About a year ago my journey into blockchain and cryptocurrencies started. There.was.so.much.unknow.
October 2017; everybody seems to talk about bitcoin and other cryptocurrencies. When others share stories how their initial investments inclined 5, 6, 7 times in value — i can understand people get triggered to want to profit from the hype.
How to buy bitcoin or other cryptocurrencies? It is less complicated than you’d first think.
3 options to buy Bitcoin
There are 3 common places to buy Bitcoin: Online brokers, Exchanges, Buying from other private users.
1. Online brokers
Do note; brokers are not the cheapest way of getting your hands on Bitcoin. The companies behind the broker you use, also make a buck in this game by using commissions when you make a transaction.
Coinbase, Poloniex and Kraken are examples of exchanges where buyers and sellers of cryptocurrencies come together. The platform itself does not sell any coins — it merely acts as a platform facilitating transactions. In return for facilitating a transaction a fee is charged.
Safeguarding their role of facilitating platform — exchanges usually want more information from you, in comparison to a broker. Not only are usual credentials like your name, date of birth, address and phone number required — a copy of your ID, and verification of your address with a recently received letter on your name is common practice when you want to use an exchange.
3. Buying bitcoins from other users
You can buy bitcoin via marketplaces like Bitcoin-otc and Localbitcoins.com .Through P2P marketplaces the process of acquiring Bitcoin can be done in an anonymous way. Con: the price of cryptocurrencies is a bit higher. When going for this route; scout the seller on ratings and the amount of transactions the seller has done.
Bitcoin wallet; public and private keys
Awesome — you are about to buy Bitcoin. You also need a place to store your coins. A digital wallet — if you will. How does this work?
A wallet has a public and a private key. Don’t be fooled; the keys are not like the common known metal keys you have in your pocket. A combination of 10 letters and numbers form the key. This makes the key difficult to guess — even when having access to all the computing power in the world.
The public key is the digital address where people can send Bitcoin to. You can compare it with a mailbox; everybody can throw something inside — but only you will have access to the content. To get access to this mailbox, you will need the private key.
When someone with bad intentions gets access to your private key; well you are f*cked. Keep your private key to yourself.
There are different types of wallets you can use — all with their pro’s and con’s. 5 types of wallets where you can save your Bitcoin:
You are in control. To minimize the change of theft you can install the software on a computer without anything else on it. Only when you want to send Bitcoins you need to have an internet connexion. For receiving bitcoins you do not need an internet connexion; the public key takes care of that.
For most people all of this sounds like a hassle; what it can be. As you are in control, you are also in charge of safety, keeping up to date of the software and the process of back-ups. #Fun!
2 - Smartphone / Tablet; you’d like to carry your bitcoins close by — to pay instore for example? A wallet on your phone helps out in convenience. Apps from Mycelium, Wirex and GreenAddress are commonly known options.
Updating software does not longer keeps you awake at night! Do note; because your smartphone / tablet (usually) is in constant internet connexion, it gives a (slightly) bigger risk. Once your phone gets lost / stolen / sinks in a hottub you face the problem that all of the coins saved on your device are also gone. #Bummer.
3 - Online; Coinbase or Blockchain.info are 3th-party tools to save your Bitcoin. You have easy access to your bitcoin and do not need to install 3th-party software for it. #Winning. Do note; you are dependent of a 3th party. If the company behind the online wallet is lacking in their security, there is a change thieves take your Bitcoins.
A strong password and 2-way verification makes it harder to access your online wallet.
Hardware wallets are not exposed to the dangers of the internet (god, i feel so old when typing this sentence). It is also more difficult to get access to your Bitcoin — imagine the drama you’d feel when you can not find the hardware wallet, again.
5 - Paper; with a paper wallet you make a physical copy of the public an private key. Often this is possible with an QR-code (whoa- QR-codes actually can be useful?!) so with a simple scan it is possible to make a transaction.
Upside of paper; it is not digital — someone needs to actually get his hands on the physical piece of paper to get access to your wallet. #SayanoraHacker. On the other side; paper is vulnerable; ink fades out, fire and water are not friend with paper. Oh — when you can not find the piece of paper anymore, you have also lost the bitcoins attached to it. #Beorganized.
Tips to savely store your Bitcoins
Now you know how to store, buy and sell Bitcoins. Every possibility comes with its pro’s and cons. To limit the changes of your bitcoins to get stolen, a couple of tips:
- Only save small amounts of Bitcoin in an online wallet; mostly used for easy payments.
- Have bigger amounts of Bitcoin? #Winning. Go offline for save keepings of your valuable coins.
- Use 2-way verification for online wallets. This way the password is not enough to get access to the wallet.
- Back-ups on a regular basis; it is a pain in the ass to remember to do so. You will be thanking yourself when you have lost your wallet and are in need of a back-up.
Uh, Ethereum, Litecoin and other coins?
Other cryptocurrencies like Ethereum, Litecoin or Dash follow the same principle. Have fun in the world of Brokers, Exchanges, Marketplaces and Wallets.
PS: For every type of crypto coin you will need a different wallet. It is not possible to receive Bitcoin on an Ether-address. Most providers of online wallets have the possibility to make a wallet per cryptocurrency.
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