[role="pagenumrestart"] [[ch01_intro_cos'_è_bitcoin]] == Introduzione Bitcoin((("Bitcoin", "operational overview", id="bitcoin-operational-overview"))) è un insieme di concetti e tecnologie che formano le basi di un ecosistema di moneta digitale. Le unità di valuta chiamate bitcoin sono usate per conservare e trasmettere valore tra i partecipanti al network di Bitcoin. Gli utenti bitcoin comunicano tra di loro attraverso il protocollo Bitcoin principalmente via internet, anche se possono essere usate anche altre reti di trasporto. L'architettura a strati del protocollo Bitcoin, disponibile come software open source, è compatibile con una vasta gamma di dispositivi, dai laptop agli smartphone, rendendo la tecnologia facilmente accessibile a tutti. [TIP] ==== In this book, the ((("bitcoins", "defined")))unit of currency is called "bitcoin" with a small _b_, and the system is called "Bitcoin," with a capital _B_. ==== Gli utenti possono trasferire bitcoin sulla rete per fare praticamente tutto ciò che è possibile fare con le valute tradizionali, come acquistare e vendere beni, inviare denaro a persone o organizzazioni o concedere credito. I bitcoin possono essere acquistati, venduti e scambiati con altre valute presso appositi cambi di valuta, i cosiddetti exchange. Bitcoin è considerato da molti la forma di denaro perfetta per internet, poiché è veloce, sicuro e senza confini. A differenza delle valute tradizionali, bitcoin è interamente virtuale. Non esistono monete fisiche né monete digitali individuali. Le monete sono implicite nelle transazioni che trasferiscono valore da chi spende a chi riceve. Gli utenti di Bitcoin controllano chiavi che permettono loro di dimostrare la proprietà di bitcoin nella rete Bitcoin. Con queste chiavi possono firmare transazioni per sbloccare il valore e spenderlo trasferendolo a un nuovo proprietario. Le chiavi sono spesso conservate in un portafoglio digitale sul computer o sullo smartphone dell’utente. Il possesso della chiave necessaria per firmare una transazione è l’unico requisito per spendere bitcoin, mettendo il controllo dei bitcoin interamente nelle mani di ogni utente. Bitcoin è un sistema peer-to-peer distribuito. Pertanto, non esiste un server centrale o un punto di controllo. Le unità di bitcoin vengono create attraverso un processo((("bitcoins", "mining")))((("mining"))) chiamato "mining," che consiste nell'eseguire ripetutamente un'operazione computazionale che fa riferimento a un elenco di transazioni Bitcoin recenti. Qualsiasi partecipante alla rete Bitcoin può operare come miner, usando i propri dispositivi informatici per contribuire a garantire la sicurezza delle transazioni. In media, ogni 10 minuti, un miner di Bitcoin può aggiungere sicurezza alle transazioni precedenti e viene ricompensato sia con nuovi bitcoin sia con le commissioni pagate dalle transazioni recenti. In sostanza, il mining di Bitcoin decentralizza le funzioni di una banca centrale relative all'emissione di valuta e alla compensazione, e rende superflua la necessità di una banca centrale. //-- Math for following paragraph -- //total_btc = 0 //for i in range(0, 10_000_000): // total_btc += (50 / (2**int(i/210000)) ) // if total_btc / 21e6 > 0.99: // print(i) // break Il protocollo Bitcoin include algoritmi integrati che regolano la funzione di mining in tutta la rete. La difficoltà del compito computazionale che i miner devono eseguire viene regolata dinamicamente, in modo che, in media, qualcuno riesca a completarlo ogni 10 minuti, indipendentemente dal numero di miner (e dalla potenza di calcolo) che stanno competendo in quel momento. Inoltre, il protocollo riduce periodicamente il numero di nuovi bitcoin creati, limitando il totale dei bitcoin che verranno mai emessi a una quantità fissa appena inferiore a 21 milioni di monete. Il risultato è che il numero di bitcoin in circolazione segue una curva facilmente prevedibile, in cui la metà dei bitcoin rimanenti viene aggiunta alla circolazione ogni quattro anni. Al blocco 1.411.200 circa, previsto intorno al 2035, sarà stato emesso il 99% di tutti i bitcoin che potranno mai esistere. A causa del tasso di emissione decrescente di Bitcoin, nel lungo termine la valuta Bitcoin è deflazionistica. Inoltre, nessuno può obbligarti ad accettare bitcoin creati in più rispetto a quelli previsti. Dietro le quinte, Bitcoin è anche il nome del protocollo, di una