Unless you haven’t heard the hype, there’s a lot of interest in Bitcoin. But even if you’re aware of it, there’s a good chance that it makes little to no sense to you. Bitcoin, despite its growing popularity, remains a new form of currency. In this case, a “cryptocurrency.”
Due to its newness, there is bound to be some confusion over what it is, how it works, and where to buy it. Fortunately, Bitcoin is becoming more accessible and easier to buy. If you are interested in Bitcoin and are considering making an investment, the following guide will assist you in doing so.
What Is Bitcoin (BTC)?
Bitcoin is digital cash that is decentralized, meaning it is free and clear of any influence from a bank. As such, the government has no say in what you do with your Bitcoin or how you buy and sell it.
To better understand how Bitcoin functions, consider the money in your wallet or bank account. This is known as “fiat money,” where every dime you use on the market is regulated and backed by the United States government.
Cryptography and Bitcoin
Bitcoin differs in this regard in that there are no government ties to it. Instead, it is powered by peer-to-peer technology and specialized software known as cryptography. It is essential to discuss cryptography, as it plays a fundamental role in how Bitcoin and other cryptocurrencies operate.
Cryptography is a form of scientific data transfer performed anonymously, which is key to the appeal of Bitcoin. And in doing so, Bitcoin becomes backed by code. Whereas traditional money is backed by physical objects – like gold, silver, or trust – Bitcoin is all digitally-powered.
The idea, as dreamed up by Bitcoin’s still-unknown founder, is that there is a need for autonomous electronic payments – one that isn’t held to the rules and regulations of the government, thereby eliminating any intermediaries.
As long as both parties are willing to perform transactions between each other, there shouldn’t be a need for a third party. At least, that’s the thinking of Bitcoin’s founder and all who invest in the concept.
Bitcoin and the Blockchain
The open-source code mentioned a moment ago is known as the blockchain. Essentially, the blockchain serves to create a shared public ledger. Every Bitcoin transaction that takes place is called a “block,” which is “chained” to the source code.
As such, each transaction creates a permanent record on the blockchain. So trusted and effective is the blockchain that over 6,000 cryptocurrencies use it.
Bitcoins by themselves are simply computer files stored in a digital wallet that you access from your smartphone or computer. A bitcoin wallet consists of both a private and public key, which allow the owner of the wallet to buy and sell, pending authorization.
These keys also serve as a way for the owner to digitally sign transactions, thus adding greater protection to Bitcoin. But it doesn’t end there. To ensure that transactions are valid and legitimate, members of Bitcoin’s peer-to-peer platform monitor and approve each one independently.
These Bitcoin community members are known as “miners,” whose services are paid for using Bitcoin. Most Bitcoin exchanges are confirmed within 10 to 20 minutes.
Where Can I Buy BTC?
There are several ways that you can buy Bitcoin, starting with cryptocurrency exchanges. Any time you’re dealing with the buying and selling of Bitcoin, security should always be at the forefront of your transactions.
This is where cryptocurrency exchanges enter the picture. Thanks to these services, you can buy and sell Bitcoin in confidence.
Coinbase is the biggest and most popular cryptocurrency exchange in the United States, which currently trades over 30 different cryptocurrencies. This exchange service makes it safe, secure, and easy to perform Bitcoin transactions. Depending on how much Bitcoin you are working with, Coinbase charges you a fee of between $0.99 and $2.99.
What’s more, Coinbase offers custodial wallets that are insured, both for traders and investors. As such, if your Coinbase wallet is breached, Coinbase will cover your losses. It’s important to note that Coinbase will not insure your losses if your wallet is compromised by your own doing.
As such, all users need to make sure that they use safe wallet practices at all times. Your personal wallet is just as important as your bank or financial institution account.
Coinbase also offers a Pro version of its services, which serves to reduce the fees charged to you whenever you buy and sell Bitcoin. If you’re new to the idea of Bitcoin and want a painless way to get your foot in the door, Coinbase is a viable option.
If you want to trade Bitcoin or other cryptocurrencies, Robinhood is the first mainstream investment broker to do so. The company is widely accepted across the United States. Only a few states are not taking part in Robinhood Crypto (as of this writing, those states are Hawaii, Nevada, New Hampshire, and West Virginia).
At present, there are nearly 15,000 Bitcoin ATMs in the United States alone, with that number continuing to increase steadily. A simple web search will direct you to the nearest Bitcoin ATMs in your area.
Keeping in line with its origins, you can buy Bitcoin directly from other fellow Bitcoin owners. You will need to use specialized peer-to-peer software to purchase Bitcoin, but it’s easier than ever to do so. Conversely, you can visit websites like localbitcoins.com to complete your exchange.
Lastly, there is Bitcoin mining. As mentioned earlier, Bitcoin miners help facilitate the use of the cryptocurrency into and out of your digital wallet. However, given that Bitcoin mining requires extensive knowledge and training in a skill, this option is limited to very few people.
How to Buy Bitcoin
Now that you have a general understanding of Bitcoin and how it functions as a whole, you can proceed with buying it. To purchase Bitcoin, you first need to establish an account with a cryptocurrency exchange, as discussed above.
When setting up your exchange account and submitting your personal information, it is crucial that you ensure a safe and secure internet connection. Cyber-thieves are always on the lookout for a chance to commit digital cryptocurrency fraud. You don’t want to use a public Wi-Fi internet connection, for example. Nor do you want to use an easy-to-breach password.
These security measures matter greatly when dealing with cryptocurrencies and other forms of digital funds. If your payment method is a credit or debit card, you’re going to need to make sure that you take the appropriate steps to secure your bank account, as well, if it isn’t already. Set up alerts to inform you if a transaction takes place above a certain dollar amount, for example.
