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Bitcoin made simple

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bitcoins.menu is the right place to start with bitcoin. General information is provided in simple words from the user perspective for better understanding. The key to fast learning is to determine what minimum you should know about bitcoin.

You don't have to comprehend electronics in order to use computer. And you don't need to be a genius to use bitcoin.

Table: What you need to learn about bitcoin

You 
Bitcoin essentials
Basic exchange
Wallets / Security
Blockchain tech
Professional exchange
Curious person
Rare user
Regular user
Investor    
Trader    
Miner    
Developer

The roles presented in the table have different tasks. Thus, information needed is different:

During the past 10 years bitcoin was called digital gold multiple times. This fact alone is enough to find out what is bitcoin. As time goes by, bitcoin adoption, use and circulation are growing. Learning about blockchain technology helps to see how bitcoin works. It also opens an understanding of innovative way of data collection and storage that can be used in many areas.
You can see that the occasional user don't have to worry about learning much about bitcoin. He can just register on simple trusted exchange with bitcoin wallet provided and be able to buy bitcoin and send it immediately. No special instruction is needed for that.
Regular user should learn at least the basics about bitcoin to understand what is he dealing with. He may be fine with using simple exchange and keeping small amounts of bitcoin on the account balance. Although as the balance grows, it is important to know how to choose bitcoin wallet. This way the user don't have to trust third-party to keep own bitcoins.
Investing — allocation of free capital into financial assets in order to generate profit.
Many new investors are lured by continuous growth of bitcoin technology and infrastructure. Serious investor should learn as much as possible about the asset he is about to invest in. This includes blockchain technology, historical data and charts, risk/reward ratio, relevant financial regulations and much more.

Small investors may use basic exchanges to get their bitcoins, yet personal wallets are highly recommended for a long-term holding. Medium to big investors should look at large professional exchanges in order to ensure adequate liquidity and suitable fiat gateway.

Institutional investors should be aware of trusted authorities on digital currency investing (e.g. Grayscale Investments, LLC) and bitcoin futures trading on Chicago Mercantile Exchange and Bakkt platform by New York Stock Exchange.
Trading — professional activity involving frequent buy and sell transactions on the exchange in order to outperform long-term investing. Common trader's instruments include technical market analysis and fundamental news analysis.
People from all over the world attracted to crypto trading thanks to its accessibility. Nonetheless, any new trader should realize that the success in trading demands time and tremendous efforts in learning. It is not a secret that only a minority of traders can trade for a living, thus the profession should be approached very responsibly. Trading is not for everyone and require certain qualities. Apart from learning bitcoin essentials and professional trading platforms, vast amount of specific knowledge is needed in effort to achieve positive results.

Bitcoin mining is not an easy task because of constantly changing conditions. The more miners in the network — the more expensive mining cost becomes. If you add to it significant price volatility and mining equipment ageing, then you realize the difficulties that miners have to face. Besides thorough understanding of blockchain and other technical aspects, successful miner have to be able to calculate economic part and to consider all possible risks.

Currently, it is not necessary to buy mining equipment to become a miner. There is a service that allows people to buy hashing power remotely and allocate it to mine bitcoin or other cryptocurrencies. The task here is to buy computing resources cheaply and make a profit from mining.

The same service offers the owners of mining equipment a software that automatically calculates and uses the most profitable mining algorithm. The service includes mining equipment profitability calculator to estimate the mining profit from different hardware whether it is a graphic card or a powerful ASIC.

Developers are likely to dive deep into the realm of blockchain technology, although some of them are common IT professionals who just apply own programming skills to certain new tasks. There are niches that opened even for beginners. The number of jobs related to blockchain is growing rapidly, so now it is a great time to get yourself engaged in online academy for crypto and blockchain.

Bitcoin essentials

What bitcoin is all about in 10 minutes read

What is bitcoin

Simply speaking, bitcoin is advanced money of the Internet. Like Internet itself, Bitcoin doesn't belong to a single person, group of people or organization. Anyone can use Bitcoin. The minimum needed is an internet access. New bitcoins are created at certain speed that cut in half every 4 years (approximately). This event is called bitcoin halving. Therefore, bitcoin has a predictable monetary supply. By the year of 2140 here will be 21 million bitcoins in total ever to be produced with more than 87% already in existence.

