Tweet
In many ways Bitcoin is similar to gold and, in some ways, it may be similar to cash.
One of the ways in which Bitcoin may be similar to cash is that you'll often need to get Bitcoin back when you spend.
What does that mean?
I'll try to explain here and if I make any errors please (someone, anyone) let me know.
If you receive 5 Bitcoins you'll will in a sense be receiving a 5 Bitcoin bill. I'm using "5" to make things easier to understand (think - US $5 dollar bill) but the same applies to any arbitrary number (e.g., 431.27 or .09) of Bitcoins which are received in a single incoming transaction.
So if you receive 5 Bitcoins and later you want to spend some of that 5 Bitcoin you'll likely need to get some change back.
What is that supposed to mean, you ask? You never had to consider getting 'change back' when spending your digital cash with Visa or Mastercard? Or course not.
I've experienced some similar 'culture shock' while living outside of the United States. For example, I've often not been able to make a purchase with my cash (the local currency of that country) because the store didn't have enough change in their cash register. Was this because I'm an American and the store was hoping that I'd just agree to overpay and let them keep the change? No, it wasn't. The same scenario happens all the time to the locals. Typically the proprietor (or their employee) will just say they don't have change and then expect you to understand that you should go and try to find a way to change your bills into smaller ones (or coins). If you look like you don't understand (e.g., confused look on your face) then they might explain to you that you might get change across the street or somewhere close by.
It might be difficult for many of us Americans to understand how a store would turn away business like this but it's very common. Moreover, in some very poor (economically) neighborhoods in the United States I've seen some small private business experience the same problem of not having enough money, or enough of one denomination of bill (or coins), to make change for a customer.
I any event, look out brave new Bitcoin user!
Bitcoin will gladly accept any amount of Bitcoin which you want to send. However, unless you understand how it works, you may end up 'losing' your change.
If you send 2 Bitcoin and you only had a single 5 Bitcoin receive amount in your Bitcoin account then what happens to the 3 Bitcoin change?
That depends.
If you just go ahead and send the 2 Bitcoin, without doing anything else, you will find that you have just sent all of your 5 Bitcoins. The receiver will still only receive 2 Bitcoins. So what happened to the other 3 Bitcoins?
I'm not 100% certain but I do know that they certainly aren't 'destroyed' or anything like that.
I believe that 3 Bitcoins would be given to the Bitcoin miners who verified the transaction. Much like you have probably said 'keep the change' at some point(s) in that past while paying for something.
So how does one make sure they get their change back? Basically you send two (2) transactions each time you want to send Bitcoins.
Sometimes this is referred to as having a 'change address' (that's what it's called at blockchain.info). Although it doesn't need to be a different address (unless you want it to be), it could be your same address.
Will you essentially ALWAYS be sending the entire balance in your Bitcoin account when sending Bitcoin? No, you will not.
As you receive more and more incoming transactions you will be adding new 'denominations' (in a sense) of Bitcoin into your account. Also, each time you 'make change' you will be doing the same (adding new 'denominations' in your account).
For example, if you have received 5 Bitcoins, 10 Bitcoins, and 100 bitcoins and now you want to send 12 Bitcoins will you essentially be sending 115 bitcoins? No, you will not.
Much like a paying with tangible cash you pull out your $10 bill and your $5 bill and then (if buying something that costs $12) get $3 in change back.
Works the same way with Bitcoin.
Now if you are using one of the many 'Bitcoin wallets' which are available you might have all of your Bitcoin stored in that company's account along with all of the Bitcoins of their other clients. I assume that with many different 'denominations' of Bitcoin in the account they'd probably always have the right amount for any transactions (eliminating the need to get change back). Moreover these same 'Bitcoin wallets' (software) may have found a way (or may be working on a way) to build a feature which 'automatically' makes change for each transaction.
I hope that all of the above was not too confusing.
In closing I want to state here that the only Bitcoin 'wallet' which I advocate and endorse is blockchain.info.
Why?
Because they don't hold your Bitcoin or place your Bitcoin into their account. Your Bitcoins are safe in your Bitcoin address and not held in some some company pool like an exchange (think - Mt Gox disaster).
