Need to Know: Practical Bitcoin basics

Need to Know: Practical Bitcoin basics

How to buy something with Bitcoin for the first time.

Unless you've been living under a rock, you've probably heard the phrase Bitcoin uttered around tech circles, or maybe even on mainstream news outlets. Maybe you've seen Bitcoin as a payment option on stores like Steam and Microsoft's. But what is Bitcoin, why should you care and is it worth bothering with?

As to what Bitcoin is, simply put, it's way of transferring money around. Some people think it's a challenge to government reserve banks (probably not) or a whole new system of finance technology akin to the credit card (quite likely), but for us plebs, right now, it's main utility is cheaply and quickly sending money from A to B. If you're interested in the more libertarian part of Bitcoin, or in the underlying blockchain technology that the fintech sector is going bananas over, there's information all over the Internet. This article is going to concentrate on the practicalities of Bitcoin.

Let’s say you want to buy something off Steam using Bitcoin, what do you do? The first step is to get some Bitcoin, which isn't that straightforward.

Generally, you buy your Bitcoin from a Bitcoin exchange. These sites take your Australian dollars and give you Bitcoin in return, based on the current exchange rate. There are a few Bitcoin exchanges in Australia such as CoinTree, Btcmarkets, CoinLoft and Buy A Bitcoin.

There are foreign exchanges too, but getting your Australian dollars to them can be a bit more complicated and expensive due to foreign transaction fees or them simply not supporting Australian dollars. But those foreign exchanges could offer better prices, so you need to do the math to figure out if it's worth it.

One of the useful things about Bitcoin is that it is relatively anonymous. If the anonymity factor interests you (I won't judge) you probably want to buy your Bitcoin via Localbitcoins. You can meet up with someone in person and pay cash for some of their Bitcoin. There are even Bitcoin ATMs around. Not many, but they do exist. There's a rudimentary map on the CoinDesk website.

You also need a wallet. When you buy the Bitcoin from an exchange, or an ATM, or wherever, the Bitcoin has to go from the person you're buying it from, into an "account" which is generally just a number, like so: 1DMrhRaAnCqMZSDBpg9v8Bz8Now6ZJc4wM - think of it like a BSB and account number, but you can have as many of them as you like, for free, and don't have to have any personal info attached to it.

Choosing a specific Bitcoin wallet method is an article in and of itself, but for a beginner, an online wallet, well-secured is a good idea. I like CoinJar myself, but there are dozens of others around.

Once you've obtained some Bitcoins and have a wallet set up, you finally get to send some Bitcoins to Steam. There's an address that looks something like this: 182jR6DDT8srmjwmq5BKCBrV1asYVq2ijv - these randomly generated numbers equate to your purchase.

You might also see a QR code next to that string of characters. That's simply there for you to use instead of typing in that long string! For example, if you have the Coinjar app on your smartphone, you can simply launch it, take a snap of the QR code and send the money that way, instead of having to log in on your computer and paste it in. It's mainly useful for "in person" transactions, like say at a cafe or a shop.

When you send the requested amount of Bitcoin to that address, the payment processor (in this case, Bitpay) receives it, notifies Steam and Steam let you download your game. That's it.

So there's some initial setup required to grab Bitcoin, but the actual payment process is quite easy once you've got everything set up - kinda like signing up for a credit card or bank account.

Maybe it's the future of payments, maybe it's not, but at least you now know the basics of how to use it.

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See more about:  australian dollars  |  bitcoin  |  how to  |  steam
 
 

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