To begin the signup process, open http://circle.com in your web browser and follow the SIGN UP links. You will be prompted to enter your First Name, your name, your Email address, and a password. After submitting your details, Circle will send you an e-mail verification. Simply follow the instructions provided. If you don't receive the email, check the spam folder of the email address you provided.

After verifying your email address, you'll be asked to enable two-factor authentication using your mobile phone. This security system uses a code sent via SMS or through Google Authenticator to allow access to your account and confirm irreversible actions, such as sending bitcoin. This helps make your account more secure by combining your password with something you physically hold, that is, your phone.

Finally, Circle will prompt you to provide two security questions. In case you lose your password, these questions will be asked before you can reset it.

Figure 1.1 - Sign up with Circle to purchase bitcoin

To purchase bitcoin, Circle requires a funding source. You can link a US bank account or a credit card. For this purpose, we will choose the credit card option as it's the quickest to set up.

Once added, you're ready to buy bitcoin! Simply enter a dollar amount ($25 for our example), and review the bitcoin amount. You can preview and confirm any additional fees or charges below. Accepting the order will initiate an instant deposit to your online bitcoin wallet.

Figure 1.3 - Buy bitcoin instantly with Circle

On your Circle account page, you can find the exact bitcoin balance under your dollar balance, as shown in the following figure:

Figure 1.4 - Your Bitcoin account and balance

Also indicated on your account page, under the balance, is the current USD to BTC exchange rate for Circle. The exchange rate can vary between services, depending on the supply and demand.

Also, in Figure 1.4, you can see that our account balance is currently $25.05, slightly higher that what we first purchased - $25.00 worth of bitcoin. This is due to a real time change in the exchange rate.

Bitcoin amounts are usually noted with the abbreviation BTC. This is similar to other currencies, such as USD and EUR. There are a few other symbols generally accepted by the Bitcoin community. Listed in the following table are the two most common ones:

	First symbol used. Was released by early adopters and is available as an image. Only available as an image or through Font-Awesome.
Ƀ	Proposed by the community as an improvement to the original Bitcoin logo. Available on most devices as a standard Unicode character.

On the account page shown in Figure 1.3, the exact Bitcoin balance account is presented as a decimal number:

0.10110406 BTC

Bitcoin amounts can have up to eight digits of precision. While every Bitcoin wallet must account for each digit of precision, the minimum amount that you can send may vary. Circle's minimum send amount is 0.00005460 BTC which is current with the amount proposed by the Bitcoin community.

Bitcoin units follow the standard metric system. The following prefixes can be used when expressing Bitcoin amounts:

Referring to the preceding table, you can write 0.44234 BTC as 442.34 mBTC. Some services and exchanges have adopted this format to make your account balance easier to read. Because amounts listed in whole numbers are generally easier to hold in one's mind, displaying the amounts in mBTC can be ideal. A cup of coffee at the time of this writing costs around 10mBTC.

Some wallets allow you to change the unit of bitcoin presented in settings. This may make accounting and calculations easier, depending on your use case, especially if the exchange rate has many decimal places.

From your Circle account, simply click the SEND MONEY link from the menu above to access the send options. Circle offers two ways to send bitcoin. You can either send it to a Bitcoin address or an email address.

If you are sending it to an email address, Circle will check to see if the address has a valid account registered to it and make an instant deposit into that user's wallet. If the receiver is not registered, an invitation will be sent with instructions on how to set up an account.

Figure 1.5 - Send bitcoin from your Circle account

In the To field, simply enter the Bitcoin address or the email address of the user you'd like to pay. For the amount, you can specify either USD or BTC. If you enter an amount in USD, Circle will automatically calculate the exchange rate. Optionally, you can provide a memo to describe your transaction.

Figure 1.6 - Circle sending a confirmation

Continuing to the next step, Circle will prompt you to enter your two-factor authentication code. This code will be sent to your mobile phone. Using this two-factor authentication helps protect your wallet from unauthorized access.

Once submitted, your transaction will be recorded instantly.

For payments between two Circle users, the transaction will be confirmed immediately. Circle maintains an internal ledger and will record the transaction off the Bitcoin network.

For payments sent to a Bitcoin address, there will be a short period of time before the transaction is confirmed and accepted by the network. Generally, this takes about 10 minutes, but it can vary depending on the network's computing power.

You can review all your payments by clicking TRANSACTIONS from the main menu.

Figure 1.7 - Circle's account transactions page

Circle provides two ways to receive bitcoin. Similar to sending bitcoin, you can send a request via email or share your Bitcoin address.

To start, click the REQUEST MONEY link from the main menu above. You'll be prompted to create a request:

Figure 1.8 - Requesting money

If you submit an email address, the recipient will receive an email providing them with instructions on how to pay. They will be given the following options:

If you select the option to Create an address and QR code, Circle will generate a new Bitcoin address for you and present a QR code to scan. You can either copy/paste the address and share it with the sender, or allow them to scan the QR using a mobile device.

Figure 1.9 - Requesting money using a QR code

A Bitcoin transaction is a record of a transfer between two or more bitcoin addresses. Similar to a credit or debit on your bank statement, the transaction records the sender, the receiver, and a date/time stamp.

All Bitcoin transactions are publicly accessible. However, the user's identify is never stored. Similar to a Swiss Bank account, only their public addresses are recorded. This makes it difficult to trace the address back to its owner. Therefore, we say that Bitcoin is pseudonymous.

More flexible than a simple bank transfer, a Bitcoin transaction can withdraw from multiple addresses to pay a list of addresses. The transaction records every address used and must account for the full balance. Any unspent bitcoin must be sent back to a "change address". It works like paying for an item that costs 12 dollars with two 10 dollar bills. The merchant accepts the two bills and returns 8 dollars in change.

