It’s the festive season, and if there is a bitcoin fan among your friends and family, then they may have given you some of the virtual currency in your Christmas stocking. If so, what should you do with it?
There are several options for you as a new bitcoin owner. We’ll tell you about them here, but before you start, please don’t do what Bloomberg TV anchor Adam Johnson did. Fellow anchor Matt Miller gave bitcoins to Johnson as a Christmas gift on air. They came in the form of a paper wallet (see below), which Johnson showed to the camera, displaying his private key in the process. Whoops. A reddit user scanned the QR code and beamed the bitcoins to his own address, bragging about it later online. There’s one person who made it onto the naughty list this year.
1. Store them securely
Which brings us to the first thing that you’re going to want to do with your new bitcoins: keep them safe. If you’ve never received bitcoins before, the chances are that you’ve been given them by someone who created a bitcoin address for you, sent some coins to it, and then gave you the address somehow. It may have come as a long number pasted into an email, or potentially on a piece of paper.
How you store the bitcoins will depend on what you want to do with them. If you’re going to spend them immediately, then you’ll want to put them into what’s called a ‘hot wallet’. This is a wallet either on your smartphone, your desktop computer, or a website, and it allows you to spend your coins straight away.
But you may also be planning on keeping the bitcoins for longer. The currency’s price is pretty volatile, and some analysts think that it will bounce far higher than it has already. If you want to keep your bitcoins for a while, then consider putting them in cold storage. This is a bitcoin wallet that doesn’t connect to the Internet. No one on the Internet can steal it because it isn’t stored on your computer, or on a remote website. The easiest way to do this is with a paper wallet.
If the bitcoin address isn’t on a piece of paper, or the gift giver has promised you some coins but hasn’t sent them yet, then you can create a paper wallet at various websites. One site that you can use to produce excellent paper wallets is Bitcoin Paper Wallet. Another example is BitAddress.org.
Sites like these will generate a bitcoin address for you. The address has two components: a public key (which you show to everyone else when you want to receive bitcoins to that address), and a private key (which you use to send the coins). The bitcoin address will be printed out onto a paper wallet for you to keep. Show the public key to the person sending the bitcoins. They will scan the address and send the coins along using their own wallet. It is important that you then keep that piece of paper safe – because if you lose it or show it to someone malicious (like Johnson did), then your bitcoins will be gone.
When you wish to spend these bitcoins, you can import your private key to a hot wallet of your choice. There are many to choose from, each with their own strengths and weaknesses. Some, like blockchain.info, store your bitcoin private keys both online, and on a mobile app. Others, like Kryptokit, restrict storage to your desktop computer only. The wallet will have a way for you to input or scan your paper wallet’s private key, transferring it into hot storage so that it is ready to spend. At this point, it effectively has an Internet-connected copy of that paper wallet, meaning that the paper wallet can’t be considered as cold storage anymore.
Check out our handy guide to bitcoin storage.
2. Give them away
So, now you’ve secured your coins. What next? In the spirit of Christmas, we thought we list the most obvious option near the top: giving them away. There are several organizations that take bitcoin donations listed here, one of which is Connie Gallippi’s BitGive Foundation. It is a respected organization, with members of the Bitcoin Foundation on its board, which takes bitcoin donations to build up a charitable investment fund. It makes financial contributions to charities that focus on public health and the environment. Most recently, it raised $4,850 for Save the Children.
3. Gamble them
Giving bitcoins to charity might be the right thing to do, but if there is a devil sitting on your shoulder, he may advise you to gamble it away instead. If you fancy a flutter and don’t fancy making the trip to Vegas, then you can do it from the comfort of your armchair, in between Turkey-induced catatonia and rounds of rum and eggnog.
There is no shortage of gambling-related sites. SatoshiDice is perhaps one of the most famous. Akin to a large, Internet-based penny slot machine, it works by publishing a variety of bitcoin addresses. Players their bitcoins to one of them, and the site’s computers evaluate them to see if you won or lost, sending back your original bet multiplied by a prize multiplier if you are successful.
‘Dice’ sites like these allow you to verify the payout either by using the bitcoin block chain, or by using pre-defined numbers which can help you to check that your payout was fair. But for those wanting a more conventional game, there are several bitcoin poker sites up and running, including Satoshi Poker, and Bits Poker. Players do so at their own risk, however. Another poker site, Seals with Clubs, just lost 42,000 hashed passwords in a hacking attack.
4. Spend them
If you are just itching to spend your new virtual currency, there are many places where you can buy goods and services online. We’re still not at the point where you can hand them over the counter at your local boxing day sale, but you can spend them online, and at selected physical merchants. There is a big list of individual merchants organized by category here, but you can also find bitcoin-based vendors on some online marketplace sites like Etsy.
Bitdazzle is an online marketplace for vendors of all kinds that accept bitcoin, which will enable you to magically turn your satoshis into that bar of lavender and oatmeal goat milk soap you always wanted.
Alternatively, use a service that will enable you to purchase pretty much anything with bitcoins. All4BTC will take your bitcoins and use them to pay pretty much any e-commerce vendor on your behalf. Or, you can buy a gift card from over 200 popular high street retailers, by sending your newly-gifted coins to Gyft.
For more details on your spending options, check out our in-depth guide here.
5. Sell them
Still have no idea what to do with those precious coins? Then flog them. If there is a bitcoin ATM near you, you may be able to sell them there. You can sometimes find bitcoin-related Meetup groups in your area, where people will lurk looking for bitcoins to buy, or items to sell in exchange for them.
You can also take advantage of direct person-to-person sales via sites such as LocalBitcoins.com, where you can find people to trade with online, or in person (be sensible and safe when doing the latter). Or, if you’re in the mood to organize a whole bunch of paperwork over the holiday, you can register yourself on one of the many bitcoin exchanges (there will probably be a local one for your country) and then deposit your bitcoins there. This will enable you to sell the bitcoins to a buyer offering a given asking price.
Whatever you decide to do with your new bitcoins, call the person that gave them to you, and give them a happy New Year’s greeting from us at CoinDesk. We like people that think outside the box. And aren’t bitcoins a much more interesting present than a pair of socks?
Disclosure Read More
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.