesting that the structure of the currency incentivizes hoarding[88] and also stating its value from the expectation that others will accept it as payment.[89] Krugman considers it wasteful to spend real resources, such as electric power, on the creation of Bitcoins.[90]
I am not a fan of Paul Krugman, in fact I usually “take the other side of the bet” (assume he is lying), so his distaste for BTC might actually be a positive… Mr. Krugman! Doesn’t printing money use up real resources as well?
Getting Started with Test Transactions
I was given 0.11 BTC (worth, roughly, $35!) by a guy whom I will call the “Original Donor” or O.D. for short. He gave them to me, sent to my Bitcoin wallet at the top of this article. He told me to go forth and “do things” (my words) and then write it up. This has encouraged me to look into a number of interesting little niches, that technophiles will likely enjoy. Because BTCs are divisible to eight digits (meaning you can give tiny quantities), 0.11 is more than it sounds.
O.D. also helped me to set up my BTC wallet (account) set up, I went looking for people who would accept a free gift of BTC! I expected Zero Hedge would be a good hunting ground for Bitcoin recipients, went into the Zero Hedge “Chat Room” and inquired if anyone wanted free BTC. Within about 15 seconds “qqqqtrader” put his wallet number out, so he (she?) was the first recipient, I sent 0.01 BTC (worth about $3.50). I wound up giving similar amounts to two others as well as the the lucky “Atm0sphere” who got 0.019, I will get to that in a little while.
1MZoWrZRqmX4Uu1XN6Hsgqk7pA44NnUksM — qqqqtrader
13hxDqmZCdWixu2ydAciyVH5CbBtyjQ3Ym — WAMBACHUMBA
1FcuSYzb7EZREsBvAmQ298z6DDpxfwQZam — OldE_Ant
19GZ1VKUbK6TQYwzqd92ewRuE42rNRF6xo — Atm0sphere
(I also sent 0.01 BTC to my O.D. to continue my testing)
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All of the above (except Atm0sphere) received the same 0.01 amount. The first three received theirs within about 30 seconds or so. The next evening, Atm0sphere wanted a donation, so I sent him 0.01 as well. But, this one did not go through in seconds like the others did… I waited a few minutes, looked at my Multibit Client and tried to see what was going on. The transaction was not being confirmed. Ahh. So, I told (ZH Chat) that I would try again, but with just 0.005 BTC, as my account was (and is) being drained… Still, the two transactions were hung-up somewhere there in Cyberspace, so after a few more minutes, I tried again, but with 0.004 BTC. Total: 0.019. Just then he told me that the BTC had finally landed into his wallet, I then went to my Multibit account, and saw, yes indeed the BTC were transferred OK.Lesson learned: If you send out BTC, wait half an hour so before sending any more!
What Countries Are Using Bitcoin?
Since then, I have sent BTC (0.01 in each case) to the O.D., as well as to two interesting websites (ounce.me) and this interesting site mentioned recently by Zero Hedge. Here is a most interesting screenshot that Andrew Hodel sent me of his http://fiatleak.com website (click on the image for a better view, I would strongly encourage everyone to go have a look at fiatleak.com, as when you seem the streaming content, some of what you see below becomes clearer…)::
There is a lot going on the above (again, please go to the site yourself!). First, note that service shows near-real-time of BTC transactions around the world. That big green number (+4888.1 BTC = approx. $1,784,000) refers to the amount of BTC sent from when you started looking at it that session (that is, it refreshes the screen from “zero” each time you go). I would guesstimate that it took perhaps 60 – 90 minutes from when Andrew opened his session until he took that screen shot.
The red letters refer to currency, each is the local one used there. USD is in US dollars, CNY is Chinese Yuan. The little red number under USD (561649.48) means that $561,649.48 was converted from dollars into BTC. In some 60 – 90 minutes… The little green number under the 561649.48 refers to the number of BTC being generated (here: 1641.93 BTC). China has even more impressive numbers (again, here): 4,635,429.7 Chinese Yuan (approx. $760,000) with a 2936.02 BTC. China and the USA are by far the biggest users of BTC, here approximately 93.5% of the world total!
