Now that you’ve learned the bitcoin basics, it’s time for you to get some bitcoins of your own! How you ask? This guide will walk you through what you need to know.
You can purchase bitcoins from exchanges, like CryptoKings or directly from other people via marketplaces.
Paying for bitcoin can be done in a variety of ways, ranging from good ol’ cash to credit and debit cards to wire transfers. You can even purchase using other cryptocurrencies, depending on who you are buying from and your location.
Surprisingly, the ease of purchase has not been passed to all credit cards or even PayPal for that matter. It can all hinge on your jurisdiction.
This is because such transactions can easily be reversed with a phone call to the card company. These are called chargebacks. Since it’s hard to prove any goods changed hands in a transfer of bitcoins these type of payment is being avoided by credit card companies and most private sellers.
It’s Time for a NEW wallet – a bitcoin wallet
So much for those fancy trifolds, bitcoins are stored in a wallet – but it’s a virtual wallet.
Of course there is security to consider and depending on the level of security you want there are different kinds of wallets available. Similar to everyday spending accounts, some are comparable to a traditional leather wallet, while others tout military-grade protections.
Here are the main options: (1) a software wallet stored on the hard drive of your computer, (2) an online, web-based service or (3) a ‘vault’ service that keeps your bitcoins protected offline or multi-signature wallet that uses a number of keys to protect the account.
Be aware of the vulnerabilities: As with anything on your computer, if you store bitcoins on your computer, make sure you back-up your wallet regularly. A corrupted drive will wipe out your wallet. Online web wallets employ varying degrees of security against hackers, from quite good (multi-factor authentication) to quite poor (ID and password).
Exchanges and Online Wallets
Bitcoin newcomers will find the competition in ‘wallets’ vast. A variety of exchanges will want your business.
The competition will come from large exchanges to more simple wallet services with limited capabilities.
Most exchanges and wallets will store amounts of digital and/or fiat currency for you, much like a regular bank account.
Exchanges and wallets are the best option if you will be engaging in regular trading and speculation and if you don’t need total anonymity, don’t mind lengthy red tape setup involving proof of identity and supplying detailed contact information.
This is the law in most countries and no regulated exchange can get around it. The best exchange option also depends where you’re located.
Coinbase is a very popular wallet and exchange service that will allow trade with US dollars and euros for bitcoins. They also have both web and mobile apps for your convenience.
Circle is a world wide service for users offering the chance to store, send, receive and exchange bitcoins. Currently only US citizens are able to link bank accounts to deposit funds, but credit and debit cards are also an option. You will find available apps for iOS and Android.
Wallet and bitcoin debit card provider Xapo has jumped into the ring. They offer deposits in fiat currency that are converted to bitcoin in your account.
Coinjar, an exchange and wallet provider, is the market leader in Australia. The Melbourne-based startup raised $500k AUD in venture funding and won an award at Finovate Europe 2015 for their user experience. The company released a debit card service, ‘Coinjar Swipe’ in February 2015.
Unocoin is an exchange available for the Indian market, allowing users to buy, sell and store bitcoin. Deposits can be made via any national online bank or through NEFT/RTGS. Registration with a PAN card is necessary for this site’s services.
Once you’ve setup your account, you will most likely need to link to an existing bank account. Then put in place the ability to move funds between it and your new exchange account via wire transfer. Many banks will charge a fee for this service.
You will find higher fees associated with transferring money to overseas accounts and also see long delays in changing your bitcoins back to fiat currency.
Be aware that if you are required to link a bank account to use the exchange, it may only admit banks from that country.
Warnings about exchanges, wallets and banks
Despite the proof of identity requirements, remember exchanges and wallets don’t provide the same protections banks do.
For example, there is often no or limited insurance for your account if the exchange goes out of business or is robbed by hackers, such as was the case with the infamous failed exchange Mt Gox.
There is no legal status for Bitcoin as a currency in most of the world, and authorities are still learning how to best approach thefts. In addition, if a theft from your personal wallet occurs due to a security or password lapse on your part, you do not have any guaranteed way to recover your funds.
Some existing banks will see digital currency and refuse to work with funds that were the result of these types of digital transactions.
Check the list below first to see if your bank may have taken action against users in the past, and for your protection, do your due diligence and open an account with a bank known to be more bitcoin-friendly.
Here are some banks known to discriminate against bitcoin.
Face-to-face, or ‘over-the-counter’ (OTC) trades
If you live in a city, want to keep your information anonymous or just don’t trust banks, you do have the option to acquire bitcoin in a face-to-face trade with a local seller.
LocalBitcoins is the primary site where these transactions can be arranged. You will also find an escrow service as an added layer of protection for both parties.
Be safe and remember a few precautions. Always meet in a busy public place, don’t meet in private homes and take all the precautions you’d normally use when walking around with large amounts of cash.
Remember, if you’re meeting face-to-face you’ll need to have access to your bitcoin wallet. Whether it’s a smartphone, tablet or laptop, you’ll also need live Internet access to confirm the transaction.
If one-on-one trades aren’t your thing, check out Meetup.com to see if your area has a bitcoin meetup group, where you can make exchanges in a group setting and in addition learn a lot from the other members.
Some seller may require a premium of around 5-10% over the exchange price for a face-to-face trade – they claim it’s for convenience and privacy. A reputable trader will negotiate the price before a meeting, but you’ll find many won’t want to wait too long in case bitcoin’s value takes a dramatic shift.
Some sellers may let you use a PayPal account to pay, though most prefer non-reversible cash for the reasons described earlier.
It would be wise to check first if such trades are legal in your local area. There is also a slight danger you’ll arouse police suspicion by exchanging cash in a public place, if they think you’re trading something more illicit.
A word or two about ‘mining’
What about this mining thing? I’ve heard you can make your own bitcoins.
You may have heard about ‘mining’ your own bitcoins with your own PC. This was possible until recently, but time and the increasing popularity of bitcoin have brought more and more powerful, mining-specific devices (called ASICs) onto the network, increasing the difficulty and energy required to mine worthwhile amounts of bitcoin.
In addition, the number of bitcoins remaining to be mined largely decreases as time progresses. All this means that you won’t find mining as an individual as cost-effective as it was just a year ago. Many end up paying more for hardware and electricity than they ever make back in bitcoin.
Most mining these days is the domain of large mining groups called ‘pools’, and companies set up specifically to mine. You may choose to buy shares in such a pool or company, but mining is definitely not the hobbyist pursuit it once was.
Beware – Anyone who claims you can mine bitcoins on your own with an ordinary PC or even a graphics card array isn’t properly informed, or may be trying to sell you outdated equipment.
Though a relatively new concept, bitcoin ATMs are growing in number.
More are on the way, from a number of different vendors including BitAccess, CoinOutlet, Genesis Coin, Lamassu and Robocoin.
Like a face-to-face exchange but with a machine, you insert your cash and either scan your mobile wallet QR code or receive a paper receipt with the codes necessary to load the bitcoins onto your wallet.
Exchange rates vary, and may be anything from 3% to 8% on top of a standard exchange price.
Buying bitcoins is not always as easy as you may think. The good news is the number of options is increasing, and it is getting easier all the time.
CryptoKings has trained representatives available to answer your questions and help you complete your transaction.