Before you can set out to buy Bitcoin, you need to get a couple of things right. Rushing into doing this might result in more letdowns than profit, even though the process is as simple as creating a social media account. In this guide, you find a detailed explanation of what needs to be done.
For starters, there has never been a better time to participate in the cryptocurrency craze than now. Bitcoin is back in the news with a bang after experiencing a short-lived low period. Those who delve into it now are sure to build upon the moment and have a couple of valuable coins under their name.
Table of Contents
What is Bitcoin?
Bitcoin is a cryptocurrency, that is, a form of digital currency in which transactions are executed and completed electronically.
Created in 2009 by a mysterious Satoshi Nakamoto, Bitcoin promises lower-cost transactions compared to traditional online payment systems. It also operates as a fully decentralized system. This means that it is not powered by a central bank or a central authority, as is the case with existing monetary systems.
As you prepare to buy Bitcoin, you ought to know that you will not be given any physical bitcoins to hold and keep safe. Instead, what you are assigned is a balance on a public ledger. The public ledger is transparently accessible for the verification of Bitcoin transactions by massive computing power.
Even though Bitcoin is yet to be named a legal tender, its charts are highly popular. The cryptocurrency has also become the basis for the emergence of altcoins, dozens of virtual currencies forked from Bitcoin.
A key factor to keep in mind is that buying the cryptocurrency is not the only way to participate in the Bitcoin craze. Some people earn Bitcoin by performing BTC mining. Mining is a process by which transactions are verified in the Bitcoin network. Those who complete the verification are appreciated for their efforts by being awarded a certain amount of Bitcoins.
A few years ago, mining was lucrative, but it is no longer. That’s so because the process is hard to accomplish with increasing complexity. You need more computing power, which ends up consuming more electricity.
Why should you consider buying Bitcoin?
If you have been planning to buy Bitcoin, then you can be sure you’ve made the right decision. For those who are still undecided, here are some reasons why you should do so.
- Fast and easy transactions – Bitcoin brings simplicity to your electronic payments and transactions. The cryptocurrency is not a preserve of the tech-savvy, considering that it has been around for nearly a decade. You can send money quickly and easily with Bitcoin.
- Profitable saving – Bitcoin is a better store of value compared to the fiat system. The severity of inflation is less severe with the cryptocurrency compared to most digital assets and traditional monetary systems. Your long-term investment in the crypto is set to appreciate rather than depreciating.
- Lower cost transactions – The costs involved in processing Bitcoin transactions are considerably low, not more than $0.02. a continued influx of investment in the cryptocurrency has helped further cut down on the transaction fees.
- It does not involve third parties – Bitcoin does not have a central authority. No government, banking system, or other financial institutions can claim control over the crypto. As a truly decentralized currency, you can be assured that your privacy is maintained through anonymous transactions.
- Eliminates the risk of fraud – Each transaction in Bitcoin is final; hence, there are no rooms for counterfeit or reverse transactions. Merchants base on this advantage as a motivating factor for adopting the crypto.
Steps to Buying Bitcoin
Step 1 – Secure and stable internet connection
All your Bitcoin-related transactions will be executed online. To have an easy time doing so, you will need stable internet connectivity. However, this would not be a problem given that internet charges have been declining over the years.
Another key factor to keep in mind is the security of your internet connection. You ought to be mindful of where and when you connect to your Bitcoin wallet. You are highly discouraged from executing a trade on an insecure or public Wi-Fi connectivity. Doing so only makes you susceptible to hackers.
When you have made up your mind to buy Bitcoin, you are encouraged to do so from your home or office internet. These internet connections are assured to be secured either with a firewall or some other kind of protection. Alternatively, those without such access could use mobile data. Simply load up data into your smartphone and create a mobile hotspot.
Step 2 – Have a bitcoin wallet
Before you can run a transaction on the network, you require a wallet. The essence of this wallet is to store your bitcoins. From it, the coins can be sent to particular addresses or received from others.