rete peer-to-peer e di un'innovazione nel campo del calcolo distribuito. Bitcoin si basa su decenni di ricerche in crittografia e sistemi distribuiti e incorpora almeno quattro innovazioni chiave, unite in una combinazione unica e potente. Bitcoin si compone di: * Una rete peer-to-peer decentralizzata (il protocollo Bitcoin) * Un registro pubblico delle transazioni (la blockchain) * Un insieme di regole per la validazione indipendente delle transazioni e l'emissione di valuta (regole di consenso) * Un meccanismo per raggiungere un consenso decentralizzato globale sulla validità della blockchain (algoritmo di proof-of-work) Come sviluppatore, vedo Bitcoin come una sorta di "denaro di internet", una rete per propagare valore e garantire la proprietà di beni digitali attraverso il calcolo distribuito. C'è molto di più in Bitcoin di quanto possa sembrare a ((("Bitcoin", "operational overview", startref="bitcoin-operational-overview"))) prima vista. In questo capitolo inizieremo spiegando alcuni dei concetti e termini principali, ottenendo il software necessario e utilizzando Bitcoin per transazioni semplici. Nei capitoli seguenti, inizieremo a svelare gli strati di tecnologia che rendono possibile Bitcoin e vedremo come funzionano la rete e il protocollo Bitcoin. .Monete Digitali Prima di Bitcoin **** L'emergere ((("digital currencies, history of")))((("history", "of digital currencies", secondary-sortas="digital currencies")))((("cryptography"))) di una moneta digitale valida è strettamente legato agli sviluppi della crittografia. Questo non sorprende, se si considerano le sfide fondamentali legate alla rappresentazione digitale del valore scambiabile con beni e servizi Tre domande essenziali che chiunque accetti denaro digitale deve porsi sono: * Posso fidarmi che il denaro sia autentico e non contraffatto? * Posso fidarmi che il denaro digitale possa essere speso una sola volta (il cosiddetto problema della “doppia spesa”)? * Posso essere sicuro che nessun altro possa rivendicare questo denaro come proprio e non mio? Gli emittenti di denaro cartaceo sono costantemente impegnati nella lotta alla contraffazione utilizzando carte e tecnologie di stampa sempre più sofisticate. Il denaro fisico risolve facilmente il problema della doppia spesa perché la stessa banconota non può essere in due posti contemporaneamente. Naturalmente, il denaro convenzionale viene spesso anche conservato e trasmesso digitalmente. In questi casi, i problemi di contraffazione e doppia spesa vengono risolti gestendo tutte le transazioni elettroniche tramite autorità centrali che hanno una visione globale della valuta in circolazione. Nel caso del denaro digitale, che non può sfruttare inchiostri speciali o strisce olografiche, è la crittografia a fornire la base per fidarsi della legittimità della rivendicazione di valore da parte di un utente. In particolare, le firme digitali crittografiche consentono a un utente di firmare un asset digitale o una transazione, dimostrando la proprietà di quell'asset. Con un'architettura appropriata, le firme digitali possono anche essere utilizzate per affrontare il problema della doppia spesa. Quando la crittografia ha iniziato a diventare più accessibile e compresa verso la fine degli anni '80, molti ricercatori hanno iniziato a tentare di utilizzarla per creare valute digitali. Questi primi progetti di valute digitali emettevano denaro digitale, solitamente garantito da una valuta nazionale o da metalli preziosi come l'oro. Sebbene queste prime valute digitali funzionassero, erano centralizzate e, di conseguenza, vulnerabili agli attacchi di governi e hacker. Le valute digitali iniziali utilizzavano un centro di smistamento centrale per regolare tutte le transazioni a intervalli regolari, proprio come un sistema bancario tradizionale. Sfortunatamente, nella maggior parte dei casi, queste nuove valute digitali furono prese di mira da governi preoccupati e alla fine eliminate attraverso procedimenti legali. Alcune fallirono in modo spettacolare quando la società madre fallì improvvisamente. Per essere robuste contro l'intervento di antagonisti, siano essi governi legittimi o elementi criminali, era necessaria una valuta digitale decentralizzata, in grado di evitare un unico punto di attacco. Bitcoin è un sistema di questo tipo, decentralizzato per design, e privo di qualsiasi autorità centrale o punto di controllo