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Bitcoin for beginners: How to get started with free bitcoins

| August 5, 2014 | Reply
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A neon sign outside an establishment proclaims "Bitcoin accepted here." Bitcoin introduced the "cryptocurrency" concept to the world in 2009. (Photo © 2014 Duncan Rawlinson/Flickr) (CC BY-NC 2.0)

A neon sign proclaims “Bitcoin accepted here.” Bitcoin introduced “cryptocurrency” to the world in 2009 and it’s both fun and easy to explore this new ecosystem without any financial risk whatsoever. (Photo © 2014 Duncan Rawlinson/Flickr) (CC BY-NC 2.0)

If you haven’t dipped a toe in the bitcoin waters yet, now is the time — before values for the trendy “cryptocurrency” either go through the roof or, just as likely, crash and burn. There’s no need to buy bitcoins in order to get started, though, because it’s quite easy (and fun!) to try out the ecosystem with no financial risk whatsoever.

What Is Bitcoin?

Bitcoin is the first and still most popular cryptocurrency, a medium of exchange in which a finite number of units are produced by computers joined together in a peer-to-peer network solving cryptographic equations.

The equations to be solved are determined by a complex algorithm comprising the core of the system and there are only so many equations to be solved. In oversimplified terms, solving an equation creates a “bit” and it’s these bits which are perceived to have value because their number is limited — only 21 million bitcoins can ever be produced — but the demand for them is unlimited.

This supply-and-demand system of creating stored value contrasts sharply with the fiat currency system in the United States, where a controlling central authority (the Federal Reserve) can print dollars at will. All bitcoin transactions, on the other hand, are managed by a peer-to-peer network with no central authority exercising control, just an underlying mathematical algorithm.

It’s important to keep in mind that neither a bitcoin nor a dollar has inherent value — both are only “worth something” if you have one and somebody else wants it. While it’s unlikely you’ll ever wake up to discover nobody wants your American dollars anymore, that scenario is indeed possible. When it comes to money and investing, nothing is ever guaranteed. Ever. Did I mention EVER?

One big thing bitcoin has going for it, though, is only a finite number of bitcoins will ever exist — no matter how popular it may become, no more than 21 million bitcoins can ever be created and not all of them will even circulate since they can be lost just like traditional currency. While the value of the dollar tends to decrease over time, the value of bitcoins should tend to increase over time, assuming demand remains constant or increases — at least that’s the theory behind the system.

Since bitcoin’s introduction in 2009, some people have made small fortunes and many more have lost their shirts. Cryptocurrency is a fascinating new paradigm, however, and it’s both fun and easy to try out the ecosystem with free bitcoins and assume no financial risk whatsoever.

Get Started With A Free Bitcoin Wallet

Before you can do anything, you’ll need a wallet in which to store your bitcoins. Because bitcoin is a digital currency and not a physical one, by necessity this wallet will reside on a computer somewhere. Your wallet can reside on your own computer or in the cloud if you opt to use a service such as Blockchain or Coinbase. (Always back up your wallet regardless of which method you choose, but backing up a bitcoin wallet is a little beyond the scope of this tutorial.)

Bitcoins are sent and received using an alphanumeric address associated with your wallet. This isn’t an account number like you’re accustomed to using for electronic bank transfers, though, so it’s safe to share the address publicly.

If you’re just getting started with bitcoin, I recommend creating a free online wallet at Blockchain.info. To create a wallet, simply go to https://blockchain.info/wallet/new, enter your email address and choose a password (use a strong password and don’t lose it; you’ll never be able to access the bitcoins in your wallet without it).

Faucets: Where Free Bitcoins Come From

Next, seek out a Bitcoin “faucet” to get some free bitcoins. My favorite is Free Bitcoin because you can win up to $200 USD in free bitcoins every hour. It’s much more likely you’ll only receive a few cents (or fractions thereof), but the site’s algorithm is provably fair and it’s entirely free so you’ve got nothing to lose.

A screen capture showing the Free Bitcoin signup screen. (The referral code in the form is mine.)

A screen capture showing the Free Bitcoin faucet signup screen. (The optional referral code is mine.)

All you’ll need to provide in order to sign up and start receiving free bitcoins to play with is your bitcoin wallet address, an email address and a password. I’ll receive a miniscule commission if you enter my referral code (589704) in the “Your Referrer” field, but that part’s completely optional.

Once you’ve signed up, click “Auto Withdraw” to make sure all your bitcoins will be automatically sent to your wallet on a weekly basis after you surpass the site’s payout threshold.

Then, all you have to do to earn free bitcoins is click “Roll” and solve a simple captcha. The system then generates a random number between 0 and 10,000 and you’ll receive a payout based on what number comes up (there’s a chart showing current payouts right on the home screen).

One thing I really love about this faucet is you can have it sound an alarm when an hour passes and you can roll again. If you’re sitting in front of a computer for hours anyway, just leave it open in a background tab and you won’t have to worry about forgetting to go back and get your free bitcoins.

Free Bitcoin says their system is “provably fair” because each roll is calculated using three parameters: a server seed, a client seed and a nonce. For cryptonerds desiring increased transparency, the site can show you the client seed and nonce to be used for your next roll along with a SHA256 hash of the server seed. You can change the client seed if you like, but the server seed is always kept secret until after the next roll.

There are numerous other bitcoin faucets available online, but Free Bitcoin provides the least hassle of any I’ve tried. Every faucet I’ve seen uses referral code marketing and some probably pay out a lot more to referrers than this one does, but I recommend it because it’s simple, straightforward and hasn’t spammed me, not because I might get a penny if you sign up through my referral link.

I may recommend other bitcoin faucets over time, but for now this one is my favorite (especially for beginners).

Keep Your Expectations Realistic

While I doubt you’ll get rich using a bitcoin faucet, the really nice thing about getting free bitcoins is you never know how high their values might go (as I write this, 1 BTC is worth $580.35 USD). Free Bitcoin pays out bitcoins based on their current value in dollars, so if you win the equivalent of $1 today and the price of bitcoins doubles tomorrow, those free bitcoins in your account will immediately be worth twice as much.

Conversely, if you win $1 and the price of bitcoins is cut by half tomorrow, those free bitcoins in your account will immediately be worth only half as much. The bitcoin market is extremely volatile, but if you’re not spending any “real” money to acquire cryptocurrency then you’ve got nothing to lose and everything to gain.

Give it a shot and see what you think.

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I'm a Mid-South photojournalist, Kentucky writer and digital media consultant (or eNinja™). Circle me on Google Plus at Plus.BillySuratt.com, follow me on Twitter at @surattb and Instagram me at @BillySuratt. Got a news tip or suggestion about some journalism that needs committed? Email blog@billysuratt.com (discretion is always guaranteed).