As already mentioned before, bitcoins are not like your physical, real-world coins. These are virtual, and so is their storage. The Bitcoin wallet is intangible and will be used for the virtual storage of public and private keys.
There are several options regarding the wallet you can use:
- Hardware wallets
- Desktop wallets
- Mobile wallets
- Web wallets
- Paper wallets
Hardware wallets and paper wallets are the most secure, given that the storage happens offline. The fact that hardware wallets and paper wallets have not been connected to any servers implies that hackers have close to zero possibility of gaining access. Take caution when using paper wallets because these need some more technical knowledge.
Desktop wallets and mobile wallets operate in an almost similar manner. The only difference between the two is that Desktop wallets are designed for PC or iMac while mobile wallets are for smartphones/tablets or iPads/iPhones. Having a backup of these wallets is important just in case anything happened to your devices.
Web wallets are the most insecure method to store your bitcoins. These are accessible via different browsers, including Google Chrome, IE, and Firefox. The fact that the private keys are stored online exposes you to the DDOS attacks.
Step 3 – Choose a Bitcoin exchange platform.
With the storage problem handled, it is about time to look into where you can buy your bitcoins. Online marketplaces known as exchanges are the most preferred platforms for making these purchases. The exchanges are connected directly to bitcoin marketplaces from where you can buy using fiat currency.
There are dozens of exchanges on the Internet, but not all of these are favorable to the average buyer. Thus, you need to make a detailed consideration concerning your platform of choice.
Before you settle on your exchange of choice, make sure that it supports different payment methods. You do not want to feel limited as to how you can make a deposit when buying the cryptocurrency.
Make a comparison of the fees involved. One exchange you might charge you higher for the same transaction that will cost half the price in a different exchange. Also, look into whether the fees are charged as a percentage or at a certain fixed cost.
The best option to choose is one that is regulated and offers some kind of security. However, given that regulation in this sector is still underdeveloped, licensing ought to be your top priority. The exchange must have at least one license from a recognized financial body. Furthermore, prioritize the security of your funds by buying from encrypted platforms.
Step 4 – Create an account on the chosen exchange
Creating your account on a Bitcoin exchange is typically a simple process as long as you made the right choice. These exchanges tend to have similar processes in doing this. You might be asked basic questions like your name, email address, and phone number while creating your account.
Step 5 – Keep your verification documents in place.
For an exchange that accepts fiat currency payment to remain operational, it is required by regulators to identify its users. This process is known as Know Your Customer (KYC). Failure to do so risks being taken off the market.
KYC involves the exchange requesting that you upload some documents for verification. The verification could be instant or take 1-2 business days, depending on the exchange in question. That is why we insisted on conducting thorough research.
The documents asked during KYC include:
- Government-issued National ID
- Driver’s license
- Passport
- Proof of residences like Bank Statement or Utility Bill
Understand the data privacy policy of your exchange before you can trust them with the requested data.
Step 6 – Preferred deposit method
If you are a first-time buyer, you will most likely pay using fiat currency. Doing so will entail depositing cash into your exchange account that you just created and verified. Some of the deposit payment methods that you are likely to be presented with include:
- Debit card
- Credit card
- E-wallets like Neteller, Payoneer, PayPal, or Skrill
- Wire Transfers
For individuals who already have other cryptocurrencies like Ripple or Ethereum, going for crypto-to-crypto exchange would more suitable.
Conclusion
Once you have decided on the exchange that you will use, set aside verification documents, and even funded the primary payment method, you are good to go. Simply follow through the account creation steps on the exchange, perform required verification, and load funds into it. Proceed to the exchange homepage and locate the “Buy” link. Different naming conventions might be used for this link.
When you buy the bitcoins, they will initially be deposited into your exchange account. Remember to transfer these to your Bitcoin Wallet. Other exchanges might let you perform a direct transfer to the wallet when buying.
