Newbie with unresolved questions....

[walden]

Hi here!

I'm originally from Spain and now living in Berlin since a while...

A friend told me about Bitcoins a year and a half ago, but he didn't catch my attention talking me about the big market of Silk Road.. so I completely forgot... until some days ago, when for some reason finding myself messing around internet I decided to do some research about it and   WTF. BTC was going to be in 2 days in Washington and China was making massive transactions, some places in Berlin already accept BTC as a payment and a couple of start-ups are focused on that.

I'm one of those people who regret not to get into BTC earlier. But I'm now here, just bought my first BTC and have some newbie questions to do, even if I read and researched quite a lot. Probably someone already asked but I didn't find it around the forum, so I apologize if I'm being repetitive. And probably for a lot of you I will sound completely ignorant, but I'm a "letters" person, computer daily user but nothing to do with programming, so understanding BTC is being difficult, and if it is for me, is also for that "hypothetical future mainstream".

1. SECURITY: I read about paperwallets and found https://bitcoinpaperwallet.com/ . How is a paper wallet/offline totally "offline" if it's generated online? I also read the best way to generate your paperwallet is downloading from https://github.com/cantonbecker/bitcoinpaperwallet the wallet generator and do it while not connected to internet, but, in that case, is not possible that another person who's doing it as well could generate the same wallet as me?? I know I'm missing something, what it is!?
How actually an offline wallet works? Can someone explain me like I'm 13 and just learning how to install a program in 1990?

2. ANONYMITY: How anonymous is Bitcoin when you don't mine, and you buy it thru mtgox, bitstamp, bitcoin.de, btc-e, or localbitcoins.. if you have to fill your personal data when adding an okpay card, mastercard or for SEPA transfers?? The only way I see for anonymity is to buy face to face?

3. WHEN CASHING OUT: Same question as before + how is not Bitcoin taxable if you receive the payments in your name? My idea is to hold them, but maybe at some point I want to cash out for any reason, so, if it's a big quantity and you don't want mess up with your bank and government, what's the best option?

4. WHAT'S WRONG WITH BTC-E?? Hehe... I saw a lot of negative comments about it around here... Why??

Thank you for your attention, and I'm sure I will keep doing "stupid" questions, I'm pretty amazed by the advantage of BTC, but I still don't understand a lot of it...

Cheers!

[1714815638]

1714815638

[1714815638]

1714815638

[TookDk]

Ad. 1
I would say, that it is not safe to generate you paperwallet online, at least if we talk about storing more than a few satoshi.
The trick for safe storage is that you and you alone know the private key - and it must not be possible to intercepted or regenerate the key.

One way to do it is to download https://www.bitaddress.org/ to a USB stick.
And then generating the private key on a offline computer, make sure the wife is out, the curtains are shut, write the key down on a piece of paper, and smash the hard drive after you are done (I know this is a little radical). 

Depending on you level of paranoia, you can use clean-never-used-before USB stick - and use a computer with a clean operating system that has never been online.
You can read about it here: https://bitcointalk.org/index.php?topic=43496.0
However you need to have some sort of trust to key generator....

I have puzzling about the digital curtation aspect of how to store BTC on a long term basis (10-20 years).
I thing a paper wallet is a good choice for long term storage, since a piece of paper is rather analog and can survive for at least 20 years, if the paper and pen is of good quatlity. However you have to trust the script that generate the private key... in theory could the script generating a pseudy random keys that can be reproduced.From the point of view that "you cannot trust anyone"; then is the only safe way to generate a key to build your own code generator on a offline computer, and make sure that the randomization is truly stochastic.

Anyway that my 5 cent, you can read a lot about the topic here on the forum.
 

[blockage]

1. SECURITY: I read about paperwallets and found https://bitcoinpaperwallet.com/ . How is a paper wallet/offline totally "offline" if it's generated online? I also read the best way to generate your paperwallet is downloading from https://github.com/cantonbecker/bitcoinpaperwallet the wallet generator and do it while not connected to internet, but, in that case, is not possible that another person who's doing it as well could generate the same wallet as me?? I know I'm missing something, what it is!?
How actually an offline wallet works? Can someone explain me like I'm 13 and just learning how to install a program in 1990?

