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How to Buy Bitcoin
Bitcoin is a digital currency that can be bought, sold and traded just like the cash we currently have in our wallets. But what makes it different from fiat currency is that it’s decentralized and operates on peer-to-peer technology with blockchain technology.
Fiat currency is operated by one central authority, like a government treasury, to regulate transactions and create money. Peer-to-peer technology allows anyone to participate in ensuring security and confirmation of transactions. Therefore, no one person or organization is the ultimate authority over Bitcoin.
Here is a summary of how to buy bitcoin:
Now that you know the basics of what bitcoin is and the overview of the buying process, we’ll go more into the details:
Create a Bitcoin Wallet
If you want to earn money online with bitcoin, you’ll need a Bitcoin wallet. What is that? A wallet is where you store Bitcoins you bought and own just like the physical wallet you probably have in your pocket or purse. But instead of holding paper cash, a Bitcoin wallet holds private keys that authorize transactions.
Private keys are strings of code that correspond with public keys that allow one to authorize transactions with the Bitcoin you own. Obviously your private keys need to be protected so having a secure Bitcoin wallet is important.
There are several types of wallets one can have from online, offline, hardware and paper wallets. All of them store Bitcoin at varying levels of security that may be appropriate for different needs. The same wallet rules apply when looking at making money with other cryptocurrency.
A good rule of thumb is that if you are planning on buying or earning a lot of Bitcoin, you will more likely need a more secure wallet to store the majority of your earnings and keep a couple online wallets for your buying, selling, or trading needs.
Pick an Exchange or Marketplace or 2… or 3...
Once you set up your Bitcoin wallet, will need to select a Bitcoin exchange. This is where you can purchase Bitcoin using USD, Euro, or your preferred fiat currency. It is recommended that you buy Bitcoin from your home currency.
There are several popular Bitcoin exchange platforms that operate internationally, here are 3 of the most popular ones:
There are several more exchanges with different key features. Keep in mind that not all cryptocurrency exchanges list all available altcoins (alternate cryptocurrencies such as Litecoin and Ethereum) on the market as there are simply too many of them.
The ones that are listed usually have to be voted in by popular demand. It isn’t uncommon for one to have a few different Bitcoin exchange accounts if you’re interested in trading Bitcoin with less popular altcoins with strong potential.
Once you have selected your preferred exchanges, go through the registration process. Some will also require an identification process for security purposes. Also, if it is offered, we recommend that you add 2-factor authentication for an extra layer of security.
From here you will have to buy Bitcoin from the exchange using your currency. Some exchanges will only let you do this once your identity is confirmed for security purposes. After that, you will have a lot of options on how to buy Bitcoin as this can be done via wire transfer, cash, credit cards, or even PayPal.
All you have to do is connect your bank account to the Bitcoin exchange platform of your choice.
From there, you have 2 options:
Buy at “Market” Price:
Where the exchange platform will purchase your Bitcoin at the best market rate available at that time.
List “Limit” Order
Where you indicate a price you are willing to pay for how much Bitcoin and wait until there is a trade listed at your preferred limit. This may take some time depending on how high or low you set your limits.
Once your orders are purchased the Bitcoin amount will automatically transfer to your online wallet where you can either store, sell or trade! And that’s how to buy Bitcoin! The ease of getting started is why we talk about bitcoin so much at our money blog.
How does Bitcoin work?
Bitcoin has been disrupting the modern world as the new and promising way to use cryptocurrency for the future. But where does it come from, why is it so popular and how does it work?
Let’s break down how Bitcoin came to be:
What is Blockchain Technology?
Everything discussed has all been made possible thanks to blockchain technology that operates as a public ledger. What this means is that all transactions made with Bitcoin are visible for all to see in codes that cannot be modified or changed. By using peer-to-peer technology, multiple people in the community are working to confirm that blockchain transactions match, therefore creating a unique type of security.
If you’re wondering if this makes the system more vulnerable to hacks or attacks, it’s actually quite secure. The decentralized system means that there are millions of people around the world working on the security of the blockchain and it would take a lot to really do damage to blockchain technology.
