How to Buy Bitcoin – Step One

The best way to learn about Bitcoin is to put a few in your pocket to get a feel for how they work.

Despite the hype of how difficult and dangerous it can be, getting bitcoins is much easier and safer than you might think. In many ways, it's probably easier than opening a traditional bank account. And what's happened in the banking system is probably safer too.

There are a few things to learn: buying and using a software wallet, learning how to send and receive money, how to buy Bitcoin from a person or an exchange.

preparation

Before you can get started, you need to get a wallet. You can easily do this by registering at one of the exchanges where the wallet is hosted for you. And although I think you might want to have one or more wallets at some point, you should start with one on your own computer to get a better feel for Bitcoin and because the wallets themselves are still experimental. At this stage of the discussion, I will point out that you are in the habit of removing your money and coins from exchanges or diversifying between exchanges to protect your money.

What is a wallet?

This way you can save your bitcoins. In particular, it is software that was developed to store Bitcoin. It can be run on your desktop computer, laptop or mobile device (with the exception of Apple) and can also be used to store bitcoins on thumb media. If you're worried about getting hacked, this is a good option. Even the Winklevoss * twins, who have invested millions in Bitcoin, invest in hard drives, which they then put in a safe.

* The Winklevoss twins originally had the idea for a social networking site that became Facebook. They hired Mark Zuckerberg, who saw their idea as his own and became incredibly rich.

What do you need to know about a Bitcoin wallet on your computer?

Below you can download the original Bitcoin wallet or client in Windows or Mac format. These are not just wallets, but part of the Bitcoin network. You receive, save and send your bitcoins. You can create one or more addresses with one click (an address is a number that looks like this: 1LyFcQatbg4BvT9gGTz6VdqqHKpPn5QBuk). You will see a field where you can copy and paste such a number from someone you want to send money to. The number will go straight into that person's wallet. You can even create a QR code that allows someone to take a photo with an app on their phone and send you Bitcoin. It is absolutely safe to issue them – the address and the QR code are both for my donation page. Feel free to donate!

NOTE: This type of wallet acts both as a wallet for you and as part of the Bitcoin system. The reason why Bitcoin works is that every transaction is transmitted across the system and recorded as a number (that is, every transaction is confirmed and made irreversible by the network itself). Any computer with the right software can be part of this system and can check and support the network. This wallet serves as your personal wallet and also as a support for this system. Please note that your computer's memory takes up 8-9 gigabytes. After you install the wallet, it takes up to a day for the wallet to sync with the network. This is normal, does not harm your computer and increases the security of the entire system. So this is a good idea.

Bitcoin Qt

  • The original wallet.
  • This is a full featured wallet: create multiple addresses to receive bitcoins, easily send bitcoins, track transactions, and secure your wallet.
  • Outside of the time required for synchronization, this is a very easy to use option.
  • Search for Bitcoin Qt Wallet Download to find their website.

armory

  • Runs on Bitcoi Qt so all synchronization requirements are the same.
  • With Armory, you can back up, encrypt, and store your bitcoins offline.
  • Search for Bitcoin Armory Wallet to find their website.

If you don't need that much memory or don't want to wait for your wallet to sync, there are good wallets that you can't use to sync the entire history of Bitcocin:

multibit

  • A lightweight wallet that syncs quickly. This is very good for new users.
  • Search for Bitcoin Multibit Wallet to find the appropriate site.

Electum

  • With this wallet, not only are you quick and easy, you can also recover lost data using a passcode.
  • Search for Bitcoin Electum Wallet to find their website.

After you set up the wallet, click around for a few minutes. Things to look for:

o A page shows how many bitcoins are currently in your wallet. Keep in mind that bitcoins can be broken down into smaller pieces, so you may see a decimal place with lots of zeros. (Interesting note, 0.00000001 is a Satoshi named after the pseudonymous creator of Bitcoin).

o Your most recent transactions are displayed in an area.

o There will be an area where you can create an address and QR code (like the one I have above). You don't need the QR code if you don't want it. However, if you run a business and want to accept Bitcoin, all you have to do is display the QR code and allow it to accept payment, take a picture of it and they will be able to send you some money. You can also create as many addresses as you want. So if you want to track where the money comes from, you can get a separately labeled address from each of your payees.

o In an area with a box, you can insert a code if you want to send money to someone else or to yourself through a purse or other wallet.

