What About Bitcoins

For anyone thinking about buying any bitcoins here are some things that I think you should know.

There will never be more than 21 million whole bitcoins, and the bitcoin network is decentralized in a way so that no single authority such as a government will ever be able to change this. The bitcoin software is also open source so that everyone is able to inspect its code to see how it works to make sure that it does not contain any exploits.

Bitcoins can be stored in any amount or fraction of an amount that you have and can be divided down to 8 decimal places. Currently 0.00000001 BTC is the smallest amount that can be handled in a transaction. If it is ever necessary in the future, the protocol and related software can be modified to handle even smaller amounts by just adding more possible decimal places.

To store your bitcoins you need to make a bitcoin wallet that has a public and private key. The public key is your bitcoin address and can be given to anyone because you can only use it to send bitcoins to it, but the private key must be kept secret and safe because it can be used to spend the bitcoins.

Think of the private key as a treasure map to buried treasure. If you lose that treasure map then your treasure will be lost forever. Also, if that treasure map is somehow copied by someone else then they will be able to steal your treasure any time they wish.

When you do anything on a computer that exposes your private key (such as importing it into a wallet, printing it from a wallet, or generating a new one), it is a very good idea to only do so on a computer that has a freshly installed operating system so that it is very unlikely that you have any viruses or keyloggers that could be looking to steal your private key.

You can make as many bitcoin addresses as you want (each with its own public and private key), and each bitcoin address that you have can separately store any amount of bitcoins that you send to it. There are also many different ways to make and store bitcoin addresses.

Many people are fond of something called a paper wallet. And many people are using them for cold storage of bitcoins. They use a trusted program to generate a public and private key on a computer with a freshly installed operating system that is not attached to an internet connection, and then print those keys onto a piece of paper. The private key on this piece of paper can optionally be encrypted with a password that would be required to recover the private key. The public key can then be used to send bitcoins to this wallet and to monitor the wallet. In this way the private key never has to be stored on a computer until you want to use the bitcoins that are sent to its public key. As long as the piece of paper containing the private key is kept safe then it can be used at a later time to spend the funds on the wallet. I do not recommend doing this unless you plan to have more than one copy of this paper wallet stored somewhere safe either digitally or physically in more than one location, because if it is ever lost then the funds in the wallet are gone forever.

Another interesting way to store your bitcoins is called a brain wallet. You can create a passphrase that should contain many words and numbers that is very complex, but should be comprised of information that you can remember that nobody would be able to guess, but you would also never be able to forget. You can then use this passphrase to create your public and private key with. If you ever lose your private key somehow due to computer failure or something, you can then recover it again with the passphrase that you originally used to create it with that you have stored in your head.

Regardless of how you create your bitcoin wallet, if you put any bitcoins in it, then you should consider including instructions on how to access the private keys for your bitcoins in some kind of living will so that they will not be lost forever upon your death.

Most bitcoin wallet programs will have the option to backup your wallet into a file to try to prevent the loss of your private keys due to a computer malfunction. This file should preferably be password protected just in case it is copied by someone else. This file contains the private keys that are stored in your wallet, so it should be saved somewhere safe so that no one but you or someone you trust will be able to access it. You should probably also physically print your keys onto a paper wallet and store this somewhere safe where it will not be stolen or damaged.

Here is some more information that you should also know about bitcoins:
http://bitcoin.org/en/you-need-to-know