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@ -115,69 +115,69 @@ A bitcoin wallet must be protected by a password or passphrase. There are many b
Once Alice has downloaded and installed the Multibit application, she runs it and is greeted by a "welcome" screen, as shown in <<multibit-welcome>>.
[[multibit-welcome]]
.The Multibit Bitcoin Client - Welcome Screen
.The Multibit bitcoin client - Welcome screen
image::images/msbt_0101.png["MultibitWelcome"]
Multibit automatically creates a wallet and a new bitcoin address for Alice, which Alice can see by clicking on the "Request" tab:
Multibit automatically creates a wallet and a new bitcoin address for Alice, which Alice can see by clicking the Request tab shown in <<multibit-request>>.
[[multibit-request]]
.Alice's new bitcoin address, in the "Request" tab of the Multibit client
.Alice's new bitcoin address, in the Request tab of the Multibit client
image::images/msbt_0102.png["MultibitReceive"]
The most important part of this screen is Alice's _bitcoin address_. Like an email address, Alice can share this address and anyone can use it to send money directly to her new wallet. On the screen it appears as a long string of letters and numbers: +1Cdid9KFAaatwczBwBttQcwXYCpvK8h7FK+. Next to the wallet's bitcoin address, there is a QR code, a form of barcode that contains the same information in a format that can be easily scanned by a smartphone's camera. The QR code is the black and white square on the right side of the window. Alice can copy the bitcoin address or the QR code onto her clipboard by clicking on the copy button adjacent to each of them. Clicking on the QR code itself will magnify it, so that it can be easily scanned by a smartphone camera.
The most important part of this screen is Alice's _bitcoin address_. Like an email address, Alice can share this address and anyone can use it to send money directly to her new wallet. On the screen it appears as a long string of letters and numbers: +1Cdid9KFAaatwczBwBttQcwXYCpvK8h7FK+. Next to the wallet's bitcoin address, there is a QR code, a form of barcode that contains the same information in a format that can be easily scanned by a smartphone's camera. The QR code is the black-and-white square on the right side of the window. Alice can copy the bitcoin address or the QR code onto her clipboard by clicking the copy button adjacent to each of them. Clicking the QR code itself will magnify it, so that it can be easily scanned by a smartphone camera.
Alice can also print the QR code as a way to easily give her address to others without them having to type the long string of letters and numbers.
[TIP]
====
Bitcoin addresses start with the digit "1" or "3". Like email addresses, they can be shared with other bitcoin users who can use them to send bitcoin directly to your wallet. Unlike email addresses, you can create new addresses as often as you like, all of which will direct funds to your wallet. A wallet is simply a collection of addresses and the keys that unlock the funds within. There is practically no limit to the number of addresses a user can create.
Bitcoin addresses start with the digit 1 or 3. Like email addresses, they can be shared with other bitcoin users who can use them to send bitcoin directly to your wallet. Unlike email addresses, you can create new addresses as often as you like, all of which will direct funds to your wallet. A wallet is simply a collection of addresses and the keys that unlock the funds within. There is practically no limit to the number of addresses a user can create.
====
Alice is now ready to start using her new bitcoin wallet.
[[getting_first_bitcoin]]
==== Getting your first bitcoins
==== Getting Your First Bitcoins
It is not possible to buy bitcoins at a bank or foreign exchange kiosks at this time. As of 2014, it is still quite difficult to acquire bitcoins in most countries. There are a number of specialized currency exchanges where you can buy and sell bitcoin in exchange for a local currency. These operate as web-based currency markets and include:
* Bitstamp (bitstamp.net), a European currency market that supports several currencies including euros (EUR) and US dollars (USD) via wire transfer
* Coinbase (coinbase.com), a US-based bitcoin wallet and platform where merchants and consumers can transact in bitcoin. Coinbase makes it easy to buy and sell bitcoin, allowing users to connect to US checking accounts via the ACH system.
* Bitstamp (http://bitstamp.net/[bitstamp.net]), a European currency market that supports several currencies including euros (EUR) and US dollars (USD) via wire transfer.
