Although many people are curious, they shy away from investing in Bitcoin. Mostly because it is a complicated investment opportunity, others are aware that there are many bitcoin scams out there and many people have lost their earnings in this way. We can assure you that Bitcoin offers many profitable opportunities for investors and is gaining popularity faster than we think. It is important to us that you understand how to buy Bitcoin and how it works before investing in it. This way, you get all the information you need to make an informed investment decision.
Before we begin, here are some key takeaways
- Bitcoin was launched in 2009 and developed by software developer Satoshi Nakamoto (pseudonym).
- Bitcoin is a virtual currency, meaning it exists online and cannot be printed or withdrawn.
- Bitcoin is decentralized and is not managed by a financial institution or central authority.
- All Bitcoin transactions are kept in a public ledger. This is completely transparent and in this way transactions can be tracked.
- Although it is almost impossible to hack your Bitcoin, it is possible that your Bitcoin wallet could be compromised. Hence, it is important that you keep it safe.
What you need to get started
A new investor needs a few things before buying Bitcoin. This includes a cryptocurrency account, personal identification documents, a secure internet connection and a payment method. We recommend all Bitcoin investors to have their own wallet outside of the exchange account. It is possible to get Bitcoin at certain ATMs. It is important to note, however, that Bitcoin ATMs will require government-issued IDs from early 2020. We do not recommend new investors to rely on Bitcoin ATMs.
Avid Bitcoin investors need to prioritize their security and privacy. You may not be able to physically accumulate your Bitcoin, but it is considered a bad idea to boast about how much Bitcoin you own. As mentioned earlier, it is important that you secure your Bitcoin wallet. Anyone with access to a private key for a public address on the Bitcoin blockchain can conduct transactions. For this reason, your private key should be kept secret.
The public ledger is accessible to everyone. However, only transactions can be viewed. Your identity is kept private. Bitcoin transactions are more transparent than cash transactions, but can be used anonymously with Bitcoin.
Here is a step-by-step guide on how to buy Bitcoin
Step 1: choose an appropriate exchange
It is very important that you sign up for a cryptocurrency exchange. With it you can buy, sell and hold cryptocurrency. We recommend choosing an exchange that will allow you to pull your crypto into your personal wallet for safekeeping. Since Bitcoin is decentralized and has individual sovereignty, you can remain anonymous with some exchanges. Most exchanges work autonomously and are also decentralized.
Step 2: review and fund your account
After choosing your exchange, make sure you have your personal documents on hand. You may need to provide your social security number, information about your employer, and a picture of your driver’s license. This process can be compared to opening a brokerage account. You can use your credit card to buy cryptocurrency. Most exchanges allow you to link your bank account directly or deposit fiat currency into a fiat wallet.
Step 3: Place your order
Once you have a payment option linked to your account, you can now buy Bitcoin. Your exchange gives you a range of order types and different investment options. Most exchanges offer markets, limit orders, and recurring investment opportunities.
Step 4: open a digital wallet
You can store all of your Bitcoin and other cryptocurrencies in a digital wallet. This wallet works with the blockchain technology. There are many digital wallet providers online. We encourage you to do your research before choosing a suitable one. There are basically two types of wallet that you need to be aware of:
- Hot Wallets: Hot wallets refer to online wallets. This wallet can run on internet connected devices such as computers, phones or tablets. These wallets are usually more vulnerable as they generate the private keys for your coins and are more vulnerable to hackers.
- Cold purses: Cold wallets refer to wallets that are not connected to the internet. Usually called offline wallets, they are safer than hot wallets because they do not depend on internet-connected devices. Cold wallets store your private key on something that is not connected to the internet and can come with software that works in parallel so that you can view your portfolio without compromising your private key.
Are there any alternative ways to buy Bitcoin?
Yes there is. Here are some additional ways you can buy Bitcoin:
1. Bitcoin ATMs
Bitcoin ATMs are similar to Bitcoin in-person exchanges. You can put cash in a machine and use it to buy your Bitcoin. It will then be transferred to your digital wallet. Bitcoin ATMs are becoming increasingly popular.
2. Peer-to-peer exchanges
With P2P exchanges, after creating an account, you can make inquiries to buy or sell Bitcoin. This includes information about payment methods and prices. You can then browse the list of users who are buying and selling their Bitcoin and choose who to transact with.
The best way to protect your bitcoin
As already explained, bitcoins are stored in a digital wallet. This wallet can be hardware based or online. It can also be stored on your mobile device, computer desktop, or in person by printing your private keys and addresses on paper. You may be wondering how safe are all of these wallet options? Well that depends on how you manage your wallet and what private keys are in it. The greatest danger is losing your private key or having it stolen.
* Important NOTE: Anyone with access to your private keys can perform transactions. For this reason, we emphasize the importance of protecting your digital wallet accounts from hackers.
Here are a few ways you can protect your account:
This is also known as cold storage. Cold storage wallets are not connected to the internet, which makes the option more secure and prevents hackers from accessing your account over the internet. We recommend that you split up the bitcoins you own. Keep some in a digital wallet and the rest in the refrigerator.
You can secure your entire wallet very early in your buying journey. In the event your device fails, a history of regular backups may be the only way to restore the currency in your digital wallet. When securing your wallet, be sure to save it in multiple locations and set a strong password.
Encryption is always beneficial when you want to add an extra layer of security to your wallet. This simply means adding a strong password to your wallet. A weak password also means your account is vulnerable and easily accessible to hackers.