che possa essere attaccato o corrotto. **** === Storia di Bitcoin Bitcoin è stato((("Bitcoin", "history of")))((("history", "of Bitcoin", secondary-sortas="Bitcoin")))((("Nakamoto, Satoshi"))) descritto per la prima volta nel 2008 con la pubblicazione di un documento intitolato "Bitcoin: A Peer-to-Peer Electronic Cash System,"footnote:[https://oreil.ly/KUaBM["Bitcoin: A Peer-to-Peer Electronic Cash System"],Satoshi Nakamoto.] scritto sotto lo pseudonimo di Satoshi Nakamoto (vedi <>). Nakamoto ha combinato diverse invenzioni precedenti, come le firme digitali e Hashcash, per creare un sistema di moneta elettronica completamente decentralizzato che non dipende da un'autorità centrale per l'emissione di valuta, la validazione o la validazione delle transazioni. Un'innovazione chiave è stata l'uso di un sistema di calcolo distribuito (chiamato algoritmo di "proof-of-work") per condurre una sorta di lotteria globale ogni 10 minuti, in media, permettendo alla rete decentralizzata di raggiungere un _consenso_ sullo stato delle transazioni. Questo risolve elegantemente il problema della doppia spesa (double-spend), in cui un'unità di valuta può essere spesa due volte. In precedenza, il problema del double-spend era una debolezza delle valute digitali e veniva affrontato facendo passare tutte le transazioni attraverso un centro di smistamento centrale. The Bitcoin network started in 2009, based on a reference implementation published by Nakamoto and since revised by many other programmers. The number and power of machines running the((("proof-of-work algorithm", seealso="mining"))) proof-of-work algorithm (mining) that provides security and resilience for Bitcoin have increased exponentially, and their combined computational power now exceeds the combined number of computing operations of the world's top supercomputers. Satoshi Nakamoto withdrew from the public in April 2011, leaving the responsibility of developing the code and network to a thriving group of volunteers. The identity of the person or people behind Bitcoin is still unknown. However, neither Satoshi Nakamoto nor anyone else exerts individual control over the Bitcoin system, which operates based on fully transparent mathematical principles, open source code, and consensus among participants. The invention itself is groundbreaking and has already spawned new science in the fields of distributed computing, economics, and econometrics. .A Solution to a Distributed Computing Problem **** Satoshi Nakamoto's invention ((("Byzantine Generals' Problem")))((("distributed computing problem")))is also a practical and novel solution to a problem in distributed computing, known as the "Byzantine Generals' Problem." Briefly, the problem consists of trying to get multiple participants without a leader to agree on a course of action by exchanging information over an unreliable and potentially compromised network. Satoshi Nakamoto's solution, which uses the concept of proof of work to achieve consensus _without a central trusted authority_, represents a breakthrough in distributed computing. **** === Getting Started Bitcoin is((("Bitcoin", "wallets", see="wallets")))((("wallets", "explained"))) a protocol that can be accessed using an application that speaks the protocol. A "Bitcoin wallet" is the most common user interface to the Bitcoin system, just like a web browser is the most common user interface for the HTTP protocol. There are many implementations and brands of Bitcoin wallets, just like there are many brands of web browsers (e.g., Chrome, Safari, and Firefox). And just like we all have our favorite browsers, Bitcoin wallets vary in quality, performance, security, privacy, and reliability. There is also a reference implementation of the Bitcoin protocol that includes a wallet, known as "Bitcoin Core," which is derived from the original implementation written by Satoshi Nakamoto. ==== Choosing a Bitcoin Wallet Bitcoin wallets ((("wallets", "choosing")))((("selecting", "wallets")))((("choosing", see="selecting")))are one of the most actively developed applications in the Bitcoin ecosystem. There is intense competition, and while a new wallet is probably being developed right now, several wallets from last year are no longer actively maintained. Many wallets focus on specific platforms or specific uses and some are more suitable for beginners while others are filled with features