This chapter focuses on bitcoin, its features, and how can we take part in the bitcoin ecosystem. The bitcoin ecosystem runs by its users getting, spending, and sending bitcoin wallets. In order to understand the concepts of this chapter, you should have at least a basic understanding of the command line on the computer you're using, and you should have Python 3.x installed on your computer.

In this chapter, we will look at the following topics:

• Introducing bitcoin and its features
• Introducing blockchain
• Attributes of bitcoin and blockchain
• How to get a bitcoin wallet
• The different forms of bitcoin wallet including getting, sending, and spending

In this section, we will explore the following topics:

• Bitcoin
• The uses of bitcoin
• Blockchains
• Attributes of bitcoin and blockchain

Bitcoin is a digital currency. This means that it exists only as an electronic record, and, unlike physical currency, you cannot hold it in your hand. You can send and receive money using bitcoin (just as you can with other methods), as well as pay for things and services with bitcoin. Bitcoin is interchangeable with traditional money.

There are exchanges where you can buy and sell bitcoin. There are many other digital currencies, but bitcoin is the first and the most popular. Bitcoin uses peer-to-peer technology to operate, with no central authority or banks managing transactions, and the issuing of bitcoin is carried out collectively by the network.

Bitcoin is open source—its design is public; nobody owns or controls bitcoin, and everybody can use it. Bitcoin is digital and decentralized. For the first time in history, people can exchange value without intermediaries, which translates to greater control of funds and lower fees.

It's a cryptocurrency, which means it's secured by design.

There are a lot of advantages to using bitcoin. Some of them are as follows:

• Fast and easy payments: It's extremely easy and fast to make payments with bitcoin. You do not have to worry about which software to use. The bitcoin network never sleeps, even on holidays. Sending payments internationally is also very easy; there are no banks to make anyone wait three business days, no extra fees for making an international transfer, and no special limitations on the minimum or maximum amount one can send.
• Privacy: Payment can be made using bitcoin without sharing any personal info; one does not need to sign up or share any card information. In fact, it is even possible to send a payment without revealing one's identity, almost like you can with physical money. However, take note that some effort may be required to protect privacy.
• Negligible transaction fees: There are very little or minimal transaction fees while making payments with bitcoin. There are no fees to receive bitcoins, and having many wallets allows you to control how large a fee to pay when spending. Most wallets have reasonable default fees, and higher fees can encourage faster confirmation of your transactions. Fees are unrelated to the amount transferred, so it's possible to send 100,000 bitcoins for the same fee it costs to send one bitcoin.
• Secure: Bitcoins are created and held electronically, but there is no credit card number involved that someone can steal as nobody can charge you money on your behalf. The transactions are made using military-grade cryptography and are highly confidential. Bitcoin will provide full access over your money and a high level of protection against almost all types of fraudulent works which involves certain steps.
• Multisignature: Bitcoin's multisignature feature allows businesses full control over their spending by allowing bitcoins to be spent only if a subset of a group of people authorize the transaction.
• Great for developers: For developers, bitcoin is the simplest of all payment systems. There are many third-party payment processing services that provide APIs. We don't need to store bitcoins on our server. If you don't use any third-party APIs, you can integrate a bitcoin node directly into your applications, allowing it to become your own bank and payment processor.

In simple terms, a blockchain is a digital ledger. It's a public record of bitcoin transactions arranged in chronological order. It is a permissionless, distributed database based on the bitcoin protocol that maintains a continuously growing list of transactional data records. It is distributed so that each participant has the copy of the whole blockchain. The blockchain is shared between all bitcoin users.

It is used to verify the permanence of bitcoin transactions and to prevent double spending. It is secure and immutable, and it's also hardened against tampering and revision, even by operators of the data store's nodes.

Each blockchain record is enforced cryptographically, and hosts run machines working as data store nodes. A blockchain is made up of blocks. A block is a record in the blockchain that contains and confirms many waiting transactions, as shown at https://www.blockchain.com/explorer:

Roughly every ten minutes, a new block containing transactions is appended to the blockchain through mining. It is a file called the bitcoin blockchain sitting on thousands of computers across the world, perhaps even on your own PC at home. The file contains data about all bitcoin transactions—that is, the payment of bitcoins from one account to another—that have ever happened.

This is often called a ledger, and is similar to a bank ledger, which keeps a record of payments.