Figure 1.10 - Bitcoin transaction with change address

In Figure 1.10, we show a starting balance of 5BTC between two addresses in our bitcoin wallet. We then send 4BTC to the receiver. To account for the full balance, the transaction returns 1BTC to our change address. After the transaction, the two funding addresses will contain 0BTC each.

The change address is optional as we can reuse an existing bitcoin address. However, most wallets create a new address as it's recommended to increase your privacy.

Before sending a transaction to the Bitcoin network for confirmation, it must be signed with the private keys of the input addresses listed. Similar to your bank requiring your signature on a check, the Bitcoin network requires you to sign your transaction before confirming it.

Figure 1.11 -A transaction with a digital signature

Bitcoin uses a digital signature to sign your transaction. The signature can only be generated by the holder of the private key. Illustrated in Figure 1.9, we can see how this signature is created and stored in the transaction.

The digital signature is used by the network to verify that the transaction was created by someone who has access to the private key. Without this verification, the transaction would be rejected from the public ledger.

The process of computing the digital signature is handled automatically by your Bitcoin wallet. The digitally signed transaction is now ready for confirmation by the network. We will discuss digital signatures in detail later in Chapter 4, Understanding the Blockchain.

After it's digitally signed, the transaction is broadcasted to the Bitcoin network and reviewed by many nodes on the network. Each node is essentially a computer with a copy of the ledger, with access to all the transactions since the beginning. The node's job is to listen for new transactions and relay them to the other nodes on the network.

Some nodes serve as miners. Miners perform computational work to ensure that each transaction is valid that it does not double the, or spend more than the available. Each miner must then prove the results to the other miners. Any discrepancies will cause the network to reject a miner's results.

This process is what makes the Bitcoin network both resilient and trustworthy. The larger the network of miners with consensus, the more we can trust the validity of the ledger. This is how Satoshi was able to design a network for exchanging virtual cash without a single point of control or failure.

Unconfirmed transactions start with zero confirmations. When a miner's work is accepted by the network, the number of confirmations for each transaction is incremented by one. Confirmations are generally accepted every 10 minutes but can vary depending on the various computational aspects of the network.

As more miners confirm the results of the previous miners, the number of confirmations for your transaction continues to increase. After some time, your transaction can have hundreds or even thousands of confirmations. With such a large number of confirmations, you can be assured that your transaction cannot be reversed.

The Bitcoin network is a very powerful network, especially when there is a large number of miners working together to validate and confirm the transactions on a public ledger. The entire ledger is copied by new miners joining the network. Transactions confirmed by an increasing number of miners results in more trust in the network. This design creates redundancy to guard against transaction fraud. Once a transaction is confirmed in the ledger, it cannot be deleted or changed.

Now that we have a basic understanding of how Bitcoin works, let's look at some wallet services and compare their differences.

Services such as Circle are called online wallets. Online wallets are web-based services that manage and store a small amount of your Bitcoins on a public web server. The rest are stored offline in a physical vault. They generally have the following characteristics:

While these are nice features to offer the public, some of the more proficient users are not in favor of having an organization control their funds.

In the past, some exchanges have suffered security breaches. While some of the services were able to cover the losses, others were not solvent and were unable to reimburse its users. That resulted in many users losing their funds.

When choosing an online wallet, be sure to do your research on the company, the team, and its history.

For users who would like more control over their bitcoin, desktop wallets may be a better choice than online wallets.

Desktop wallets are applications that run on your computer and connect directly to the Bitcoin network. Having the application installed locally gives the users full control of their Bitcoin wallet and their private keys.

Some desktop wallets, such as Bitcoin Core, download a full copy of the Bitcoin ledger to disk. This can require more than 10 gigabytes of local storage and can take a couple of days to download and verify.

More efficient desktop wallets, called lightweight clients, connect to an online copy of the ledger. This reduces the storage requirements and the setup time. In most cases, your wallet can be ready within a few minutes.

The risk of using a desktop wallet includes hardware failures, computer viruses, and unauthorized access. Before accepting any Bitcoin to your desktop wallet, you should be familiar with the backup and restore process, and you must ensure that your computer is safe from malicious attacks.

For more advanced users, many desktop wallets offer a console where they can interact with their wallet by issuing commands. Users can generate various kinds of transactions and directly manipulate their list of private keys and addresses.

In Chapter 5, Installing a Bitcoin Node, we'll explain how to safely use and configure Bitcoin Core, the official Bitcoin client, as a desktop wallet.

Having access from your mobile phone is a practical way to carry and spend bitcoins on the go. Most of the online services mentioned previously have applications available for download on the iPhone and Android app stores. Because the Bitcoin keys are stored and managed on servers, your account is protected by your username and password.

It's also worth mentioning that there are independent mobile wallets that store access to the keys on the phone. Because storing the private keys on your phone can be risky, in the event it's lost or stolen, the wallets offer a way to protect your bitcoin with 24 words that are randomly chosen. You will be able to restore your wallet, if lost, using the passphrase.

As one of the most secure options, hardware wallets store and encrypt your private keys on removable USB devices. Because the keys are never copied to your computer or made available online, it makes it extremely difficult to hack.

During setup, the hardware wallet will generate 24 random words, similar to the mobile wallets, as the password to your bitcoin. Backing up your wallet is as simple as backing up the list of words. To restore your device, you simply provide the same set of words during setup.

The two commercially available hardware wallets are Ledger (https://www.ledgerwallet.com/) and Trezor (www.bitcointrezor.com). They both plug into your USB port and include a user-friendly interface.