* Coinbase (http://www.coinbase.com/[coinbase.com]), a US-based bitcoin wallet and platform where merchants and consumers can transact in bitcoin. Coinbase makes it easy to buy and sell bitcoin, allowing users to connect to US checking accounts via the ACH system.
Crypto-currency exchanges such as these operate at the intersection of national currencies and crypto-currencies. As such, they are subject to national and international regulations and are often specific to a single country or economic area and specialize in the national currencies of that area. Your choice of currency exchange will be specific to the national currency you use and limited to the exchanges that operate within the legal jurisdiction of your country. Similar to opening a bank account, it takes several days or weeks to set up the necessary accounts with the above services because they require various forms of identification to comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) banking regulations. Once you have an account on a bitcoin exchange, you can then buy or sell bitcoins quickly just as you could with foreign currency with a brokerage account.
Crypto-currency exchanges such as these operate at the intersection of national currencies and crypto-currencies. As such, they are subject to national and international regulations, and are often specific to a single country or economic area and specialize in the national currencies of that area. Your choice of currency exchange will be specific to the national currency you use and limited to the exchanges that operate within the legal jurisdiction of your country. Similar to opening a bank account, it takes several days or weeks to set up the necessary accounts with these services because they require various forms of identification to comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) banking regulations. Once you have an account on a bitcoin exchange, you can then buy or sell bitcoins quickly just as you could with foreign currency with a brokerage account.
A more complete list can be found at http://bitcoincharts.com/markets/, a site that offers price quotes and other market data across many dozens of currency exchanges.
You can find a more complete list at http://bitcoincharts.com/markets/, a site that offers price quotes and other market data across many dozens of currency exchanges.
There are three other methods for getting bitcoins as a new user:
There are four other methods for getting bitcoins as a new user:
* Find a friend who has bitcoins and buy some from them directly. Many bitcoin users started this way.
* Use a classified service like localbitcoins.com to find a seller in your area to buy bitcoins for cash in an in-person transaction.
* Sell a product or service for bitcoin. If you're a programmer, sell your programming skills. If you have an online store, see [XREF-bitcoin-commerce] to sell in bitcoin.
* Use a bitcoin ATM in your city. A map of bitcoin ATMs can be found at http://www.coindesk.com/bitcoin-atm-map/
* Use a bitcoin ATM in your city. You can find a map of bitcoin ATMs at http://www.coindesk.com/bitcoin-atm-map/.
Alice was introduced to bitcoin by a friend and so she has an easy way of getting her first bitcoin while she waits for her account on a California currency market to be verified and activated.
[[sending_receiving]]
==== Sending and receiving bitcoins
==== Sending and Receiving Bitcoins
Alice has created her bitcoin wallet and she is now ready to receive funds. Her wallet application randomly generated a private key (described in more detail in <<private_keys>>) together with its corresponding bitcoin address. At this point, her bitcoin address is not known to the bitcoin network or "registered" with any part of the bitcoin system. Her bitcoin address is simply a number that corresponds to a key that she can use to control access to the funds. There is no account or association between that address and an account. Until the moment this address is referenced as the recipient of value in a transaction posted on the bitcoin ledger (the blockchain), it is simply part of the vast number of possible addresses that are "valid" in bitcoin. Once it has been associated with a transaction, it becomes part of the known addresses in the network and Alice can check its balance on the public ledger.
Alice meets her friend Joe who introduced her to bitcoin at a local restaurant so they can exchange some US dollars and put some bitcoins into her account. She has brought a printout of her address and the QR code as displayed in her bitcoin wallet. There is nothing sensitive, from a security perspective, about the bitcoin address. It can be posted anywhere without risking the security of her account.
Alice meets her friend Joe, who introduced her to bitcoin, at a local restaurant so they can exchange some US dollars and put some bitcoins into her account. She has brought a printout of her address and the QR code as displayed in her bitcoin wallet. There is nothing sensitive, from a security perspective, about the bitcoin address. It can be posted anywhere without risking the security of her account.