I have used bitaddress.org to generate paper wallets. You can save the website to disk and run it whereever you want. If you're paranoid than this still isn't secure as a bad-seeded random number generator might be used (which is hopefully fixed by now in all address generators) or some hacker replaced the website and introduced a bad-seeded RNG. There is also the possibility to have a digital offline wallet with Armory. You can create transactions completely offline and save them to a USB key. You can then plug it into an online computer and broadcast the transaction to the network.

2. ANONYMITY: How anonymous is Bitcoin when you don't mine, and you buy it thru mtgox, bitstamp, bitcoin.de, btc-e, or localbitcoins.. if you have to fill your personal data when adding an okpay card, mastercard or for SEPA transfers?? The only way I see for anonymity is to buy face to face?

Most exchanges now require you to submit identification and proof of residence. BitStamp moved from Slovenia to the UK I think but is only collecting that information out of self-regulation as they are not (yet) legally required to do so. They try to follow best-practices regarding anti money laundering and know your customer rules. Buying in person is probably your best option. Shouldn't be a problem in Berlin though.

3. WHEN CASHING OUT: Same question as before + how is not Bitcoin taxable if you receive the payments in your name? My idea is to hold them, but maybe at some point I want to cash out for any reason, so, if it's a big quantity and you don't want mess up with your bank and government, what's the best option?

I assume you're paying your taxes in Germany. Currently you're obliged to report income from mining (lol as if they can check that) but you can also get tax reduction based on electricity costs. If you buy Bitcoins and hold them, then any profits you make are tax-free after one year. No kidding, this is real but unique to Germany at the moment. I have no experience how the tax office deals with it though, because I'm not living in Germany anymore. But I wouldn't consider day-trading to be holding coins, so any profits you make that way are taxable. But how do they want to check that anyway? You might prove that you own a private key and held the coins there or whatever....

4. WHAT'S WRONG WITH BTC-E?? Hehe... I saw a lot of negative comments about it around here... Why??

But indeed a lot of people distrust that exchange. The support/dev are not really responsive to their non-russian customers. It's quite hard to get funds into it without paying high fees. However, in the 2 years I have been that exchange I never had any problems. They have been hacked last year and payed the loss of coins themselves. Other exchanges simply close down after such an event and give you a "sorry, we got hacked and we can't reimburse you". So that at least speaks for them and I would trust them more than I would trust mcxnow.

[Flashman]

I think the chances of generating the same wallet as anyone else are about the same as all of the oxygen molecules in the room randomly going to the ceiling and  suffocating you...


Unless...

You use a very easy to guess or popular pass phrase to generate the random key, like the first line of ANY song or book or something, or a quote from a popular TV show or movie. Then you are not being random, just a sheep trying to be cool.

[blockage]

I think the chances of generating the same wallet as anyone else are about the same as all of the oxygen molecules in the room randomly going to the ceiling and  suffocating you...


Unless...

You use a very easy to guess or popular pass phrase to generate the random key, like the first line of ANY song or book or something, or a quote from a popular TV show or movie. Then you are not being random, just a sheep trying to be cool.

You are referring to a deterministic wallet rather than a plain paper wallet aren't you?

[walden]

Thanks for your answers! and thank you blockage for taking the time to answer point by point

I was having the same doubt about the paper wallet but finally got it with Flashman reply. I was missing that my random paperwallet was depending of the passphrase... great.

So, I download the bitaddress.org, go offline, write a passphrase and Generate, print it still offline. And I can start to send BTC there already?

thanks guys!!

[TookDk]

Yes, after you have generated a pair of private and public keys - then can you send BTC to your public key.

BUT

Please "test" with a small amount first, and then try to redeem the amount with you private key - so you know what you are doing.

[Flashman]

You are referring to a deterministic wallet rather than a plain paper wallet aren't you?

Only due to the popular/easy methods of paper wallet generation using that scheme.