Bitcoin is currently the world’s most popular cryptocurrency. After the all-time highs it has reached toward the end of year 2017, it is attracting more and more interested buyers looking to own the virtual currency. There are many methods which can be used to own Bitcoins; setting up hardware to mine your own Bitcoins, paying for someone to mine them for you (cloud mining) or trading other cryptocurrencies for it. But the easiest way would be to exchange it for fiat currencies.
But taking into account the currency’s concealed nature, people which are new to the world of cryptocurrency might have a hard time understanding and mastering how the process of buying and selling Bitcoins actually works.
Most think of the long-term profitability potential, prominent figures in the crypto industry like JPMorgan CEO Jamie Dimon thinks Bitcoin is basically a Ponzi scheme. That is not a false accusation, as most bitcoin investment programs are proven to be investments scams based on a type of Ponzi scheme. Aside from other scams and HYIP (high-yielding investment programs), there are still legitimate ways to earn Bitcoins.
The issue here would be how to change legally recognized payments into Bitcoins. Seeing as Bitcoin is an entirely virtual currency, this might confuse new buyers on how to start. As with real money, you need wallet to keep your Bitcoins once you have purchased them.
Bitcoin Wallets. What are they?
Establishing a bitcoin wallet is a very important step in the process of buying bitcoins. These digital wallets do not technically store bitcoins anywhere, there is a private key which corresponds to each bitcoin address that exists in the wallet. There are more types of wallets; desktop, mobile, web hosted, hardware and paper wallets.
Desktop wallets are installed on a desktop computer and are used for buying, storing, selling Bitcoins. The mobile wallets carry the same functions like desktop wallets, the only difference being that you can do it on your smartphone or tablets.
Web wallets store the private keys online allowing you to access your bitcoins from any browser or mobile. Hardware wallets hold private keys electronically in a secure hardware device. These are considered highly secure methods of storing bitcoins (it is immune to hacks and viruses) but at the moment their number is very limited.
Paper wallets are documents that contain data that generates the private keys. Storing on these wallets is not safe unless strict security measures are taken during the initial preparation and generating process.
While some Bitcoin exchanges also have digital wallets available, but it is not recommended to keep you Bitcoins there because exchanges concentrate more on currency trading, and less on security storing to keep the user’s coins safe.
Bitcoin exchanges. What to look for?
In order to purchase Bitcoins, you need to use a Bitcoin exchange that deals in their own real currency.
Bitcoin exchanges work similar to banks. You deposit amounts of money in the supported currency of the exchange, uses the balance to trade with others and then withdraws that money or transfers their cryptocurrencies into their wallets.
The easiest way of buying Bitcoins is through a Bitcoin exchange. When you choose your exchange, be sure not only to go for the lowest fees and charges, make sure you also do some extensive research on their reputation.
Registration process and purchasing
A basic registration process on an exchange platform goes like this: you supply basic information that was required by the platform (each have more or less the same requirements)- a name, email, password and location (if your location is supported by your exchange of choice). You also need to be older than 18.
Once the exchange has gone through the verification process and has successfully created your account, the next step is to link your freshly made account with your bank account, or Paypal account (if it is supported). Then purchases can be made through the linked bank account or debit and credit cards.
The user then decides how many Bitcoins he wants to purchase. Be careful, as exchanges have set daily buying limits, but when your personal information is fully verified the limit increases.
The value of bitcoin is shown in US dollars, but some exchanges that offer trades in EUR or other fiat currencies will convert Bitcoin’s value to the selected currency.
One a purchase has been established, the user will transfer their newly acquired Bitcoins in their digital wallets to keep them safe. This is a step that must not be omitted, as many make the mistake of leaving their crypto assets in their exchange’s wallet.
While at first you may not have the capital to buy an entire bitcoin, remember that the coin is infinitely divisible, so you can start off by buying tiny parts so it can fit your budget.
The quickest way to buy Bitcoin without having to create an exchange account is to find a broker to buy them for you, but if you are looking for a better deal or want to get more involved in cryptocurrency trading and investment, it’s best you start that exchange account.
Make sure your wallet keeps its customers assets in ‘cold storage’ and has its security protocols updates. Also, if they have other authentication options, like two factor authentication, do not forget to enable them. Wallets also have a thing called seed phrase which is a recovery phrase that is given to you when you need to recover your bitcoin wallet.
Receiving your bitcoins
After your transaction, provide your wallet address to get your bitcoin. This address consists of a long string of numbers and letters, roughly 15 digits long. On Bitcoin.info you can find out what wallet address you have by accessing in the Request tab.
Exchanges will require said address to initiate the transfer. Once this procedure has begun, a notification will show up in your wallet in less than an hour. Exchanges usually show their transfer time in confirmations, so be sure to look for those with the lowest numbers.
Depending on the network’s speed and congestion, each bitcoin confirmation takes about 10 minutes.
Acquiring bitcoins is in principle quite simple, but you have to watch out and make sure your Bitcoin wallet and exchange are secure and trustworthy.