Establish a Payment Method
Your crypto exchange account will need to be tied to a payment option, as discussed above. On that note, please be aware that while Bitcoin and other forms of cryptocurrency are legal in the U.S., some banks are opposed to them.
As such, you will need to check with your financial institution to make sure that it accepts crypto. Elsewise, you could see your crypto exchanges denied by your bank, including deposits. Moreover, you’ll want to keep in mind that your crypto exchange service will charge a fee for all cryptocurrency transactions.
Now that you’re all set up with your crypto account, and you have an established payment method, you are ready to start buying Bitcoin and other cryptocurrencies. Fortunately, exchange options have improved significantly in recent years.
It’s worth pointing out that crypto exchange services were once regarded with great skepticism, and rightfully so. At no time in recent history has a new form of currency been introduced to the public on such a grand scale. Instead of exchanges and crypto being viewed as a scam, both have steadily gained legitimacy over the years.
More people trust Bitcoin than ever, and that includes trading and investments. So now, not only can you buy and sell Bitcoin in confidence, but you can use exchange services to do so with minimal concern.
Crypto exchange services offer a variety of ways to invest and order crypto coins. You can even set up recurring investments by day, week, or month. And if you want to buy or sell your cryptocurrency, you have the option to do so, as well.
Each exchange service will provide you with step-by-step instructions for you to follow. In doing so, you will be able to complete each type of transaction with your crypto coins, whether they are coins from Bitcoin or another popular digital currency.
Buying Bitcoin: Here’s What to Watch For
Security is the biggest issue. As you learn more about how the world of cryptocurrency works, you will become more comfortable with using Bitcoin. Depending on how you store your cryptocurrency, you could be at greater risk of being compromised. You will find more information on this subject in the next section.
Another factor to consider is trading. If you’re investing in Bitcoin, you may wish to hold onto your funds in the hopes that they will increase in value. But you always have the right to sell your purchases any time you wish, which you can do via the click of an app or through a trading service for a fee.
What to Do After I Buy Bitcoin
Wallets for crypto such as Bitcoin offer security and protection for your assets. Once you buy crypto coins from an exchange, you need to place them in a wallet. Think of a wallet as a type of bank for your currency.
Once your assets are in your personal wallet, you’ll have complete access and control over your crypto cash. With all wallets comes a private key. Without it, you won’t be able to access your funds, whether for trading, selling, or making purchases.
It’s important to note that while many exchange services offer wallets, some do not. And since exchange services are in the business to sell Bitcoin and other digital cash, wallet security is not necessarily their forte.
Choose a Wallet
As such, you’ll want to consider getting your own wallet to store your funds. There are many popular options to choose from, as well as whether you want a hot or cold wallet. Hot wallets are a type of online wallet, whereas cold wallets are a type of paper or offline wallet.
The main difference between the two wallet types comes down to security. Since hot wallets are online-based and accessed from a computer or smartphone app, they are more susceptible to being compromised. Conversely, cold wallets function independently of the internet. As such, they are much harder to breach.
Users of cold wallets access their private key via software that doesn’t require an internet connection, making them the safer choice for users who wish to avoid all possible risks of their digital cash being accessed illegally.
How to Safely Buy Bitcoin
Depending on the level of anonymity you wish to maintain, you may need to do some searching for a cryptocurrency exchange that doesn’t require you to submit personal information. Some do, others don’t. That said, as long as you are a legal U.S. citizen with no inclination to use Bitcoin for less-than-scrupulous activity, you should be just fine using most exchanges.
Moreover, the majority of cryptocurrency exchanges in the United States honor the KYC (Know Your Client) platform. This is the standard by which the investment industry operates, allowing investment advisors to see crucial information about the clients they work with.
Essentially, it is a way to offset any potential risk before working with a client. Obviously, you wouldn’t want to trade, sell, or purchase Bitcoin from someone who lacks the necessary credentials or has a history of nefarious activity. The KYC trading platform seeks to give you more security so you can avoid potential pitfalls in your investment activity.
Despite its detractors, Bitcoin appears to be working out rather well. It is currently an acceptable payment method from industry leaders like Microsoft, AT&T, Home Depot, Starbucks, and Whole Foods, just to name a few.
And then there’s the climb in Bitcoin price. What started out at just a few dollars rose to a staggering $55,000+ in February 2021.
That’s per Bitcoin.
So you can see how easily an investor could make a sizeable fortune by buying Bitcoin early on and selling it for a profit later. You can still buy Bitcoin, of course. It’s just that the cost to do so is a lot higher than it used to be.
Bitcoin and other digital currencies allow you to own your funds without other parties having their hands in your investments. If you value this type of financial freedom, BTC is absolutely a good investment.
You sure can, and that’s one of the appealing aspects of Bitcoin. However, you will want to make sure that you use an exchange service with low credit card fees. Research the cost of several services until you find one that suits you.
Yes, as long as you’re using PayPal with a trading platform to buy Bitcoin.
You can buy Bitcoin with cash by using either a Bitcoin ATM or through direct, in-person purchases.
Yes. One Bitcoin can be divided into several parts for easier purchase. In fact, you can divide one Bitcoin by as much as eight decimal points.
There are always risks with any online transactions. But as long as you use caution and follow the steps above, you should be in good shape.
Rosalie is a brilliant content creator who works at Bitcoinbuster.com. She is very adept at reporting and puts all of herself into crypto and casino sites. Rosalie has published thousands of articles since her first job as a media creator in 2014, making her fit to write across all aspects of gambling and cryptocurrencies.