Why bitcoin has value

The slogan “Be your own bank” describes the nature of Bitcoin. Not only bitcoin has all the properties of money, but the advantages never seen before. Bitcoin is a medium of exchange, that is divisible (the smallest value is 0,00000001 BTC), portable and fungible etc. (see the full money features table) Unlike any currency, its supply is strictly limited — bitcoin is designed to be a store of value over long period of time. Bitcoin has superior privacy capabilities and it can't be confiscated. Bitcoin transactions can't be cancelled, sanctioned or censored.

History of bitcoin

Bitcoin was launched in 2009 as an open source cryptographic project by a person or group of people using Satoshi Nakamoto name. Many see bitcoin as the answer to a financial crisis of 2008 and as the solution to fight poverty giving people the possibility to accumulate wealth long-term. Independent bitcoin network has grown into a big infrastructure over the years. The system has proven to be stable and resistant to hackers. Bitcoin price chart shows how bitcoin value has multiplied many times over the years.

Bitcoin has built a wide infrastructure around itself. Here at bitcoins.menu you will get information only about proven by time and recognized by community services or solutions whether it is a wallet, an exchange, a tool, an app or anything else. Nonetheless, please do your due diligence when managing money — no financial advice is given here. Many large investors define bitcoin as high-risk asset. Bitcoin price still suffers from high volatility that should be reduced with mass adoption.

Important to know

About bitcoin addresses and transactions

What is a bitcoin address?
Bitcoin address (also known as public address) by its use is similar to the bank account number. If you give your public bitcoin address to the sender, it is enough for him to send you bitcoins. Each bitcoin address is unique. How to get bitcoins
Picture: How to receive bitcoins
Public bitcoin address consists of 26-35 alphanumeric characters, starting with 1, 3 or bc1. Please note, that letters are case-sensitive: “A” not equals to “a” and “B” not equals to “b” and so on. Here are some examples of bitcoin addresses:

1Lb7AaHr65nLALeHU5UJfmJTSa5zxnJ34e

39H6Evj9SUXCy9a168AHUGNE7eELodMhDd

bc1q6xf2wzr4zljf7h4gkqfp5q8qcythgs2cal4pw3
You can get a bitcoin address when register on most of the bitcoin exchanges. If you set up your own bitcoin wallet, you will see your public bitcoin address under the Receive tab.
Simply speaking, bitcoin transaction is when bitcoins are sent from one address to another or several other addresses.
Bitcoin transaction is created by the sender and initially gets into as unconfirmed transaction. In order to be completed, transaction needs to be confirmed by miners maintaining the bitcoin network. When miners confirm the transaction, it gets the first confirmation. The number of confirmations grows over time.
Bitcoin transaction needs to get at least one confirmation. One confirmation on average takes 10 minutes. Technically, in rare cases, it can take from several seconds up to 90 minutes. In most cases, one confirmation is enough for the transaction to be considered as verified. Although, some exchanges require several confirmations before bitcoins are deposited to your account.
Bitcoin blockchain is open and anybody can browse it. Use the public bitcoin address to locate associated transactions or use transaction id (TXID) if known. Here are some popular bitcoin blockchain explorers:

Explore the bitcoin blockchain

Bitcoin exchanges

Trusted exchanges where you can buy, sell and send bitcoin fast and easy

Localbitcoins

person-to-person exchange
Started in 2013, Localbitcoins is great for beginners. It reflects the true nature of bitcoin allowing users in any country to buy and sell bitcoin to each other safely. Pros: in-built bitcoin wallet with very low fees, friendly user interface, variety of payment methods and more.
Localbitcoins official video

Binance

advanced trading platform
Binance is the leading trading platform with high liquidity and great customer service. Binance offers 300+ trading pairs including most popular altcoins, margin trading, lending, stacking and crypto loans functions as well as up to 125x futures trading. You can buy bitcoin, numerous altcoins and stablecoins with your Visa/Mastercard or via p2p gateway.
Binance exchange review

Bitcoin wallets

Learn about bitcoin wallets in plain English

If you haven't done so, please see what bitcoin address is before learning about wallets.