Alice wants to convert just $10 US dollars into bitcoin, so as not to risk too much money on this new technology. She gives Joe a $10 bill and the printout of her address so that Joe can send her the equivalent amount of bitcoin.
Alice wants to convert just 10 US dollars into bitcoin, so as not to risk too much money on this new technology. She gives Joe a $10 bill and the printout of her address so that Joe can send her the equivalent amount of bitcoin.
Next, Joe has to figure out the exchange rate so that he can give the correct amount of bitcoin to Alice. There are hundreds of applications and web sites that can provide the current market rate, here are some of the most popular:
Next, Joe has to figure out the exchange rate so that he can give the correct amount of bitcoin to Alice. There are hundreds of applications and websites that can provide the current market rate. Here are some of the most popular:
* bitcoincharts.com, a market data listing service that shows the market rate of bitcoin across many exchanges around the globe, denominated in different local currencies
* bitcoinaverage.com, a site that provides a simple view of the volume-weighted-average for each currency
* ZeroBlock, a free Android and iOS application that can display a bitcoin price from different exchanges
* bitcoinwisdom.com, another market data listing service
* http://bitcoincharts.com/[bitcoincharts.com], a market data listing service that shows the market rate of bitcoin across many exchanges around the globe, denominated in different local currencies
* http://bitcoinaverage.com/[bitcoinaverage.com], a site that provides a simple view of the volume-weighted-average for each currency
* http://www.zeroblock.com/[ZeroBlock], a free Android and iOS application that can display a bitcoin price from different exchanges (see <<zeroblock-android>>)
* http://www.bitcoinwisdom.com/[bitcoinwisdom.com], another market data listing service
[[zeroblock-android]]
.ZeroBlock - A bitcoin market-rate application for Android and iOS
image::images/msbt_0103.png["zeroblock screenshot"]
Using one of the applications or websites above, Joe determines the price of bitcoin to be approximately $100 US dollars per bitcoin. At that rate he should give Alice 0.10 bitcoin, also known as 100 milliBits, in return for the $10 US dollars she gave him.
Using one of the applications or websites just listed, Joe determines the price of bitcoin to be approximately 100 US dollars per bitcoin. At that rate he should give Alice 0.10 bitcoin, also known as 100 millibits, in return for the 10 US dollars she gave him.
Once Joe has established a fair exchange price, he opens his mobile wallet application and selects to "send" bitcoin. He is presented with a screen requesting two inputs:
Once Joe has established a fair exchange price, he opens his mobile wallet application and selects to "send" bitcoin. For example, if using the _Blockchain_ mobile wallet on an Android phone, he would see a screen requesting two inputs, as shown in <<blockchain-mobile-send>>.
* The destination bitcoin address for the transaction
* The amount of bitcoin to send
@ -186,16 +186,16 @@ Once Joe has established a fair exchange price, he opens his mobile wallet appli
.Bitcoin mobile wallet - Send bitcoin screen
image::images/msbt_0104.png["blockchain mobile send screen"]
In the input field for the bitcoin address, there is a small icon that looks like a QR code. This allows Joe to scan the barcode with his smartphone camera so that he doesn't have to type in Alice's bitcoin address (+1Cdid9KFAaatwczBwBttQcwXYCpvK8h7FK+), which is quite long and difficult to type. Joe taps on the QR code icon and activates the smartphone camera, scanning the QR code from Alice's printed wallet that she brought with her. The mobile wallet application fills in the bitcoin address and Joe can check that it scanned correctly by comparing a few digits from the address with the address printed by Alice.
In the input field for the bitcoin address, there is a small icon that looks like a QR code. This allows Joe to scan the barcode with his smartphone camera so that he doesn't have to type in Alice's bitcoin address (+1Cdid9KFAaatwczBwBttQcwXYCpvK8h7FK+), which is quite long and difficult to type. Joe taps the QR code icon and activates the smartphone camera, scanning the QR code from Alice's printed wallet that she brought with her. The mobile wallet application fills in the bitcoin address and Joe can check that it scanned correctly by comparing a few digits from the address with the address printed by Alice.
