Hi,
This is a draft of an article I am writing about Bitcoin.
Please note that I am NO expert. I am a software developer and have a "working" knowledge of encryption. However, I don't yet have a grasp on the whole Bitcoin technology and how it actually uses encryption.
My goal is to write an article on how to _use_ Electrum.
Did I write something horribly stupid here? If so, please point it out but be kind -- and remember that this is just a draft! I haven't checked it yet.
Thanks in advance...
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Manage your Bitcoins using Electrum
Bitcoin is the most established digital currency available today. It provides a safe, anonymous way to use manage your bitcoins. However, managing bitcoins is not _quite_ as simple as managing a bank account. In this article I will explain how to manage your bitcoins using Electrum.
# The basics: setting up Electrum
First of all, I suggest you [install the latest version of Electrum](
https://electrum.org/#download). Note that Electrum exists for Linux, Windows, OS X and Android. Instructions will vary depending on your operating system.
Once you have installed it, it will ask you what you want to do: create a new wallet, or restore a wallet. For now, just chose to create a new wallet leaving the default options.
=IMG=1.png=The initial screen=
Then, the second step comes along: electrum will show you your "wallet generation seed", which is a list of 13 words you will absolutely need to save somewhere safe.
=IMG=1a.png=The list of 13 words. If you are serious about bitcoins, you should memorise them=
Remember: anybody with these words will be able to open your Electrum wallet, and spend _all_ of your bitcoins if they wish, by simply guessing your password!
Once you're done, it will prompt you with a password request. You should treat it like you treat your Internet Banking password.
Once you are done, you are finally good to go:
=IMG_CLEAR=2.png=Electrum started for the first time=
It shows by default a list of transactions you made. As you can see, there is (obviously) nothing here.
# Getting real money in
Exchanging Bitcoins into real money and vice versa is a tricky business. The main issue is that when you change real money into bitcoins, the tokens exchanged are 100% anonyumous. So, these transactions are _very_ prone to fraud and money laundering.
This is the reason why:
* companies who exchange bitcoins for money and vice versa are really careful about the identities of their customer
* **anybody who claims that they will snd you money for your bitcoins without asking for ID and proof of address are very likely to be a scam**
=247_screen.png=What it looked like when I sent money over=
The Bitcoin wiki has a page on [How To Buy Bitcoins With Your Credit Card](
https://en.bitcoin.it/wiki/How_To_Buy_Bitcoins_With_Your_Credit_Card). I would not use any service that is not listed here.
As an Australian travelling through Italy, for the purpose of writing this article, I picked 247exchange.com. However, at the moment they do not cater for US customers.
However, in any case, when you buy bitcoins you will need to provie your "bitcoin address": if you click on the "Receive" tab in Electrum, you will see the long string of numbers and letters. That's the address you will need to tell the bitcoin exchange you use.
Changing real money into bitcoin can be a real pain! However, it's well worth the effort.
# How receiving bitcoins work
Shortly after initiating your transactions, your bitclient will show a "pending" transaction; it will stay "pending" for a while: it will take some time for the bitcoin network to acknowledge the transaction as "done". The details are a little technical; however, just remember that it will take around 10 minutes or so.
=IMG=pending.png=The transaction is still pending=
=IMG=pending2.png=One of the addresses is now showing the transaction=
Once the money is "cleared", it will appear as available in Electrum. At that point, the address is considered "used" by Electrum.
=IMG=cleared.png=One of the addresses is now showing the transaction=
For safety reasons, you shouldn't reuse the same address to receive more funds. Since it's impossible to know who "owns" a specific wallet, you might receive large amounts of bitcoins, but all to different addresses; only you will know that those addresses all belong to you.
=IMG=transaction_done.png=Once the transaction it's done, it's shown as done=
=IMG=transaction_done_2.png=See how the receiving address now has a balance=
Once you have received the bitcoins, the receiving address will show a balance.
# Sending bitcoins
Assume now that you want to send bitcoins out. Assume that you want to send half of the bitcoins you have on your wallet.
=send_1.png==
=send_2.png==
=send_3.png==
=send_4.png==
=send_4_1.png==
=send_history.png==
First of all, you will need to know the bitcoin address where you are sending your bitcoins to. Once you have it, go to the "Send" tab and enter the number of bitcoins you want to send.
Assume that you want to send a portion of the bitcoins you have. So, you have 4.9 micro bitcoins, and you want to send 3 out.
Click on "Send", enter the address where you want to send your bitcoin, pick "3" (as in, 3 micro bitcoins) and hit "send". You will be warned of a fee that will be automatically charged.
If you look at your wallet after this operation, you will see that:
* The address you used to receive the bitcoins is under the "used" list
* The equivalent of the "unspent" bitcoins is under "change"
This can be confusing at first, but it actually makes a lot of sense: you had 4.9 micro bitcoins, and sent 3 out. However, in order to send those 3 micro bitcoins, you actually sent the _whole_ 4.9 micro bitcoins, and got the "change" (minus the fees).
This will also preserve your privacy: this "fragmentation" in your virtual wallet makes it much harder for anybody to figure out how much a person has.
# Recovering your wallets
Recovering your coins in case of disaster consists in having two pieces of information:
* The private key, used to "sign" the coins
* The coin's addresses (technically speaking, the "public key")
Note that the private key is also normally password-protected.
In theory, for each one of the bitcoin addresses you have, you will have a password-protected private key stored somewhere. So, in order not to lose your "wallet", you would have to save your private key (or keys) somewhere _very_ safe, remembering that private key + password to unlock it = full access to your bitcoins.
This is why Electrum uses a different method: the 13 words at the beginning are used as "unique seed". This means that you are able to _generate_ your private keys automatically, even if you lose them. You can see the 13 words as the word combination able to _regenerate_ your wallet from nothing. Learning 13 words is much easier than finding a "secure" spot for your private keys.