How are Bitcoins Created?
As mentioned previously, blockchain technology is made secure through a decentralized system that is managed by peer-to-peer technology. How this works in reality is through a process called Bitcoin mining where a dedicated computer or several computers are used to confirm transactions. Many online jobs have actually been created from the need for people to carry out bitcoin mining!
Since there will be several Bitcoin miners who are working to compare and confirm transactions, it’s actually a race for who will verify a transaction first. The first Bitcoin miner to verify a transaction will create a new “block” to be added to the permanent blockchain thus triggering a code that will reward a miner with a new Bitcoin.
About Bitcoin, Cryptocurrency and Governments
Despite Bitcoin and other cryptocurrencies being a decentralized system with no central authority from governments, this doesn’t mean it is exempt from regulation. For various reasons, there are more and more countries who will have either some kind of regulation on Bitcoin and cryptocurrencies or ban them all together.
Don’t think of this as a good or bad thing.
With Bitcoin and cryptocurrency skyrocketing to fame, there are big risks that can cause issues for some who jump into the cryptocurrency world without performing due diligence. It’s important not to get ahead of yourself, being excited in making quick money, and investing everything you have.
In fact, all of the new rules coming out might be to protect citizens from being scammed. It might also be different governments’ ways to bring some regulation to a system that has none at the moment.
Regardless of this, you should check your country’s stance on Bitcoin and cryptocurrency to make sure you know how to invest in bitcoin in ways that won’t raise any red flags.
Final Things to Keep in Mind When You Buy Bitcoin
Think About Exchange Fees
As you learn how to buy Bitcoin and research what Bitcoin exchanges you want to use, one thing to keep in mind is that there is almost always an exchange fee. You should make sure that the exchange fees that are charged are not ridiculous. Who would want to pay $100 US exchange fees for a $400 US valued Bitcoin purchase?
Usually, exchange fees will be listed in Bitcoin so it may take some converting to make sure that the Bitcoin exchange medium will charge you a fair price.
Watch the marketplace
One word of caution about how to buy Bitcoin is to always watch the marketplace. The value of Bitcoin against fiat currency has fluctuated dramatically over the past year or so either making people millionaires overnight or bankrupt. Of course the idea would be to make money from investing in Bitcoin but that requires vigilant attention to the marketplace and Bitcoin’s value.
At this point, you may only buy a small fraction of Bitcoin unless you have a few thousand Dollars to burn for 1 full Bitcoin. But if the price falls tomorrow, then you would have lost value in your Bitcoin against your original fiat currency. So learn how to buy Bitcoin with.
Look for Transparent Audit Information
Following the idea of looking for a reliable exchange platform, one great way to see if an exchange platform is reliable is to see how transparent they are about their exchanges. What this means is that the platform of your choice will publish the audit information to confirm their Bitcoin reserves.
This way they can prove that their platform is legitimate and reliable for Bitcoin exchanges.
This may also include transaction fees, transfer fees or more. If an exchange platform is not giving you all of these details up front then this is a huge red flag that it isn’t a reliable platform to work with.
Think About Security
No matter how much an exchange platform will invest in the security of their trades and transactions, they are always at risk of being hacked simply because they are an online business.
As you learn how to buy Bitcoin this also applies to you as you attach your Bitcoin wallet information to your trading platform, as well as your banking information to buy Bitcoin or even convert it back to a fiat currency.
So make sure you take extra precautions about what financial information you attach to your Bitcoin wallets and exchange platforms. Change your passwords regularly and enforce 2-factor authentication. Keep an offline Bitcoin wallet of some sort and keep it backed up regularly.
Learning about the world of Bitcoin and how to buy Bitcoin is a new and exciting adventure for many. As the world moves forward with the disruption of Bitcoin, knowing how to buy Bitcoin today may be part of your everyday life in the future! Setting up Bitcoin wallets is easy and so is buying Bitcoin from an exchange platform. It just takes a little know how and research.
Now that you have learned how to buy Bitcoin, get out there and explore what you can do with it!