Joe then enters the bitcoin value for the transaction, 0.10 bitcoin. He carefully checks to make sure he has entered the correct amount, as he is about to transmit money and any mistake could be costly. Finally, he presses "Send" to transmit the transaction. Joe's mobile bitcoin wallet constructs a transaction that assigns 0.10 bitcoin to the address provided by Alice, sourcing the funds from Joe's wallet and signing the transaction with Joe's private keys. This tells the bitcoin network that Joe has authorized a transfer of value from one of his addresses to Alice's new address. As the transaction is transmitted via the peer-to-peer protocol, it quickly propagates across the bitcoin network. In less than a second, most of the well-connected nodes in the network receive the transaction and see Alice's address for the first time.
Joe then enters the bitcoin value for the transaction, 0.10 bitcoin. He carefully checks to make sure he has entered the correct amount, because he is about to transmit money and any mistake could be costly. Finally, he presses Send to transmit the transaction. Joe's mobile bitcoin wallet constructs a transaction that assigns 0.10 bitcoin to the address provided by Alice, sourcing the funds from Joe's wallet and signing the transaction with Joe's private keys. This tells the bitcoin network that Joe has authorized a transfer of value from one of his addresses to Alice's new address. As the transaction is transmitted via the peer-to-peer protocol, it quickly propagates across the bitcoin network. In less than a second, most of the well-connected nodes in the network receive the transaction and see Alice's address for the first time.
If Alice has a smartphone or laptop with her, she will also be able to see the transaction. The bitcoin ledger - a constantly growing file that records every bitcoin transaction that has ever occurred - is public, meaning that all she has to do is look up her own address and see if any funds have been sent to it. She can do this quite easily at the blockchain.info website by entering her address in the search box. The website will show her a page (https://blockchain.info/address/1Cdid9KFAaatwczBwBttQcwXYCpvK8h7FK) listing all the transactions to and from that address. If Alice is watching that page, it will update to show a new transaction transferring 0.10 bitcoin to her balance soon after Joe hits "Send".
If Alice has a smartphone or laptop with her, she will also be able to see the transaction. The bitcoin ledger—a constantly growing file that records every bitcoin transaction that has ever occurred—is public, meaning that all she has to do is look up her own address and see if any funds have been sent to it. She can do this quite easily at the blockchain.info website by entering her address in the search box. The website will show her a page (https://blockchain.info/address/1Cdid9KFAaatwczBwBttQcwXYCpvK8h7FK) listing all the transactions to and from that address. If Alice is watching that page, it will update to show a new transaction transferring 0.10 bitcoin to her balance soon after Joe hits Send.
.Confirmations
****
At first, Alice's address will show the transaction from Joe as "Unconfirmed". This means that the transaction has been propagated to the network but has not yet been included in the bitcoin transaction ledger, known as the blockchain. To be included, the transaction must be "picked up" by a miner and included in a block of transactions. Once a new block is created, in approximately 10 minutes, the transactions within the block will be accepted as "confirmed" by the network and can be spent. The transaction is seen by all instantly, but it is only "trusted" by all when it is included in a newly mined block.
At first, Alice's address will show the transaction from Joe as "Unconfirmed." This means that the transaction has been propagated to the network but has not yet been included in the bitcoin transaction ledger, known as the blockchain. To be included, the transaction must be "picked up" by a miner and included in a block of transactions. Once a new block is created, in approximately 10 minutes, the transactions within the block will be accepted as "confirmed" by the network and can be spent. The transaction is seen by all instantly, but it is only "trusted" by all when it is included in a newly mined block.
****
Alice is now the proud owner of 0.10 bitcoin which she can spend. In the next chapter we will look at her first purchase with bitcoin and examine the underlying transaction and propagation technologies in more detail.
Alice is now the proud owner of 0.10 bitcoin that she can spend. In the next chapter we will look at her first purchase with bitcoin and examine the underlying transaction and propagation technologies in more detail.