for advanced users. Choosing a wallet is highly subjective and depends on the use and user expertise. Therefore, it would be pointless to recommend a specific brand or wallet. However, we can categorize Bitcoin wallets according to their platform and function and provide some clarity about all the different types of wallets that exist. It is worth trying out several different wallets until you find one that fits your needs. ===== Types of Bitcoin wallets Bitcoin wallets ((("wallets", "types of", id="wallet-type")))can be categorized as follows, according to the platform: Desktop wallet:: A ((("desktop wallets")))desktop wallet was the first type of Bitcoin wallet created as a reference implementation. Many users run desktop wallets for the features, autonomy, and control they offer. Running on general-use operating systems such as Windows and macOS has certain security disadvantages, however, as these platforms are often insecure and poorly configured. Mobile wallet:: A ((("mobile wallets")))mobile wallet is the most common type of Bitcoin wallet. Running on smart-phone operating systems such as Apple iOS and Android, these wallets are often a great choice for new users. Many are designed for simplicity and ease-of-use, but there are also fully featured mobile wallets for power users. To avoid downloading and storing large amounts of data, most mobile wallets retrieve information from remote servers, reducing your privacy by disclosing to third parties information about your Bitcoin addresses and balances. Web wallet:: Web wallets ((("web wallets")))are accessed through a web browser and store the user's wallet on a server owned by a third party. This is similar to webmail in that it relies entirely on a third-party server. Some of these services operate using client-side code running in the user's browser, which keeps control of the Bitcoin keys in the hands of the user, although the user's dependence on the server still compromises their privacy. Most, however, take control of the Bitcoin keys from users in exchange for ease-of-use. It is inadvisable to store large amounts of bitcoin on third-party systems. Hardware signing devices:: Hardware signing devices((("hardware signing devices"))) are devices that can store keys and sign transactions using special-purpose hardware and firmware. They usually connect to a desktop, mobile, or web wallet via USB cable, near-field-communication (NFC), or a camera with QR codes. By handling all Bitcoin-related operations on the specialized hardware, these wallets are less vulnerable to many types of attacks. Hardware signing devices are sometimes called "hardware wallets", but they need to be paired with a full-featured wallet to send and receive transactions, and the security and privacy offered by that paired wallet plays a critical role in how much security and privacy the user obtains when using the hardware signing device. ===== Full node versus Lightweight Another way to categorize Bitcoin wallets is by their degree of autonomy and how they interact with the Bitcoin network: Full node:: A full node ((("full nodes")))is a program that validates the entire history of Bitcoin transactions (every transaction by every user, ever). Optionally, full nodes can also store previously validated transactions and serve data to other Bitcoin programs, either on the same computer or over the internet. A full node uses substantial computer resources--about the same as watching an hour-long streaming video for each day of Bitcoin transactions--but the full node offers complete autonomy to its users. Lightweight client:: A lightweight client,((("lightweight clients")))((("simplified-payment-verification (SPV) clients")))((("SPV (simplified-payment-verification) clients"))) also known as a simplified-payment-verification (SPV) client, connects to a full node or other remote server for receiving and sending Bitcoin transaction information, but stores the user wallet locally, partially validates the transactions it receives, and independently creates outgoing transactions. Third-party API client:: A third-party API client ((("third-party API clients")))is one that interacts with Bitcoin through a third-party system of APIs rather than by connecting to the Bitcoin network directly. The wallet may be stored by the user or by third-party servers, but the client trusts the remote server to provide