What is a bitcoin wallet?
Generally speaking, bitcoin wallet is a program, hardware or service that lets you send, receive and store bitcoins on your public bitcoin addresses. The wallet generates public bitcoin addresses and keeps your private keys safely.
Bitcoin wallet creates public addresses
Picture: Bitcoin wallet
The private key (or keys) is an important component of bitcoin wallet. Private key is a long string of letters and numbers. You don't really have to see it when using bitcoin — wallet handles it.

Private keys should be kept safe. Whoever owns private keys, owns bitcoins related to that keys.
Bitcoin wallet generates private keys for you and then uses them:

  • It creates public bitcoin addresses from the private keys.
  • It scans the bitcoin blockchain to get the balance of own public addresses.
  • It uses a private key to sign the outgoing transaction from the associated public address.
  • It broadcasts the transactions to the bitcoin blockchain.
Scheme: What bitcoin wallet does
Picture: Bitcoin wallet work
Seed phrase (also known as mnemonic phrase) is used for convenient wallet backup. It consists of 12 – 24 words. For example:

act pull only shy inner proof spot power stem rate hello vote

It is much easier to write down easy to read seed phrase rather than writing down unreadable private keys.

Seed phrase, supported by many wallets, is used to generate private keys. Thus, seed phrase is as important as private keys and must be kept secret. If bitcoin wallet is lost, seed-phrase is used to recover the wallet.
Different types of bitcoin wallets:

  • Hardware wallet — electronic gadget connected to the user's PC, tablet or smartphone.
  • Software wallet is a computer program, running on the user's PC or mobile device.
  • Online wallet is a third-party web-service, working on remote server accessible from any web-browser.
  • Hot wallet refers to the wallet connected to the internet. This includes mobile, PC and online wallets.
  • The cold storage wallet is a little piece of hardware that is not connected to the Internet, thus they are not exposed to hacker attacks.
Online bitcoin wallet (also known as Web wallet) is a third-party service where you can receive, store and send bitcoin. The service is accessible through general browser like Chrome or Safari on your PC or smartphone. Web wallets can be different:

  • Web wallets where you have access to your private keys.
  • Web wallets that gives you access only to public bitcoin addresses and funds there.
Second type of wallets normally belongs to services where you can buy and sell bitcoins.

It is recommended to keep significant amounts of bitcoin only on wallets when you have access to your private keys. Otherwise, you have to rely on third-party to store your bitcoins. Simply speaking, if the platform gets hacked, your bitcoins may be at risk.
Hardware wallet is a small device similar in size to USB Flash drive. Usually it has electronic display showing transaction details.

The interfaces of software wallets can be very different and depend on the software developers. Bitcoin hardare wallet example
Photo: What bitcoin hardware wallets look like
Any bitcoin wallet can generate many bitcoin addresses. In order to top up the bitcoin wallet, you need to send bitcoins to any of its addresses.

It is recommended to use new public address only once for better privacy. Bitcoin addresses can be reused multiple times — just remember, that all the transaction history associated to any bitcoin address is publicly open.

Common way to top up your bitcoin wallet is to use an exchange platform. How to top up bitcoin address or account
Picture: Topping up bitcoin wallet
A hardware wallet is the most secure bitcoin wallet. Even being connected to a compromised computer, hardware wallet remains immune to viruses and malware. It displays transaction information on its own screen and lets you check the details before signing the transaction.

Wallet security

Despite the fact that hardware wallets are the safest way to store bitcoin, many people use other types of wallets. First, hardware wallets costs from around $50 while other wallets are mostly free. So if you use bitcoin only for small payments, you should be fine using free alternatives.

Secondly, there are situations where you have to use other types of wallets. For example, when you buy bitcoin, you are likely to do so on an exchange with web wallet service provided. When creating a web wallet account, please use long unique password with random characters that you don't use anywhere else like e-mail etc.

2FA

Almost every web service will suggest you use so-called 2FA (stands for 2-factor authentication). This is a great way to add very strong layer of security to your account. If you access your online wallet or exchange from the PC, you can install small 2FA app (e.g. Google Authenticator) to your mobile phone. Whenever you log in to your web wallet, apart from your password, you will be asked for a short code generated by your 2FA mobile app. This way even if a hacker intercepts your password on a PC, he won't be able to get access without 2FA code. Remember, 2FA security with a mobile app is stronger that 2FA with SMS codes.

