Gobblin' Up The Coins
When you are first investigating Bitcoin, you will quickly find a graph that looks like this:
Your first reaction, similar to mine, might be something like this:
This could have been the end of it for me. Our client The Outsider had asked me to support Bitcoin commerce on their website (coming soon, check them out on Facebook or Twitter) and I could have just implemented the system and forgotten about the whole thing. If it were a stock in the stock market anyone could be forgiven for looking at at the graph and say "Meh, it had it's run". A nagging feeling and a lot of recent publicity kept telling me that the value of Bitcoin versus US dollars must not be the end of the story.
So the question for me became "how can I get ahold of my own Bitcoins to play around with and see what this community is all about with my zero budget and the difficulty of purchasing Bitcoin in the United States at the moment."
A great answer for me, and a way to get involved with the communities, is mining.
Bitcoin Mining Is Dead
If you have been looking deeper into Bitcoin than just looking at a US dollar value graph, you have probably heard the following:
Yo bro, I heard mining is dead.
-- Some guy on the internet
Bitcoin mining is indeed unattainable for a little nobody like myself with nothing but his desktop computer. What I found next led me to literally a whole new subculture, and a burgeoning ecosystem.
Enter The Altcoin Revolution
A whole plethora of coins started with the Bitcoin fork called Litecoin, with new ones springing up every day. Some have interesting and innovative new features. For example "proof of stake" gives you the equivalent of bank interest for holding coins. Others are clones of other coins with a new name and/or theme.
Small amounts of these alternate coins (also known as "altcoins" or "cryptocurrency") can indeed be mined by the computer hardware sitting on my desk right now.
First, find an interesting coin. For example, CleanWaterCoin is a philanthropic coin that uses profits to get water to people in need. Second, find a mining pool for your coin of choice. For CleanWaterCoin the largest I found is their pool at pool.cleanwatercoin.org. Last, download "cgminer" if you have an ATI video card or "cudaminer" if you have an NVidia video card. Start mining!
After a couple days of mining, you will have enough to start experimenting. Stay tuned for my personal trials and tribulations!
What can you do with your brand new coins? The CleanWaterCoin home page has options for spending their coins. Or you can follow my footsteps and trade.
The Exchanges
Exchanges are websites that convert one type of coin to another. Two popular ones with low minimum trades are mintpal.com and bittrex.com. These sites are miniature stock markets! Here is today's price of a coin called CINNI:
Huh, isn't that interesting? The price of CINNI rises and lowers against the price of Bitcoins. That volatility is a trading market, neat! And possibly the greatest thing about this miniature stock market is that you can trade with investments starting at 0.0001 BTC or $0.04. This won't make you rich, but it's a great way to try your hand at trading with a risk about the same as losing a quarter out of a hole in your pocket.
Doge. Doge Doge Doge.
So what the heck? Is this pronounced like "dojh" or "doggy"?! Nobody knows, just roll with it. I like "doggy". Laura likes "dojh". [I just read it naturally that way - Laura]
Doge has a value that's around 0.000001 of a Bitcoin. Why on Earth is that useful?! Well, 3 reasons.
First, Doge makes the promise of micro transactions real. Bitcoin promises the ability to do that with its high amount of divisibility. But in practice, Bitcoin transaction fees are at least 0.0001 Bitcoins. That makes transactions smaller than about $0.04 USD impractical, the fees are more than the transaction amount. The Doge fee of 1 DOGE is two orders of magnitude smaller than Bitcoin's fee. This makes it ideal for tipping, throwing around small amounts of money to spread community love, and transferring money between exchanges.
Second, the approximate 0.000001 value of Bitcoin has been pretty darned stable, with good potential for future growth. I like to keep a portion of my coins in Doge because it holds its value against bitcoin. Historically, you can see this clearly at the exchanges.
Third, the Dogecoin community is amazingly generous. My experience has been that Dogecoin users are the nicest people on the internet. After I lost a little money on the trading exchanges, the awesome Dogecoin folks more than made up for it with their tips. Get involved and be yourself and they throw money at you! You can find them on /r/dogecoin on reddit.com.
Stay tuned!
In future posts, I will be exploring all of these neat ideas and sharing my experiences with Bitcoin and cryptocurrencies in detail.