How to Buy and Store Bitcoin
Some years back, the best way to get Bitcoin would be to mine for it. However, things have changed quite a lot for Bitcoin, especially for beginners whose focus have now shifted to questioning “how to buy Bitcoin”.
The decentralized digital currency has been in the lime light for some time now and a lot of people are trying to capitalize on its insane value. ‘How to buy bitcoins with cash’ registers as a pretty popular search phrase on Google as more people gain an interest in not just Bitcoin, but cryptocurrencies as a whole.
This Bitcoin guide aims to present you with the best path to follow as you navigate through the insanely exciting and shaky world of Bitcoin. This includes tips on how to get started as well as overall information on the best services you should begin with, especially if you are a newcomer.
The Basics of Bitcoin for Beginners
Bitcoins can be bought from either directly from other users via Bitcoin marketplaces or from exchanges. Buyers can pay for Bitcoin in a number of ways including hard cash, wire transfers, credit and debit cards or even using other forms of cryptocurrencies that are currently in use – but this is all dependent to your location and the party that is selling you the bitcoins. But there are still a couple of things you need to set up before you can finally buy or mine Bitcoin and of the first steps is creating a Bitcoin wallet.
Getting a Bitcoin Wallet
A Bitcoin wallet is simply a store for your Bitcoin – to make it simpler, you can think of a Bitcoin wallet simply as type of bank account or eWallet. The only difference is that it is exclusively meant for Bitcoin. Bitcoin wallets vary in nature and thus offer different features depending on what you prefer most or what you can afford.
For instance, depending on the security levels you desire, you get to choose from a variety of service providers with some offering wallets that act like regular spending accounts or other types that boast of military grade security features.
Even so, you can easily choose from the four main available options that are:
- a) A software wallet that is stored on the hard drives of users’ computers,
- b) An online web-based wallet service,
- c) A ‘vault’ service that is designed to keeps users’ Bitcoins protected when offline, or
- d) A multisignature wallet that utilizes a number of different keys to protect the user’s account.
There is varying level of vulnerabilities that all these types of wallets exhibit. Therefore, it is imperative that your choice reflects upon the risks you’re willing to take and the compromises you are willing to make. If you decide to store your Bitcoins offline on your computer’s hard drive, for instance, you will need to back up the wallet regularly to reduce the risk of losing your Bitcoin when the hard drive is damage or corrupted.
Similarly, should you choose to go with online web wallets, then you will save yourself a lot of trouble by picking one that offers a considerable level of security against hackers. Ideally, ones that use multi-factor authentication techniques to verify identities should be at the top of your search list as opposed to some others who only offer the regular ID and password for identity verification.
Getting BTC from Exchanges and Online Wallets
Once you have your Bitcoin wallet setup, you will need to know how to add funds to your Bitcoin wallet. Luckily there is a vast selection of Bitcoin exchanges and online wallets ranging from full-blown exchanges for institutional traders to smaller online wallet services that have limited trading caps that players can choose from. In most cases, any exchange or online wallet that you choose will store certain amounts of both normal/fiat currency and Bitcoin for you as you go about your trading.
Bitcoin trading for beginners has gotten easier and all they need to do now is to have just enough money and a Bitcoin wallet so that they can begin buying Bitcoin. These options are best since other than offering Bitcoin traders the space and resources for regular trading and speculation, they also offer a decent number of extra features that will help you be a professional Bitcoin trader.
However, you will need to know that is not entirely anonymous and you may need to endure a lengthy bureaucratic setup procedure which may require detailed personal info as proof of identity. This requirement is put in place to conform with the law in most countries where Bitcoin trading occurs – this is laid out in most exchange’s anti-money laundering and know-your-customer policies.
Currently, the largest full trading exchange services by volume includes Hong Kong’s Bitfinex, US’ Bitstamp, US’ Kraken, BTC-e and China’s OKCoin among others. There are also a variety of popular Bitcoin wallets including;
- Leger Nano S – A tiny giant. The world’s most popular hardware wallet due to its high security features and small form factor.
- Cubits – One of the safest online wallets you’ll find with cold storage features and multi-signature lockdown.
- Coinbase – It is perhaps the most popular exchange and Bitcoin wallet in the world. It even allows users to trade Euros and US dollars for bitcoins either on the web or on their outstanding mobile apps.
- Circle – Which offers users Bitcoin storage services as well as the ability to transact and trade Bitcoin. While at this time only US citizens can link their bank accounts to deposit funds, credit and debit cards are viable options for other users.
- Unocoin – Which intends to primarily target the Indian market of Bitcoin users, allows users to sell, buy and store Bitcoin. Users are allowed to make deposits through NEFT/RTGS or any national online bank.
- Coinjar – Is the biggest name in Bitcoin exchange and the best wallet provider in Australia.
Over-the-counter trades, also known as face-to-face’ trading, is an easy way of getting bitcoins to your wallet. It is most suitable for Bitcoin users who prefer not to compromise their anonymity by signing up onto exchange sites and do not want to go through the hassles of linking their bank accounts to their exchanges. All you need to do is to find a local Bitcoin seller who is within or near your geographical location.
To help with this, there are a variety of great services that allow and facilitate this type of trading. One such service is LocalBitcoins, which is a site that allows buyers and sellers to negotiate prices and arrange for time and locations for the trades. There are, of course, important precautions that you need to take before you decide to meet up with a stranger to trade Bitcoin. Safety first! Also, you will need to have access to your Bitcoin wallets as well as a reliable internet connection to confirm the Bitcoin transaction.
Meetup.com is another great site for ‘face-to-face’ Bitcoin trading as it offers information on Bitcoin groups within certain areas. It is not only a better option because it’s safer, but it also gives newcomers a bit of insight into the way the Bitcoin community operates.
Sticking to Good Old Bitcoin Mining
Mining Bitcoin individually on standalone PCs is more or less counterproductive at this time thanks to the increasing popularity of Bitcoin that prompted the introduction of more powerful and mining-specific computers onto the Bitcoin network. Consequently, more energy is required to mine a worthwhile amount of Bitcoin for individuals.
Nowadays, most Bitcoin mining is done in pools and companies that are setup specifically for the purpose of mining. You are better off buying shares in one of these pools or the companies rather than trying to do it yourself. Alternatively, users can opt for ‘cloud mining’ services that allows users to mine bitcoins without investing in the expensive and powerful rigs that are often associated with Bitcoin mining. Cloud mining simply means that a Bitcoin user mines Bitcoin on rented resources from a company’s data center.
A few years back, this would have sounded like a far-fetched futuristic dream that would probably only come to see the light of day in a science fiction movie. However, they indeed are real and despite being a relatively new concept, the numbers are increasing with a number of great vendors like CoinOutlet, Genesis Coin, BitAccess and Robocoin already on board. At a BTC ATM, users insert cash or scan QR codes from their mobile wallets to get the bitcoins credited to their wallets or in some cases, they receive a receipt containing codes required to load the bitcoins into their wallets.
Bitcoin Investment Trusts
Bitcoin investment trusts such the Winklevoss ETF and the Bitcoin Investment Trust (BIT) are great alternatives for any potential Bitcoin user who is not very receptive of the idea of buying and safely storing a large number of bitcoins, especially considering how valuable they have become. These investment trusts invest exclusively in Bitcoin and utilize advanced protocols to safely store the shareholders’ Bitcoin.