it with accurate information and protect its ((("wallets", "types of", startref="wallet-type")))privacy. [TIP] ==== Bitcoin ((("Bitcoin", "as peer-to-peer network", secondary-sortas="peer-to-peer network")))((("peer-to-peer networks, Bitcoin as")))((("peers")))((("clients")))is a peer-to-peer (P2P) network. Full nodes are the _peers:_ each peer individually validates every confirmed transaction and can provide data to its user with complete authority. Lightweight wallets and other software are _clients:_ each client depends on one or more peers to provide it with valid data. Bitcoin clients can perform secondary validation on some of the data they receive and make connections to multiple peers to reduce their dependence on the integrity of a single peer, but the security of a client ultimately relies on the integrity of its peers. ==== ===== Who controls the keys A very((("wallets", "key control")))((("keys, control of")))((("bitcoins", "key control"))) important additional consideration is _who controls the keys_. As we will see in subsequent chapters, access to bitcoins is controlled by "private keys," which are like very long PINs. If you are the only one to have control over these private keys, you are in control of your bitcoins. Conversely, if you do not have control, then your bitcoins are managed by a third-party who ultimately controls your funds on your behalf. Key management software falls into two important categories based on control: _wallets_, where you control the keys, and the funds and accounts with custodians where some third-party controls the keys. To emphasize this point, I (Andreas) coined the phrase: _Your keys, your coins. Not your keys, not your coins_. Combining these categorizations, many Bitcoin wallets fall into a few groups, with the three most common being desktop full node (you control the keys), mobile lightweight wallet (you control the keys), and web-based accounts with third parties (you don't control the keys). The lines between different categories are sometimes blurry, as software runs on multiple platforms and can interact with the network in different ways. ==== Quick Start Alice is not a technical user and only recently heard about Bitcoin from her friend Joe. While at a party, Joe is enthusiastically explaining Bitcoin to everyone around him and is offering a demonstration. Intrigued, Alice asks how she can get started with Bitcoin. Joe says that a mobile wallet is best for new users and he recommends a few of his favorite wallets. Alice downloads one of Joe's recommendations and installs it on her phone. When Alice runs her wallet application for the first time, she chooses the option to create a new Bitcoin wallet. Because the wallet she has chosen is a ((("wallets", "noncustodial")))((("noncustodial wallets")))noncustodial wallet, Alice (and only Alice) will be in control of her keys. Therefore, she bears responsibility for backing them up, since losing the keys means she loses access to her bitcoins. To facilitate this, her wallet produces a _recovery code_ that can be used to restore her wallet. [[recovery_code_intro]] ==== Recovery Codes Most ((("wallets", "recovery codes", id="wallet-recovery")))((("recovery codes", id="recovery-code")))((("backing up", "recovery codes", see="recovery codes")))modern noncustodial Bitcoin wallets will provide a recovery code for their user to back up. The recovery code usually consists of numbers, letters, or words selected randomly by the software, and is used as the basis for the keys that are generated by the wallet. See <> for examples. ++++
Sample recovery codes
Wallet Recovery code

BlueWallet

(1) media (2) suspect (3) effort (4) dish (5) album (6) shaft (7) price (8) junk (9) pizza (10) situate (11) oyster (12) rib

Electrum

nephew dog crane clever quantum crazy purse traffic repeat fruit old clutch

Muun

LAFV TZUN V27E NU4D WPF4 BRJ4 ELLP BNFL