There are other options and features, but to begin with, these are the points you should know.

Get the first bitcoins

Now that you have a wallet, of course you will want to try it out.

The very first place is http://faucet.bitcoin.st/.

This is a website that spends small amounts of Bitcoin to get users used to it. The original version was operated by Bitcoin's main developer, Gavin Andreson. This site has since been closed and this site is operated by sending one or two ads per month. You agree to receive these messages by requesting the bitcoins. Copy your new Bitcoin address, paste it and enter a phone number to which you can receive an SMS. They send a text message to make sure that people don't come back all the time as it doesn't cost anything to create a Bitcoin address. They will also send out advertisements once or twice a month to support their operations. The amount they send is trivial: 0.0015 BTC (or 1.5 mBTC). However, they are processed almost immediately and you can check that your address and wallet are working. It's also quite a feeling to get that serving of Bitcoin. (Disclaimer: I have no connection to this website and I get nothing when you use it. I just think they are a great way to get your feet wet.)

Congratulations! You have just entered the Bitcoin economy.

To wet your feet a little, you can look for gold. There are a number of services and websites that you can use Bitcoin to pay to visit specific websites, complete online surveys, or watch sponsored videos. These are harmless and you can earn a few extra bitcoins this way. However, keep in mind that these are companies that get paid when users click the links on their websites. They essentially withdraw part of what they get paid to you. There is nothing illegal or immoral about this (you may like what you see and buy!), But they are often striking and may not be easy. Everyone I tried (especially bitvisitor.com) was paid out as announced. It's interesting to experiment with, but even with the likely increase in Bitcoin, you won't become a millionaire. So if you are not a promotional junkie, I would recommend you keep going. If you want to try just google "free bitcoins" or something along those lines and you will find numerous websites.

Buy bitcoin hand in hand

After all, this will be the real test for Bitcoin. Can people easily swap them back and forth? If this is not possible, there cannot be a Bitcoin economy as retailers cannot use it. If retailers can't use it, what use is it on earth? Fortunately, this is not a real problem. The iPhone is a bit boring, but many smartphones have apps (mobile wallets) that read QR codes and allow you to send Bitcoin to any recipient. You can also display a QR code of your address or have a card with your QR code in your wallet so people can send Bitcoin to you. Depending on the type of wallet you have, you can then check whether the bitcoins have been received.

A few things to consider:

  • If you set up your wallet and click a little, you'll see an option that lets you pay a fee to speed up transactions. This money is made available to a Bitcoin miner when he / she / she processes Bitcoin information. The miners who create blocks of information keep the system up to date and secure. The fee is an incentive for the miner to include your information in the next block of information and "verify" it. In the short term, miners make the most money mining new coins (for more information, see What are Bitcoins?). In the long run, as it becomes more difficult to find new coins and the economy grows, fees will be an incentive for miners to create more blocks and keep the economy going. Your wallet should default to 0 charges. However, if you want, you can add a fee to prioritize your transactions. You are not required to pay a fee, and many organizations that process many small transactions (such as those looking for gold described above) charge enough fees to keep miners happy.
  • When you click in your wallet, on the transaction page, or link to specific transactions, a confirmation message appears. When you make a transaction, this information is sent to the network and the network sends back an acknowledgment that there is no duplicate entry for this Bitcoin. It's wise to wait until you get multiple confirmations before moving away from someone who paid you. Hand-to-hand cheating is actually not very easy, and it is not very cost-effective for the criminal, but it can be done.

Where can you buy such a Bitcoin?