I will mention three other features of the fiatleak screenshot above. First, the little orange circles with a “B” in them are Bitcoins being created from local cash (left arc represents the past several seconds of US BTC creation), the two to the right are Chinese, and the one “over Italy” is in the Eurozone. Second, the little gold dots running along just above the currency symbols are BTCs being made. The higher the little dot, the greater the amount. If the amount is enough, the vertical green numbers appear, you can see a pair of BTC creations of about 48.5 BTCs ($17,700 each) each towards the left (“under Baja California” and “left of Peru”).
I would strongly urge any of you who “do” BTCs to donate to Mr. Hodel, here is his BTC wallet:
1DUtwZkDZTy4ZDNzE7mDZ4r9QRZc2D8kCC
I sent him 0.01 BTC!
Do Most People Know About Bitcoin Yet?
Results of my own (non-scientific) investigations among acquaintances regarding use of BTC were disappointing.
a) I asked ALL of my Facebook friends (74) if any of them wanted any free (0.01) BTC. Results? 0 /74
b) I asked ALL members of my Joke List (about 52 members) if they wanted the same. Results: 0 / 52
c) I asked three members (a friend, an AT&T cellphone store and a Starbucks cashier) if they had even HEARD of BTC. Results: 0 / 3
d) I asked ALL members at pmbug.com (a gold-oriented forum-style website, 565 members signed up (so let’s call it 250 active members), everyone should check it out as well). Results: 0 wanted any BTC
So, among those I know (there is a fair amount of duplication in the above), Total:
74 + 52 + 250 = 376 people had their chance to get free money, NONE wanted it.
3 people I talked with: 0 of them had even heard of BTC…
How to Install and Use a Wallet
Bitcoin is very technical…
First I had to find a Bitcoin client-side program, my O.D. suggested Multibit 0.5.14, so I went to download it. The download went fine until my computer then told me I needed to download Java (owned by Oracle now, it is some kind of computer language that can be run on many types of devices). OK, OK, I downloaded Java as well.
After all of that, Mutlibit provides a desktop icon that allows you to start using BTC immediately (assuming you have any to spend or you can get someone to send you some). After I was ready. the O.D. sent me the 0.11 BTC and told me to go forth and use them…
And so I have. I have 0.02 BTC in my wallet. That may not sound like much (it is worth some $8 if I read correctly this morning), but, I can chop my donations to 0.002 or even much less…
Here is an example of Multibit Raw Transaction Details (from me to “qqqqtrader”):
ab49600e12a0d32f8377d0298d1d9363c0a66049823d7599017831671a419d63:
Seen by 4 peers. Appeared in best chain at height 268931, depth 436, work done 52894100447296009660.
from 1P11zA1GaJcyjc7oVt1jVQvWcPoW12sv5R / ca95255e10d533385e2d741f52c1c24c5191a82f8ecfb66796b5b933bd7f3fb6:0
to 1MZoWrZRqmX4Uu1XN6Hsgqk7pA44NnUksM 0.01 BTC
to 1P11zA1GaJcyjc7oVt1jVQvWcPoW12sv5R 0.0899 BTC Spent by
06f2fd676764a7f139b1d5c78da6aa216ef42acabd63b201197ae186a3e786e1
Investing in Bitcoin
I was asked (by Comment at Zero Hedge) by “Bindar Dundat” if BTC was suitable for investment.
At this point I would respond “No“. There is too little history of BTC and the prices of Bitcoins are hugely volatile. ”Buy BTC at your own risk!”
More to Come!
That is enough for one article on Bitcoin. I will be exploring BTC websites as well as seek out BTC users in my city for more information and maybe to buy some more. I really need to buy something real, that will be an important test for me (and typical people, not just people who are very knowledgeable about technology).
That will be my next article on Bitcoin…
