How to Buy and Store Bitcoin
You’ve heard about bitcoin right? The most popular cryptocurrency that has been making waves and is now being accepted all over the world with a growing number of applications, but you are wondering how you can buy it, and also store it so it doesn’t get lost or stolen. I am going to walk you through how you can buy and store bitcoin safely in a few simple steps.
How you can buy your Bitcoin
You know how you go to a store and pay for stuffs with money from your wallet? That’s how buying Bitcoin works. But there are simple steps you need to take.
Get a trustworthy wallet
Before you can start thinking of buying bitcoin, you have to first find a bitcoin wallet. There are many specific digital wallets that you can use in storing bitcoin until you are ready to use or exchange them for another currency.
These wallets vary in regards to features, security, and platforms where they can be used. It is therefore important to find a wallet that checks off all the important features you are looking for, download it to the suitable platform, and start using it.
If you are a newbie to the bitcoin business, you can easily download these wallets for free, but some fees may apply when you want to exchange currencies when moving money to other accounts.
Electrum: which is primarily used on desktop computers, and helps you secure your bitcoin by giving you a unique encryption key. For large amounts of Bitcoin, this wallet offers you a safer option.
Mycelium: this is compatible with many advanced technologies, like Tor, and is quite popular.
Coinbase wallet: which is a user friendly and ties directly to its exchange services. It is easy to use and is one of the most popular American Bitcoin wallets out there. You can easily access it from any device to make changes or check up on your account, and it comes with a certain amount of insurance for the Bitcoin you store with it.
Select the appropriate exchange
Knowing the right bitcoin exchange is an important step if you want to fully enjoy the bitcoin value since you are going to be investing your funds into it.
To choose the right bitcoin exchange, you have to know exchange country locations. This is very important as laws and regulations vary from country. It is often recommended to buy bitcoin in your home country since you are familiar with their laws. The exchange may accept multiple currencies whether you select your home country or not. But, you need to read between the lines to know what currencies can or cannot be accepted, and also the additional transaction fees attached to buying bitcoin and the payment methods offered.
Another thing you would want to look out for is the change fees. These have to be within reason and are not exorbitant compared to other exchange markets. These fees can change with time and also vary from exchange to exchange.
You would like to go for exchanges with higher volume order volume, as this is evidence that the exchange has liquidity and a lot of people are using the exchange. Most appropriate exchanges will publish their order book, nut the fact that some exchanges don’t publish theirs doesn’t mean they are not legit.
Transparency is another thing you should take note of when choosing an exchange. Competent exchanges will publish cold storage addresses or audit information on how you can verify their bitcoin reserves, and these audits is a great way to prove to you that they have liquidity, aren’t running a fractional exchange, and are capable of covering all bitcoin exchange rates.
How quickly can I get the bitcoin if I purchase with this exchange? This is also an important question. Though the time of delivery might vary from person-to-person, it is always good to know if the exchange offers locked-in pricing. This means you will charged the exact amount you bought the bitcoin even if it would take a couple of days to get to you.
Does the exchange follow the Know Your Customer (KYC) and Anti-Money Laundering (AML) laws in your choice country? If yes, then you will have to send them some identification information before buying.
How secure is the exchange? Does the exchange offer secure logins coupled with two-factor authentication (2FA)? Or is its site HTTPS or HTTP? These are things you shouldn’t overlook before choosing an exchange.
Finally, how reputable is the exchange? You can answer this question by discussing with your peers or through customer reviews or forums. This helps you avoid bitcoin fraud.
Preferred payment method
Payment methods vary depending on what your selected exchange is willing to use. Due to the increased rate of scams, this is somewhat a sore point for many exchanges. However, the most accepted forms of payment include bank account and credit card transfers. PayPal transfers and wire transfers are usually not allowed.
However, you may want to go with Coinbase wallet as it allows all these mentioned payment methods, hence its record as the most recommended for novices. Bitcoin ATMs, available in limited number of cities, allows you exchange your bitcoin in Coinbase, and other compatible wallets, for cash, which is an alternative to withdrawing with an exchange.
Now you can buy and store your BTC
Bitcoin values have been on a rise lately, so you are most likely going to be buying it in fractions, well unless you have a butt load of cash. For instance, the market is at $500 for 0.031800 of a bitcoin. All you have to do is to keep your eye on the market daily.
For beginners, start small and start trading. Your exchange generates an account automatically to store your bitcoin, which you can then transfer to the address of your created bitcoin wallet. There are usually charges attached to this transfer by your exchange.
