Bitcoin

Bitcoin 101 - What you need to know

Bitcoin seems complicated but don’t worry, it’s not as intimidating as it sounds.

You completed your purchase at one of Coinmiles’ partner brands and just received some free Bitcoin in your wallet.

While you’re super excited to see the balance, you start thinking to yourself – wait, what exactly does this “Bitcoin” mean and what can I do with it? And why is it such a small number with many decimals? Don’t worry, you’re not the first person to have those questions, and the answers are pretty easy to understand.

What is Bitcoin?

Let’s start with the basics. Bitcoin is the world’s largest form of cryptocurrency. What is a cryptocurrency? In short, we can say it's a form currency that exist virtually rather than in a physical state. The cool thing about virtual currencies is that they can be sent anywhere in the world without the need of a bank. A good old internet connection and there you go, you can own, send and receive some Bitcoin.

Cool, but can I buy out stuff with it?

Sure you can. Even better: you can exchange them against cold, hard cash, in any currencies on earth.

That being said, we're sure you’ve noticed that you can’t walk into every store and pay with your Bitcoin. That’s mostly because its acceptance is still growing and varies from country to country. But did you know that, according to a 2020 conducted by HSB, 36% of merchants in the US accept Bitcoin? This includes big names like Microsoft, A&T, Expedia, and many others. In Canada, the acceptance rate is lower but growing very rapidly.

Are there any other uses?

Yep. One of the key attributes attracting people to Bitcoin is its potential for investment growth.

Like other currencies (and public shares), Bitcoin is traded on exchanges and therefore, its value goes up and down according to those markets. Just like those other investments, the Bitcoin price is volatile (meaning that it changes quite a bit) but over the long run, it tends to increase. By no means are we saying that it is guaranteed to increase, but many experts are predicting significant growth potential for Bitcoin in the coming years. So, Bitcoin is also seen as a great long-term investment by many.

Sure, but...price can also go down right?

Yes, like any investment you make, you gotta have a certain risk tolerance. That's why we're giving you free Bitcoin when you shop using Coinmiles - this way, you get all of the benefit and none of the risks! You would have paid the same shirt at the same price, only this time you're getting free Bitcoin in addition. More precisely, you'll get some fraction of a Bitcoin.

Fraction of a Bitcoin? There is such a thing?

Yes. Let's say a Bitcoin is worth $10,000. If you get $50 worth of Bitcoin, you'll get 0.005 Bitcoin. That's it, it's pretty simple.

To be more precise, a Bitcoin is dividable in 8 decimals (yes, that's a lot). So in theory, you could only own 0.00000001 Bitcoin. That small unit is called a "satoshi" (or if you want to look cool, you can use the term "Sats"). So when someone says they're "stacking sats", they're simply saying they're accumulating small fraction of Bitcoin (usually in the hope that someday, they'll be worth much more)!

In short, you don't need to own a "full Bitcoin" to have Bitcoin. You'll notice that even if technically we should be using the word "satoshi" when we're talking about Bitcoin cashback, we chose to keep the word Bitcoin in order to make things easier to understand for our new users.

Got it. So once I get Bitcoin, what do I do with it?

The short answer is: you can leave it there, or cash it out!

While we are happy to hold your Bitcoin cashback in the wallet on Coinmiles, you are free to transfer your balance to any other crypto wallet (more about that in a second). It could be your wallet or your friend's wallet - it's your balance after all! To transfer Bitcoin fin another wallet, all you need is the address of the receiving wallet.

Ugh... you keep saying the word Wallet. How does that work?

It's pretty much what it sounds like! The easy answer is that a wallet will hold your cryptocurrencies (and sometimes your "real" money) in an app or a website. Think about a Paypal for your Bitcoin. That's it. From your wallet, you can send and receive Bitcoin (please note that you cannot receive Bitcoin in Coinmiles, our wallet is only designed as a feature for us to give you free Bitcoin cashback).

Interesting. So what if I want to buy some Bitcoin? I heard that people were using exchanges, right?

Exactly.

The best analogy for the exchanges are probably, well, the stock market exchanges like Questrade, TD Direct Investing or Robinhood. Exchanges are used to trade between cryptocurrencies, and between cryptocurrencies and fiat (CAD, USD, GBP, etc.). Essentially, they match a someone who wants to buy Bitcoin (say, you) with someone else who wants to sell Bitcoin.

Be aware that when creating your wallet, the third parties will ask you for documentation to prove your identity and place of residence. This is a normal part of the regulations that must adhere to in order to help prevent money laundering and fraud. It is usually a straightforward process but just don’t be surprised when those documents are requested of you.

So, I can I get cash for my Bitcoin, right?

Yes! Argh, we just told you so! Were you not listening?

We're kidding of course, but we know from experience that some people have difficulty believing that Bitcoin has a real value and can absolutely be exchanged against cash! Yes, you can "cash out" your Bitcoin. If you earn Bitcoin cashback in Coinmiles, you can cash it out using Interac. We'll simply transfer the amount representing the current market value into your bank account. Easy, peasy.

I've heard that a few people got their Bitcoin stolen? How can I protect myself?

By their nature, Bitcoin transaction are irremediable. This means that once your Bitcoin has been sent to another address, it can't be undone.

Just like everything else, you have to be careful. For example, you may walk with $50 in your pocket, but probably not with $1,000. The best practice to protect your Bitcoin is to use a cold-wallet - that simply means a wallet that isn't connected to the internet. Essentially, your Bitcoin will be held on a "usb stick". Unless a hacker has access to that stick, they won't be able to transact your wallet. The most popular one are probably Trezor and Ledger.

Is that all I need to know?

Pretty much. While we are just scratching the surface in here, just remember that it's very simple and very similar to cash in a lot of ways. And it’s even simpler with Coinmiles – we take care of everything for you. All you need to do is make purchases and then wait for your Bitcoin to appear in your wallet on the app. Like, seriously, what can we do more here?

But the main reason why using Coinmiles is a must is this – there is no risk, but all rewards.

You received Bitcoin cashback for free by buying something you would have anyways and you can benefit from the increase in value as the price of Bitcoin rises. We don’t know of many other systems that can offer such a highly attractive risk-reward scenario. It’s almost too good to be true 😉.

The takeaways:

• Bitcoin can be used to make purchases.

• Bitcoin can increase (and decrease) in value.

• You can create a wallet to hold your Bitcoin – and it’s pretty simple to do.

• You can use an exchange to trade your Bitcoin for fiat like Canadian Dollars.

With Coinmiles, it's simple, you get all of the benefit, and none of the downside.  And we take care of everything.