++++ [TIP] ==== A recovery code is ((("mnemonic phrases", see="recovery codes")))((("seed phrases", see="recovery codes")))sometimes called a "mnemonic" or "mnemonic phrase," which implies you should memorize the phrase, but writing the phrase down on paper takes less work and tends to be more reliable than most people's memories. Another alternative name is "seed phrase" because it provides the input ("seed") to the function that generates all of a wallet's keys. ==== If something happens to Alice's wallet, she can download a new copy of her wallet software and enter this recovery code to rebuild the wallet database of all the onchain transactions she's ever sent or received. However, recovering from the recovery code will not by itself restore any additional data Alice entered into her wallet, such as the labels she associated with particular addresses or transactions. Although losing access to that metadata isn't as important as losing access to money, it can still be important in its own way. Imagine you need to review an old bank or credit card statement and the name of every entity you paid (or who paid you) has been blanked out. To prevent losing metadata, many wallets provide an additional backup feature beyond recovery codes. For some wallets, that additional backup feature is even more important today than it used to be. Many Bitcoin payments ((("offchain technology")))are now made using _offchain_ technology, where not every payment is stored in the public blockchain. This reduces user's costs and improves privacy, among other benefits, but it means that a mechanism like recovery codes that depends on onchain data can't guarantee recovery of all of a user's bitcoins. For applications with offchain support, it's important to make frequent backups of the wallet database. Of note, when receiving funds to a new mobile wallet for the first time, many wallets will often re-verify that you have securely backed-up your recovery code. This can range from a simple prompt to requiring the user to manually re-enter the code. [WARNING] ==== Although many legitimate wallets will prompt you to re-enter your recovery code, there are also many malware applications that mimic the design of a wallet, insist you enter your recovery code, and then relay any entered code to the malware developer so they can steal your funds. This is the equivalent of phishing websites that try to trick you into giving them your bank passphrase. For most wallet applications, the only times they will ask for your recovery code are during the initial set up (before you have received any bitcoins) and during recovery (after you lost access to your original wallet). If the application asks for your recovery code any other time, consult with an expert to ensure you aren't ((("wallets", "recovery codes", startref="wallet-recovery")))((("recovery codes", startref="recovery-code")))being phished. ==== ==== Bitcoin Addresses Alice is ((("addresses", "explained")))now ready to start using her new Bitcoin wallet. Her wallet application randomly generated a private key (described in more detail in <>) that will be used to derive Bitcoin addresses that direct to her wallet. At this point, her Bitcoin addresses are not known to the Bitcoin network or "registered" with any part of the Bitcoin system. Her Bitcoin addresses are simply numbers that correspond to her private key that she can use to control access to the funds. The addresses are generated independently by her wallet without reference or registration with any service. [TIP] ==== There are a variety ((("invoices")))of Bitcoin addresses and invoice formats. Addresses and invoices can be shared with other Bitcoin users who can use them to send bitcoins directly to your wallet. You can share an address or invoice with other people without worrying about the security of your bitcoins. Unlike a bank account number, nobody who learns one of your Bitcoin addresses can withdraw money from your wallet--you must initiate all spends. However, if you give two people the same address, they will be able to see how many bitcoins the other person sent you. If you post your address publicly, everyone will be able to see how much bitcoin other people sent to that address. To protect your privacy, you should generate a new invoice with a new address each time you request a payment. ==== ==== Receiving Bitcoin Alice((("bitcoins", "receiving")))((("receiving bitcoins"))) uses the _Receive_ button, which displays a QR code, shown in <>. [role="width-50"] [[wallet_receive]] .Alice uses the Receive screen on her mobile Bitcoin wallet and displays her address in a QR code format. image::images/mbc3_0101.png["Wallet receive screen with QR code displayed. Image derived from Bitcoin Design Guide CC-BY"] The QR code is the square with a pattern of black and white dots, serving as a form of barcode that contains the