If you access your web wallet from a smartphone, it is recommended to use another device for 2FA app, not the same smartphone. The idea behind 2FA security layer is to separate account access point from the 2FA code generator point.

Use with caution

If you are very confident in a computer security, you may prefer to use solid desktop wallet. If you are not a tech-savvy, you better use mobile or online wallet for small transactions and hardware wallet for bigger amounts. In case you use bitcoin in everyday life, then mobile wallet is the most convenient option — most mobile bitcoin wallets are able to read QR-codes.

Get educated

If you invest your life savings in bitcoin, certainly get yourself a hardware wallet. History shows us that multiple exchanges, PCs and passwords were hacked over time. If you can't get yourself a hardware wallet, please always use 2FA and learn more about bitcoin wallet security issues, how exactly an account may be attacked and what are preventative measures to be safe. Don't be paranoid, just get educated.

Recommended wallets

Here are some trusted wallets in each category:

Hardware wallet

There are two most popular manufacturers of hardware wallets on the market — Trezor and Ledger. Trezor is considered the oldest (since 2014) and the safest with its open source code (independently audited). Besides, it is more affordable. User interfaces are rather different, so you may have a look at the wallets from both manufacturers.

Online wallet

Localbitcoins offers an online wallet that currently has the lowest fees for the transactions than other types of wallets. This has become possible as the platform combines transactions from many users into one transaction saving on total fee. Moreover, users on Localbitcoins since 2013 can easily buy or sell bitcoins to each other at competitive rates.

Mobile and desktop

Veriphi startup has conducted comprehensive comparison between 25 mobile and PC bitcoin wallets. 48 criteria, including security, support, 2FA, functionality, compatibility etc. were taken into account. The inclusive report, presented in reader-friendly table, should help you when choosing the best bitcoin software wallet.

Bitcoin blockchain explained

How does bitcoin blockchain work in simple words

What is bitcoin blockchain?

Bitcoin blockchain is a chain of blocks consisting of all confirmed bitcoin transactions. One block is created after another in 10 minutes on average.

Why 10 minutes?

This was predefined in bitcoin open source code by the creator of bitcoin Satoshi Nakamoto in order for bitcoin blockchain not to grow in size too fast, because it keeps history of all transactions since the creation of bitcoin.

Where is bitcoin blockchain stored?

Blockchain, also known as distributed ledger, exists as many identical copies in the bitcoin network. When a new block is created, all the copies get updated.

Is blockchain robust?

Yes. Blockchain integrity and chronological order of blocks verified by cryptography. Each block contains digital signature that confirms the authenticity of all the previous blocks.

Who builds bitcoin blocks?

Bitcoin miners provide their computational resources to maintain the bitcoin network. They compete with each other to confirm the transactions and find new blocks faster.

How transaction gets into the block?

Unconfirmed bitcoin transactions are added to the memory pool (also known as mempool) by the senders. From there miners are picking the transactions with higher fees first.

Who sets a transaction fee?

The bitcoin transaction fee is set by the sender. The more fee he decides to pay for the transaction — the better chances that the transaction gets confirmed in the nearest block.

How to calculate a bitcoin transaction fee?

Most bitcoin wallets suggest current recommended transaction fee. This value depends on the number of unconfirmed transactions in mempool and average fees set by other senders. You can see current mempool state and fee level in mempool observer.

How bitcoins are created?

New bitcoins are created in every new block. Together with the fees for transactions they are rewarded to the miner or to the mining pool who found the block before others did.

What is a mining pool?

Individual miners are likely to unite into mining pools in order to have better chances competing with other miners finding new blocks faster and getting rewarded.

Why blockchain has value?

Blockchain introduced the most robust way to store data unchanged. The data is kept very safe being stored as multiple copies across the world. The data integrity is ensured by cryptography. No one can alter any block of information unless the majority of network participants decides to do so, while participants are incentivized to keep the data unchanged.

Blockchain future outlook

Blockchain technology can be utilized differently with potential use cases yet to be discovered. There are many developing areas including transparent voting, decentralized finance, smart-contracts, see-through funds distribution, asset tokenization, counterfeit prevention, digital identity services etc.

What are you going to do?

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