Bitcoin Overview
Bitcoin are virtual currencies that are not controlled by any government or bank and are limited in circulation. There is no risk of inflation because the maximum number of bitcoins will be about 21 million bitcoin. A very good introduction to bitcoin can be found on our Introduction to Bitcoin post.
However, a major issue with this crypto-currency is it is volatile. In 2017 alone, the price has increased from around $1000 US in January to around $18,000 US in December – an 18X increase. In between those two points, the price has risen and fallen many times.
What to Expect When Buying Bitcoin
Bitcoin & Private Keys
Bitcoin lives a digital life in the internet. There is no actual Bitcoin (although you can buy physical representations of Bitcoin like this one on Amazon.) Bitcoin are stored with a private digital key that you should never reveal to anyone. If anyone finds your private digital key, they can take your Bitcoin (send it to their wallet).
Bitcoin Addresses
Bitcoin is sent to a Bitcoin address. It is helpful to think of this as being similar to an email address. You will need to create a Bitcoin address to receive the Bitcoin. The Bitcoin address is created from your private digital key. You can re-use old Bitcoin addresses but it is not recommended since it is fairly easy to make new Bitcoin addresses.
The Bitcoin address is a group of alpha-numeric characters like the following
3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy
Transaction Time
Bitcoin transactions tend to occur every 10 minutes or so. Therefore it takes some time to get the Bitcoin once it has been started. The transaction can be viewed as part of the blockchain using websites such as Blockchain.info and typing the hash in the search bar. The rule of thumb is to allow 1 or 2 more transactions to occur to confirm the transaction.
How To Buy Bitcoin
Step 1. Get a Wallet
You’ll need a wallet to store your Bitcoin and create the Bitcoin address. There are wallet apps for computers, mobile phones, and tablets. My personal favorite is a hardware wallet because it is a device that only has one use – to store Bitcoin and is therefore harder to hack.
Examples of Wallets
Step 2. Ways to Get Bitcoin
Trading Good and Services
Recently, Craigslist added a checkbox to indicate a seller would accept bitcoin for a service or product they were selling. There is one freelancer website devoted to paying with bitcoin (xbtfreelancer.com). Use these services to trade your time or products for Bitcoin.
Buy From A Friend
With the recent popularity of Bitcoin, there is a good chance you have a friend with Bitcoin. This is a good way to get started because your friend can walk you through the process and hopefully your friend is trustworthy. Simply generate a receive Bitcoin address and give this address to your friend. They will send the Bitcoin to this address.
Buy From an Exchange
Exchanges such as Coinbase, Kraken and Bittrex allow you to purchase Bitcoin from them. These are similar to stock market brokerage firms. Coinbase allows you to purchase Bitcoin using a credit card. They can also be linked to your bank acount for withdrawing or depositing Bitcoin purchases or sales.
More information about using an exchange can be found on our Where to Buy Bitcoin from Reliable Bitcoin Exchanges post.
Popular Exchanges
- Coinbase – Based in San Francisco CA, USA
- Kraken – Based in San Francisco, CA, USA
- Bittrex – Based in Seattle, WA, USA