same information in a format that can be scanned by Joe's smartphone camera. [WARNING] ==== Any funds sent to the addresses in this book will be lost. If you want to test sending bitcoins, please consider donating it to a bitcoin-accepting charity. ==== [[getting_first_bitcoin]] ==== Getting Your First Bitcoin The((("bitcoins", "acquiring", id="bitcoin-acquire")))((("acquiring bitcoins", id="acquire-bitcoin"))) first task for new users is to acquire some bitcoin. Bitcoin transactions are irreversible. Most electronic payment networks such as credit cards, debit cards, PayPal, and bank account transfers are reversible. For someone selling bitcoin, this difference introduces a very high risk that the buyer will reverse the electronic payment after they have received bitcoin, in effect defrauding the seller. To mitigate this risk, companies accepting traditional electronic payments in return for bitcoin usually require buyers to undergo identity verification and credit-worthiness checks, which may take several days or weeks. As a new user, this means you cannot buy bitcoin instantly with a credit card. With a bit of patience and creative thinking, however, you won't need to. Here are some methods for acquiring bitcoin as a new user: * Find a friend who has bitcoins and buy some from him or her directly. Many Bitcoin users start this way. This method is the least complicated. One way to meet people with bitcoins is to attend a local Bitcoin meetup listed at pass:[Meetup.com]. * Earn bitcoin by selling a product or service for bitcoin. If you are a programmer, sell your programming skills. If you're a hairdresser, cut hair for bitcoins. * Use a Bitcoin ATM in your city. A Bitcoin ATM is a machine that accepts cash and sends bitcoins to your smartphone Bitcoin wallet. * Use((("bitcoins", "currency exchanges")))((("currency exchanges"))) a Bitcoin currency exchange linked to your bank account. Many countries now have currency exchanges that offer a market for buyers and sellers to swap bitcoins with local currency. Exchange-rate listing services, such as https://bitcoinaverage.com[BitcoinAverage], often show a list of Bitcoin exchanges for each currency. [TIP] ==== One of the advantages of Bitcoin over other payment systems is that, when used correctly, it affords users much more privacy. Acquiring, holding, and spending bitcoin does not require you to divulge sensitive and personally identifiable information to third parties. However, where bitcoin touches traditional systems, such as currency exchanges, national and international regulations often apply. In order to exchange bitcoin for your national currency, you will often be required to provide proof of identity and banking information. Users should be aware that once a Bitcoin address is attached to an identity, other associated Bitcoin transactions may also become easy to identify and track--including transactions made earlier. This is one reason many users choose to maintain dedicated exchange accounts independent from their wallets. ==== Alice was introduced to Bitcoin by a friend, so she has an easy way to acquire her first bitcoins. Next, we will look at how she buys bitcoins from her friend Joe and how Joe sends the bitcoins to her ((("bitcoins", "acquiring", startref="bitcoin-acquire")))((("acquiring bitcoins", startref="acquire-bitcoin")))wallet. [[bitcoin_price]] ==== Finding the Current Price of Bitcoin Before ((("bitcoins", "exchange rate", id="bitcoin-exchange-rate")))((("exchange rate", id="exchange-rate")))((("current price of bitcoins", id="current-price")))Alice can buy bitcoin from Joe, they have to agree on the _exchange rate_ between bitcoin and US dollars. This brings up a common question for those new to Bitcoin: "Who sets the price of bitcoins?" The short answer is that the price is set by markets. Bitcoin, like most other currencies, has a _floating exchange rate_. That means that the value of bitcoin fluctuates according to supply and demand in the various markets where it is traded. For example, the "price" of bitcoin in US dollars is calculated in each market based on the most recent trade of bitcoins and US dollars. As such, the price tends to fluctuate minutely several times per second. A pricing service will aggregate the prices from several markets and calculate a volume-weighted average representing the broad market exchange rate of a currency