Unit 5: Bitcoin in Practice
Now that you have some base awareness of Bitcoin, we will cover basic instruction on putting Bitcoin into practice in this unit. This includes acquiring Bitcoin, using a Bitcoin wallet and the Lightning Network, privacy and security practices, and avoiding common pitfalls, scams, and mistakes.
Completing this unit should take you approximately 2 hours.
Upon successful completion of this unit, you will be able to:
- differentiate between the different means of acquiring Bitcoin;
- use a Bitcoin wallet;
- apply best practices in Bitcoin privacy and security;
- explain what the Lightning Network is and how it works; and
- describe common pitfalls and scams.
5.1: Acquiring Bitcoin
A typical strategy for people new to Bitcoin is first acquiring a small amount of Bitcoin (sats) while learning more about what Bitcoin is, and later purchasing more once they have learned. This short article explores and compares the main methods to acquire Bitcoin. What are the main methods of acquiring Bitcoin? Which methods are most suitable for you?
5.2: Using a Bitcoin Wallet
A Bitcoin wallet is how you interact with the Bitcoin network. It will manage your Bitcoin private keys for you, though there are different types of wallets. Bitcoin users typically go through a progression in terms of wallet types, and ways of interacting with the network.
As you read this text, consider how you would select a bitcoin wallet, what kinds of Bitcoin wallets there are, how to send and receive, and what other progression steps you can take when using Bitcoin. Think about how you can move through the different levels, how backups work, and how you would secure your Bitcoins against loss.
5.3: Bitcoin Privacy and Security Basics
Using Bitcoin privately and securely is not "on by default". There are active steps that a user must undertake to improve their privacy and security. In this article, you will learn some of the basic pointers with privacy, such as network privacy and transaction graph privacy.
Security in Bitcoin is dependent on getting sufficient randomness in the generation of your seed and private keys, protecting those keys from the outside world, while still making suitable trade-offs for you to still be able to use Bitcoin. What kinds of tools should you use to secure your Bitcoin? What single points of failure exist in your setup, and how could they be removed? What other ways can you mitigate these risks?
5.4: Lightning Network Basics
The lightning network is a special layer adding faster payments and additional functionality to Bitcoin. Lightning enables participants to dramatically speed up Bitcoin transactions while still retaining many interesting qualities of Bitcoin, such as non-custodial transaction and settlement, at much lower fees for small payment values.
What is the lightning network? What are some popular lightning wallets, and when should they be used? How does a user set up and run a lightning node?
5.5: Common Pitfalls and Scams
Bitcoin has unfortunately had a lot of scammers operating in the space as well as having its fair share of common pitfalls. Read this article and understand some of the common points to be wary of. This may include being wary of people who ask for your seed phrase or ask for Bitcoins promising high returns back.
Which techniques would you use to ensure that you remain safe in the Bitcoin space?
Unit 5 Recap
Unit 5 Assessment
- Receive a grade
Take this assessment to see how well you understood this unit.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.