Think of Blockchain.info as a very helpful and useful tool for plugging into the Bitcoin blockchain.
One of the ways in which Bitcoin may be similar to cash is that you'll often need to get Bitcoin back when you spend.
What does that mean?
I'll try to explain here and if I make any errors please (someone, anyone) let me know.
If you receive 5 Bitcoins you'll will in a sense be receiving a 5 Bitcoin bill. I'm using "5" to make things easier to understand (think - US $5 dollar bill) but the same applies to any arbitrary number (e.g., 431.27 or .09) of Bitcoins which are received in a single incoming transaction.
So if you receive 5 Bitcoins and later you want to spend some of that 5 Bitcoin you'll likely need to get some change back.
What is that supposed to mean, you ask? You never had to consider getting 'change back' when spending your digital cash with Visa or Mastercard? Or course not.
I've experienced some similar 'culture shock' while living outside of the United States. For example, I've often not been able to make a purchase with my cash (the local currency of that country) because the store didn't have enough change in their cash register. Was this because I'm an American and the store was hoping that I'd just agree to overpay and let them keep the change? No, it wasn't. The same scenario happens all the time to the locals. Typically the proprietor (or their employee) will just say they don't have change and then expect you to understand that you should go and try to find a way to change your bills into smaller ones (or coins). If you look like you don't understand (e.g., confused look on your face) then they might explain to you that you might get change across the street or somewhere close by.
It might be difficult for many of us Americans to understand how a store would turn away business like this but it's very common. Moreover, in some very poor (economically) neighborhoods in the United States I've seen some small private business experience the same problem of not having enough money, or enough of one denomination of bill (or coins), to make change for a customer.
I any event, look out brave new Bitcoin user!
Bitcoin will gladly accept any amount of Bitcoin which you want to send. However, unless you understand how it works, you may end up 'losing' your change.
If you send 2 Bitcoin and you only had a single 5 Bitcoin receive amount in your Bitcoin account then what happens to the 3 Bitcoin change?
That depends.
If you just go ahead and send the 2 Bitcoin, without doing anything else, you will find that you have just sent all of your 5 Bitcoins. The receiver will still only receive 2 Bitcoins. So what happened to the other 3 Bitcoins?
I'm not 100% certain but I do know that they certainly aren't 'destroyed' or anything like that.
I believe that 3 Bitcoins would be given to the Bitcoin miners who verified the transaction. Much like you have probably said 'keep the change' at some point(s) in that past while paying for something.
So how does one make sure they get their change back? Basically you send two (2) transactions each time you want to send Bitcoins.
Sometimes this is referred to as having a 'change address' (that's what it's called at blockchain.info). Although it doesn't need to be a different address (unless you want it to be), it could be your same address.
Will you essentially ALWAYS be sending the entire balance in your Bitcoin account when sending Bitcoin? No, you will not.
As you receive more and more incoming transactions you will be adding new 'denominations' (in a sense) of Bitcoin into your account. Also, each time you 'make change' you will be doing the same (adding new 'denominations' in your account).
For example, if you have received 5 Bitcoins, 10 Bitcoins, and 100 bitcoins and now you want to send 12 Bitcoins will you essentially be sending 115 bitcoins? No, you will not.
Much like a paying with tangible cash you pull out your $10 bill and your $5 bill and then (if buying something that costs $12) get $3 in change back.
Works the same way with Bitcoin.
Now if you are using one of the many 'Bitcoin wallets' which are available you might have all of your Bitcoin stored in that company's account along with all of the Bitcoins of their other clients. I assume that with many different 'denominations' of Bitcoin in the account they'd probably always have the right amount for any transactions (eliminating the need to get change back). Moreover these same 'Bitcoin wallets' (software) may have found a way (or may be working on a way) to build a feature which 'automatically' makes change for each transaction.
I hope that all of the above was not too confusing.
In closing I want to state here that the only Bitcoin 'wallet' which I advocate and endorse is blockchain.info.
Why?
Because they don't hold your Bitcoin or place your Bitcoin into their account. Your Bitcoins are safe in your Bitcoin address and not held in some some company pool like an exchange (think - Mt Gox disaster).
Think of Blockchain.info as a very helpful and useful tool for plugging into the Bitcoin blockchain.