pair (e.g., BTC/USD). There are hundreds of applications and websites that can provide the current market rate. Here are some of the most popular: https://bitcoinaverage.com[Bitcoin Average]:: A site that provides a simple view of the volume-weighted average for each currency. https://coincap.io[CoinCap]:: A service listing the market capitalization and exchange rates of hundreds of cryptocurrencies, including bitcoins. https://oreil.ly/ACieC[Chicago Mercantile Exchange Bitcoin Reference Rate]:: A reference rate that can be used for institutional and contractual reference, provided as part of investment data feeds by the CME. In addition to these various sites and applications, some Bitcoin wallets will automatically convert amounts between bitcoin and other currencies. [[sending_receiving]] ==== Sending and Receiving Bitcoin Alice ((("bitcoins", "spending", id="bitcoin-send")))((("spending bitcoins", id="send-bitcoin")))((("bitcoins", "receiving", id="bitcoin-receive")))((("receiving bitcoins", id="receive-bitcoin")))has decided to buy 0.001 bitcoins. After she and Joe check the exchange rate, she gives Joe an appropriate amount of cash, opens her mobile wallet application, and selects Receive. This displays a QR code with Alice's first Bitcoin address. Joe then selects Send on his smartphone wallet and opens the QR code scanner. This allows Joe to scan the barcode with his smartphone camera so that he doesn't have to type in Alice's Bitcoin address, which is quite long. Joe now has Alice's Bitcoin address set as the recipient. Joe enters the amount as 0.001 bitcoins (BTC); see <>. Some wallets may show the amount in a different denomination: 0.001 BTC is 1 millibitcoin (mBTC) or 100,000 satoshis (sats). Some wallets may also suggest Joe enter a label for this transaction; if so, Joe enters "Alice". Weeks or months from now, this will help Joe remember why he sent these 0.001 bitcoins. Some wallets may also prompt Joe about fees. Depending on the wallet and how the transaction is being sent, the wallet may ask Joe to either enter a transaction fee rate or prompt him with a suggested fee (or fee rate). The higher the transaction fee, the faster the transaction will be confirmed (see <>). [[wallet-send]] .Bitcoin wallet send screen. image::images/mbc3_0102.png["Wallet send screen. Image derived from Bitcoin Design Guide CC-BY"] Joe then carefully checks to make sure he has entered the correct amount, because he is about to transmit money and mistakes will soon become irreversible. After double-checking the address and amount, he presses Send to transmit the transaction. Joe's mobile Bitcoin wallet constructs a transaction that assigns 0.001 BTC 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 to Alice's new address. As the transaction is transmitted via the peer-to-peer protocol, it quickly propagates across the Bitcoin network. After just a few seconds, most of the well-connected nodes in the network receive the transaction and see Alice's address for the first time. Meanwhile, Alice's wallet is constantly "listening" for new transactions on the Bitcoin network, looking for any that match the addresses it contains. A few seconds after Joe's wallet transmits the transaction, Alice's wallet will indicate that it is receiving 0.001 BTC. [[confirmations]] .Confirmations **** At first, ((("bitcoins", "clearing transactions")))((("clearing transactions")))((("transactions", "clearing")))((("confirmations")))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 recorded in the Bitcoin transaction journal, known as the blockchain. To be confirmed, a transaction must be included in a block and added to the blockchain, which happens every 10 minutes, on average. In traditional financial terms this is known as _clearing_. For more details on propagation, validation, and clearing (confirmation) of bitcoin transactions, see <>. **** Alice is now the proud owner of 0.001 BTC that she can spend. Over the next few days, Alice buys more bitcoin using an ATM and((("bitcoins", "spending", startref="bitcoin-send")))((("spending bitcoins", startref="send-bitcoin")))((("bitcoins", "receiving", startref="bitcoin-receive")))((("receiving bitcoins", startref="receive-bitcoin"))) an exchange. In the next chapter we will look at her first purchase with Bitcoin, and examine the underlying transaction and propagation technologies in more detail.