When it comes to cryptographic money, the best wallet is a little different. You don’t need to store the digital money on your phone, but you do need to be able to pick it up and use it whenever you want. If you’re using a Bitcoin wallet as an email address, or storing it in a file on your computer, then anyone who gets hold of your computer can grab that money.
A good wallet is easy to set up but hard to forget. It must generate a new key for each transaction, yet that has to be easy to remember but hard for others to guess. And it must offer encryption so that even if you lose your phone or your laptop, no one else could access the money.
The best bitcoin wallet for Android is Mycelium .
Bitcoin is a new kind of money, and wallets are the key to spending it, so if you want to get rich from it, you need a wallet. Bitcoin wallets have many advantages over the usual apps for transferring money. They are decentralized: no one company can shut them down; no bank can freeze your account unless you give them your personal information; there is no charge for sending or receiving bitcoins. But because bitcoin is still in its infancy, it has not yet attracted all the best developers, which means there are still some bugs in the software.
A few months after I started using bitcoin, the first rumors of a major flaw in the system appeared. Bitcoin mining is a process that involves two people: an “attacker” and a “defender.” The attacker puts up money to try to find a number called a nonce; if they guess it right, they get their money back plus an extra seventeen zero-bit bitcoins.
The difficulty of finding this number is getting higher all the time. At first, there were only twenty-one million possible nonces, but now there are over two trillion. If you want to make money on bitcoin, you have to invest in custom-made hardware to find these nonces. Unless one of those machines gets lucky faster than anyone else’s machine, your investment will be worth less and less every day.
In 2011, someone found the first nonce that was smaller than the previous one. Everyone thought that was it: an endless cycle of ever-smaller nonces seemed like a sure thing, and so no one invested in new hardware. But then something unexpected happened: instead of making things easier, the nonces got harder and harder to find. By early 2013, it took ten billion hashes just to find the next nonce; at that rate it would
It is difficult to make an analogy to anything in our own lives, but mining bitcoins seems like a plausible one. It seems like a good way to make some money. But it isn’t. Bitcoin mining is essentially a lottery. You have to spend lots of electricity to try to make money, and if you don’t succeed you still lose your money.
That’s not very different from shopping online or playing slot machines. It’s just that we think of those as ways of making money, whereas bitcoin mining really is a way of making money–but it doesn’t work as well as we think it does, and the people who do understand this are often trying to run away from the fact.
Bitcoin is a technological breakthrough that needs to be explained. The most basic problem with Bitcoin is that it is not much of a money system. It is a way for people to exchange things, but the thing you can exchange isn’t money, it’s computer time.
Bitcoin isn’t money because Bitcoin has no central bank and no government-backed currency. The Bitcoin network is run by volunteers. That makes it democratic–the digital equivalent of direct democracy. And because there are no taxes or unnecessary fees, the system is also voluntary–the digital equivalent of direct democracy without taxation.
Theoretically, Bitcoin could work as a global currency, but it doesn’t work enough like money yet to support that. Bitcoin probably won’t ever be the right kind of money for all people all of the time–it’s not quite liquid enough–but it will probably be a good kind of money for most people at some point in the future.
In the late nineties I was a senior software engineer at IBM. IBM was one of the first companies to seriously embrace cryptography, and we had many specialists working on it.
IBM wanted to make its own crypto standard, and there were fierce battles between our people and everyone else’s. We didn’t want some other company to define our crypto standards—that would have been like letting Microsoft write the system to protect e-commerce.
But this was a war that we couldn’t win. The best cryptography is built by experts, not by physicists or engineers. They are too much in love with their domain to see what others are doing. We needed help from outsiders with no particular interest in cryptography, people who had an outsider’s skill for seeing things that others couldn’t see but could be done if you knew how.
In the end we hired a couple of guys from MIT, who came in and did an amazing job. They managed to make a highly efficient system using a very simple idea: they took the data that cryptographers usually deal with—secret keys—and instead of dealing with them as secret, they gave them a name: Alice.
If you are not careful, the very best things you do can seem like the worst things.
People often complain that they don’t get enough recognition. But what they mean is that they don’t get enough money. The truth is, if you do things well, someone else won’t give you money for it. If you have a great idea for an app but no one wants to pay you for it, it’s because people don’t want to spend money on apps. The problem isn’t that people don’t notice your app; it’s that people don’t want to spend money on apps.