Investing in Bitcoin for the complete beginner.
The purpose of this article is to help people get ahold of their first bitcoins and show them the basics.
Bitcoin is as easy to use as Email really, but I’ve noticed that Bitcoin enthusiasts want to explain the inner workings so much, that they confuse newbies. Do you really need to know how email works or how the internet works for you to use it? Of course not.
Simply put Bitcoin some qualities of cash and some qualities of gold. They are easy to send anywhere in the world, and there is an absolute limited supply of 21 million that will ever exist. Bitcoin has no center, so no one entity is in control of it, kind of like the internet or email. Bitcoin is non physical which means it only exists in the digital realm. Transactions are irreversible unlike credit cards or paypal. Bitcoins are traded 24 hours a day on the open market. The price of Bitcoin at the time of this article is around $230 USD.
Lots of very smart people from Silicon Valley to Wall Street seem to think Bitcoin is the future of finance and will have a very disruptive effect on the way we use money in the future. After using it for years, I tend to agree with them.
Now before I start confusing you, lets talk about how to get some and the basics of sending Bitcoin.
Most beginners these days simply use Coinbase (click here to visit) to get hold of their first Bitcoins. Coinbase is a very well funded startup that not only helps you buy Bitcoins but will also hold them for you and keep them safe. They have been around since 2012 and has over 2 million users. They exist to make it easy as possible for the average joe to buy and protect their bitcoins.
The signup process with Coinbase is pretty straightforward. You will be asked to link your bank account and you might also be asked to upload a picture of your ID. Some people do not like this step but Coinbase is forced to follow KYC laws.
To buy Bitcoin, you simply hit the buy button in Coinbase, and tell them how much you’d like to buy. They will withdraw the money from your bank account and deposit the Bitcoins in your Coinbase wallet. I must tell you that there is about a 4 day delay before you will actually get your Bitcoins, because thats how long it takes for Coinbase to get the money from your bank account. This is because the old banking system is slow, not because of Bitcoin! Although there is a delay, coinbase honors the original price of Bitcoin at the time of purchase. Bitcoins can be divided up to 8 decimal places so you can always purchase a part of a bitcoin if you can’t afford a full one.
You might also have a small limit on the amount you can buy at the beginning, but after a couple purchases they will raise your daily limits into the thousands of dollars.
Unlike credit cards or paypal, Bitcoin transactions are irreversible. Once they are sent to someone, there is not getting them back unless that person wants to send them back. This is why companies are so cautious with new users at first.
EDIT: Today I was informed that coinbase is testing a new program where users can purchase bitcoins instantly with a credit or debit card. Yay. When it is fully live you will know.
Another way to buy is to actually meet someone face to face and exchange cash for Bitcoin. Sites like LocalBitcoins.com can help.
There, you create an account and search for someone in your area. You can arrange to meet at a coffee shop and do the transaction. LocalBitcoins holds the Bitcoins in Escrow until the transaction is complete. Sellers are rated with a feedback system sort of like Ebay.
If you prefer more anonymity, sites like Localbitcoins might be more your style.
Sending and Receiving Bitcoin
If you want to send Bitcoin to someone, you need to find out what their wallet address is just like if you were sending an email. Unlike an email address, a Bitcoin address is just a long jumbled bunch of numbers and letters. For example.
If you are in your coinbase wallet and wanted to send me some bitcoins, you’d simply hit the send button, and paste in that address in the box.
If you are buying something from a merchant in the real world or exchanging Bitcoins in person, you will normally scan a QR code instead of pasting in a long address.
Scanning a QR code basically is the same thing as pasting in a long address, its just quicker and user more user friendly.
You have the option to scan a QR code in your coinbase phone app.
If you need to receive bitcoins from someone and do not know your wallet address, simply click My Wallet on the left then Wallet address. There you will be shown your QR code and your Bitcoin address.
Coinbase also has a very nice app for Iphone and Android that you should download after signing up. You should also make sure to add 2 factor authentication to your Coinbase account. This means they will also send you a secret number by text when logging in. This is an extra layer of security to keep your account from being hacked.
My next post will be about other alternative wallets to store your Bitcoins if you are not happy with letting a third party like coinbase hold them for you.
I hope you enjoyed this “Bitcoin for dummies” post, let me know if you have any questions.