The unit of value is also called “bitcoin”. Transactions are recorded in a public ledger. Each transaction is allocated to an “address”. One could think of these addresses as post office boxes, each holding some money. The ledger is publicly accessible and anyone can have visibility to all transactions as well. Anyone can see the flow of money from box to box but it is very difficult, and it is impossible in some cases to know who owns each address. The anonymity of the owner depends on the owner reviling his or her identity voluntarily. So who owns each address holding the money?
The answer is simple. When you want to get paid in bitcoins you will create one of these destination addresses or boxes as I prefer to imagine them. During the creation of a box a cryptographic key is generated at the same time. The owner of the address/box and the holder of the key is the owner of the money which is sent to the address/box. A Bitcoin address looks like this – 13NQdNhYbVXXhBesz1P95EViot4zX5ZK8y . If you feel like sending some donation to this address please do so. The address is real. Did you notice what has just happened? I revealed that I own this address. If one can establish who wrote this article one can trace all transactions sent to the address and have the visibility to how much money is in it. Therefore for the highest level of privacy sake it is recommended that each address is used only once. In practice one would only create an address for each transaction in order to hide large transaction from shady sources but doing so is impractical or at least inconvenient.
In order to make it all work first you need to install a wallet software on your computer. The wallet will generate new addresses so you can receive money. The wallet will also generate keys to these addresses and will store them on your computer. YOU NEED TO BACKUP YOUR WALLET! If your wallet or the computer gets damaged you will loose all the keys to your boxes full of bitcoins. You will not be able to access this money ever again. There are some cloud based wallets out there which are backed up in the cloud. Beware though, keeping your coins in a web/cloud based wallet gives the operators of such wallet access to your money. You are more in control if the wallet software you choose resides on your computer. Backing it up to a USB key takes little time. Having a second backup off site in case of fire of some other disaster is also a good practice.
I mentioned web based wallets above. There are different types of wallets available and all meet different requirements. Full size wallets allow you to keep a copy of the full public ledger of transactions. This is how the ledger is stored. Everybody who owns a full wallet participate in storing, backing up and verifying transactions in the ledger. Then there are light wallets. They hold your keys and addresses but do not hold the ledger.
Mobile device wallets are typically light or web based for it is hard to expect a cell phone to have sufficient storage or processing capacity. My favorite wallet is MultiBit.
If you are still reading this then you have probably installed or are ready to install your wallet. Once your wallet is installed you can create a destination address sometimes also called a “request”. Once you created an address you can use it to earn free bitcoins. Earning free bitcoins is easy. Many “faucet” websites will pay you simply for visiting them. “Faucets” as they are called drip bitcoins in small quantities. They pay you for viewing adds. Sounds good? Not really! Unless you can find faucets which pay “big bucks” it can become addictive to hop from site to site in search for small quantities of bitcoins. It’s ok to do it while you are testing the system. Most of the faucets require entering “capcha”. Capcha is an object the website which requires a short answer to a presented challenge. Human intelligence is required to interact with a capcha successfully. The website want’s to make sure that it is interacting with a human and not with a computer program written by some hacker. I have a faucet site where you can earn bitcoins while you are offline or asleep. Here are the steps:
1. Install a Wallet
2. Generate a request address where you want your bitcoins delivered.
3. Visit the faucet website – link below.
4. Enter your bitcoin address. Make sure your browser support cookies and that they are enabled.
5. Come back to the site in a few hours or days and click on the “Claim now” button.
6. Hit “Play” on the next screen and answer the capcha challenge.
7. Come back as often as you like and collect more and more “Satoshi” – Satoshi are like cents to a dollar.
8. You will paid every Sunday if your balance is more than 5500 Satoshi.
9. Check your wallet. There should be money there.
So if you wallet is working some free bitcons can be earned here.