  • You may have a Bitcoin Meetup near you.
  • You can visit localbitcoins.com to find people near you who are interested in buying or selling.
  • Some are trying to open local street exchanges around the world. These are called Buttonwoods after the first street exchange was set up on Wall Street in 1792 under a Buttonwood tree. See if there is one near you or if one starts.
  • See if you have friends who want to try bitcoins. The more people use Bitcoin, the bigger and more successful it will be. So please tell two friends!

Some people ask if it is possible to buy physical bitcoins. The answer to this is both a yes and a no. Bitcoin is inherently a digital currency and has no physical form. However, there are several ways you can practically hold Bitcoin in your hand:

  • Cascascius coins: These are Mike Caldwell's ideas. He mintes physical coins and then embeds the private keys for the bitcoins in them. You can get the private key by pulling a hologram from the coin. This clearly shows that the coin has been manipulated. Mike went out of his way to make sure he could be trusted. This is a good investment strategy because these coins could be huge collectibles in the coming years.
  • Paper wallets: A paper wallet simply means that you don't keep the key information in a digital wallet, but print it out with a private key and keep it in a safe, in a drawer or in your mattress (if you wish). This is a highly recommended and inexpensive system to keep your Bitcoin safe. However, keep in mind that someone could steal them or if your house is on fire, they go with the house and there is no way to get them back. Really no different from cash. As with Casascius coins, they are only really good for spending when you put them back in the computer.

* There is software that makes it easier to print your wallets. bitcoinpaperwallet.com is one of the best and has good instructions on how to use it.

* The bitcoins are not in the wallet, but still on the Internet. There is a QR code on the outside of the wallet that you can use to send coins to the wallet at any time.

* The sealed part of the wallet contains the private key, without which you cannot access the coins. Therefore, only put as many coins in the wallet as you do not want to reach. You won't be able to whip this thing and take out a few coins to buy a cup of coffee. Think of it as a piggy bank. To get the money, you have to smash it. Smaller amounts can be withdrawn, but at this point wallet security is compromised and it would be easier for someone to steal the coins. Better to have them all in or out.

* People who use paper wallets are usually security-conscious, and there are a number of ways for villains around the world to hack your computer. Bitcoinpaperwallet.com gives many great tips on how to securely print your wallets.

Some people have also asked about buying bitcoins on eBay. Yes, it is possible, but they will be far too expensive. Given the extreme market value premium you may see, selling on eBay seems like a better option. But like anything that's too good to be true, it's too good to be true. As I'll explain in the next section, selling Bitcoin in this way is just too risky.

How not to buy bitcoin

In the next section, I'll explain a few key points about buying on Bitcoin exchanges. Before I do it, I want to warn you.

A short history lesson: When people first started building a Bitcoin-based business, they used all the tools available to any merchant. They are sold by credit card and PayPal. The problem with this business model was quickly recognized: Bitcoin transactions can only be reversed by the recipient of the money. Credit cards and PayPal have strict buyer protection policies that make it relatively easy for users to request a refund. So shameful people recognized this and started buying Bitcoin and then requesting a refund sooner or later. And since Bitcoin is a non-physical product that was shipped using new and poorly understood technological means, sellers could not dispute this. For this reason, sellers no longer accept credit cards and PayPal.

This was a big problem for the currency: how to move money between buyer and seller? A business has emerged that will credit Bitcoin to you when you transfer money to them. These companies very often provided addresses in Albania, Poland or Russia. The fact is that many of them worked and there are many stories on the forums of people who bought bitcoins this way. But it took a lot of time and in the meantime, the buyer just had to bite their fingernails and wonder if they'd get their bitcoins or kiss their investment goodbye.

I expect that as Bitcoin becomes more acceptable and valuable, we will see a version of the fraud with the Nigerian prince. So the warning is: we now have exchanges and other businesses that make it easy to put money in and out of exchanges. Never transfer money for Bitcoin. It was a short-lived and forgotten moment in the history of Bitcoin.

Next, I'll talk about how to shop on a Bitcoin exchange and give an overview of some of the most popular exchanges.

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