You should note that bitcoin transfer could take time unlike other currency trades. So you would want to think twice before leaping over to your account and start transferring your funds.
In order not to forget your bitcoin, you should start spending or exchanging them, or better yet, find online stores, or local stores that accept bitcoin as a form of payment.
How you can store your Bitcoin safely
You have your wallet all set up, and you’ve purchased your first bitcoin, but how do you keep it safe?
Securing your bitcoin is top priority. You can store your bitcoin in the earlier mentioned wallets, but how safe are they? Since they are online wallets, what is the guarantee that they can’t be hacked?
In general, there are five main types of wallet; desktop, online, mobile, paper, and hardware wallets. But how do they work?
These are wallets, or software, that operates primarily on computers. Installing the original bitcoin client means you already have a running wallet. Unlike some other wallets, these allow you create a bitcoin address, which you can use in receiving or sending virtual currency, store a private key, and also relay transactions on the network.
Asides the original bitcoin client, there are also other desktop wallets with varying characteristics. These include Hive (an OS X-based wallet that comes with an app that connects you directly to bitcoin services), MultiBit (runs on Linux, Windows, and Mac OSX), Armory (tailored for enhanced security), and DarkWallet (tailored for anonymity, and provides services, such as ‘coin mixing’, using lightweight browser plug-in).
Also known as web wallets, these wallets store your private keys online and are controlled by someone else on a computer that is connected to the internet. Several online services are available with some being able to link your wallets to any device you own, therefore, you can easily access your wallet from anywhere you are notwithstanding the device you use.
Unfortunately, these are not really secure as the organization running the website, where your private keys are stored, can decide to take full control of your bitcoin. Scary isn’t it? Especially if you have over time accumulated a butt load of bitcoin fortune.
Think about it, how well will your desktop or online wallet help you if you are out in a store and you’re trying to pay for stuffs? Now, this is where a mobile-based wallet comes in handy. They are apps on mobile devices both that store the private keys for your bitcoin addresses, which can enable you pay for things in physical stores directly from your phone.
Mobile wallets are not full bitcoin clients, hence you cannot download the entire bitcoin blockchain which grows and is multiple gigabytes in size. Many phones can’t hold the amount of data that comes with this blockchain. For this reason, they are often designed with Simplified Payment Verification (SPV), which downloads a small subset of the blockchain, and get right information from other trusted nodes in the bitcoin network.
Some examples of mobile wallets include Mycelium, Xapo, the android compatible Bitcoin wallet, and Blockchain. If you are looking for Iphone wallets read this article. These wallets keep your private keys backed up on a web-based server, and encrypted on your phone.
Paper wallets are one of the most cheapest and popular ways you can truly safeguard your bitcoin wallet. They generate your bitcoin address and create two QR codes embedded in an image, one being your private key (for spending your bitcoin), while the other is your public address (for receiving your bitcoin).
If you would rather have your bitcoin electronically, then you should go with Hardware wallets. These devices that can hold your private keys electronically and can help you facilitate payments. They are in some way similar to your bank token, but are limited in number.
The well known hardware wallets are Trezor hardware wallet (suitable if you do not rely on third-party bitcoin storage services or cold storage), and Ledger USB wallet (with a smartcard security mechanism).
On the 4th of February 2014, the Nymi sports wristband was announced by Boinym, which can act a bitcoin wallet and uses your heart rhythm as security keys. Interesting isn’t it?
How safe are bitcoin wallets? This depends on how well you manage them. Your unique keys in your wallets are the only way you can access your account and make transactions in your bitcoin address. Once you lose the, you also lose your bitcoin. So, as long as they don’t get lost, and no one else can access them, they are quite safe.
You can secure your wallet in several ways. You can either:
- Encrypt it with a strong password, which makes it more difficult to easily access your wallet
- Back it up by making a copy of your private keys or your whole wallet. This way if your wallets gets corrupted, you can get all your data back.
- Use Multi-signature addresses, which allows multiple parties to have equal access to an address using a public key. However, when a single individual wants to make transactions, they need the other signatories to sign the transaction along with them, or;
- Take your bitcoin keys offline, which you can do by using cold storage wallets. This stores your private bitcoin offline so they can’t be accessed by someone else on the internet. This is advisable if you have a bulk of bitcoin fortune, so if you lose your online wallet, only a small amount of bitcoin is lost.
With the increasing rate of cyber-crimes, knowing how to safely buy and store your bitcoin safely is always important. So, from this article do you think you are now ready to buy and store bitcoin safely?