Both bitcoin and blockchains have the following similar attributes:

• Blockchain is the technology behind bitcoin. It works like a database for all bitcoin transactions, and it keeps all records of bitcoin transactions since the very first transaction. The initial and most widely known application of blockchain technology was the public ledger of transactions for bitcoin. However, digital currencies are not the only use for blockchain technology.
• Blockchain is a no-trust-based system, which can be used to conduct all kinds of transactions, such as digital contract signing. blockchain technology can be used to create a permanent public transparent ledger system for compiling data on sales, storing rights data by authenticating copyright registration, and so on.

To start making payments with bitcoin, we need a bitcoin wallet. However, before we create a wallet, we should be aware of the following things:

• Security: We should take steps to secure our wallet. There are a lot of different features that come with different wallets. You should evaluate all of them and choose whichever is best for you.
• Volatility: The bitcoin price is volatile and goes up and down, depending on market conditions.

Bitcoin wallets come in a lot of different forms. Some of them are listed here:

• There are smartphone app wallets, there are online web wallets—for example, blockchain.info and coinbase.info—there are desktop-based wallets for macOS, Linux, and Windows operating systems, and there are also dedicated hardware-based wallets.
• Online web wallets can be accessed from any web browser and from any operating system, so that makes it quite platform-independent:
  • One of the most popular ones is coinbase.info, where you can purchase and send bitcoins.
  • There are a few others as well, such as BitGo, BTC.com, Coin.Space, GreenAddress, and so on. There are also mobile wallets that you can use from your smartphone. They are available for Android phones, Windows phones, Blackberries, and iOS phones. Some of the most popular ones are breadwallet, Coin.Space, Mycelium, and so on.
• There are also wallets that are available for desktop computers running on all operating systems. Some of the popular ones are bitcoin Core, GreenAddress, and BitGo, among others.
• Bitcoin wallets may require specific hardware solutions, for example, Trezor. Trezor is a hardware wallet that has a lot more security, and we can even sign transactions, connect to an online device, and spend bitcoins from this wallet. It is a separate device, so it's much more secure and less prone to hacking. It is also recommended that you use bitcoin cold storage for a large number of bitcoins. Bitcoin cold storage can be held offline, like in a paper-money wallet. For this purpose, you can get a bitcoin address from bitaddress.org, which can be used to send bitcoins and then store the details offline.

Bitcoins can be bought from an exchange website. One example of an exchange website is Coinbase.info, and bitcoin.org lists a lot of these exchange websites. Some operate globally and some are specific to a particular country or a region, depending on the laws of that country. There are exchanges available for all regions and countries of the world. For example, one of the most popular ones is Coinbase.com. Here, bitcoins can be sent and sold, and you can see your account details, containing information on what bitcoins you hold with them.

You can also buy bitcoins from bitcoin ATMs. One of the best websites to use to find your local bitcoin ATM is https://coinatmradar.com/. For example, the following screenshot shows a map of the United States, where you can see all the available bitcoin ATMs where you can buy bitcoin:

You can also buy bitcoins in person from other users. The locations of people who are interested in selling bitcoins can be found at https://localbitcoins.com/. In the following screenshot, we can see all the people in the United States who are interested in selling bitcoins. Bitcoins can be bought from this site by other users. You can also sell bitcoins to other users who are interested in buying them:

There are also a lot of places where we can spend bitcoins online on products and services. One of the sites to find these places is https://spendabit.co/. From this site, we can search for the products from sellers who accept bitcoins as payment.

For example, when we perform a sample search of toaster in the search bar, it will show all the listings from the sellers who are selling this product and are ready to accept bitcoins as payment.

Another place to find businesses that accept bitcoins is http://99bitcoins.com. This website contains a list of companies that accept bitcoins as payment. There are a lot of well-known names that are listed, as shown in the following list:

• WordPress: Allows people to create blogs
• Overstock: The online retailer
• Subway: Accepts bitcoins
• Microsoft: Users can buy content with bitcoin on Windows store
• Reddit: Buy premium features with bitcoins

If you are interested in searching for local businesses that accept bitcoins, you can search for them at coinmap.org.

In this chapter, we were introduced to bitcoin and blockchain technology, and how we can start playing a part in the bitcoin ecosystem. We learned about bitcoin and its features, blockchains, how bitcoin and blockchains work together, and what the difference between them is. We also explored getting a bitcoin wallet and how to start using it.

We learned how to get and send bitcoins, and we learned about the various places to get bitcoins, both online and offline. We looked at how to send bitcoins, and we looked at some places where you can spend bitcoins and buy products and services.

In the next chapter, we will explore the bitcoin and blockchain APIs programmatically, and look at how to get started with mining bitcoins.