Trending

Newsletter

A Safe How-To Guide for Buying and Using Bitcoin

By: Contributor - May 1, 2014, 8:48 am

EspañolThere are a plethora of articles and videos that explain what bitcoin is for people who only have a vague idea about the cryptocurrency. However, not everyone who knows what bitcoin is understands how to safely buy and use the digital currency. For instance, many have the misconception that they can invest in bitcoin. While the price of bitcoin does fluctuate and people do gain revenues from currency trading using it, bitcoin is not a stock. It’s a currency meant to be held and used like any other currency in the world.

The difference is that bitcoin is a worldwide peer-to-peer digital currency, unlike the paper and coins we are familiar with today. As a result, there are no bank fees, transaction fees, or transfer fees that are incurred from government-backed currencies like the dollar or euro. In fact, bitcoin has the smallest transaction costs of any currency in the world. Most often, there are no fees, but if the transfer is small, the average fee is 0.0001 Btc. (less than US$0.05 in today’s market). No bank can match such a marginal cost for its customers.

The first step to buying your very own bitcoins is to get yourself a “wallet.” A wallet is like your own bank account. It allows you to securely hold your bitcoins, as well as send and receive bitcoins to and from others. Blockchain.info is one of the most secure sources for getting your own wallet. In fact, Blockchain doesn’t hold or own its customers’ bitcoins, and therefore cannot see your balance or seize your money for fees like a local bank. Your money is owned by you. Blockchain requires no identification to open a wallet, just an email address.

bitcoin-tcatm-1
Source: Bitcoin.org.

Once you take the 30 seconds to start your own wallet, it will give you a bitcoin address. This code is what you’ll send to people so that they can transfer bitcoins to you. But, no one can take your bitcoins just because they have your address. It’s very safe to share your wallet, so don’t feel you need to guard your address with your life.

One thing to understand is that all bitcoin transactions are public knowledge in what’s called “the blockchain.” However, the blockchain does not show your personal information or what was bought, just the transfer of bitcoins from one address to another. Remember, your bitcoin wallet address is not linked to your personal identification. The blockchain is simply a self-regulating accounting mechanism that helps keep the bitcoin community in check and everything secure. Your personal information is safe.

After you have your wallet established, the next step is to fill it up with bitcoins! The website best used for this service is Coinbase. While everything can be done anonymously with your wallet, buying bitcoins does require that you verify a bank account and a phone number. Coinbase does a fantastic job with their security by verifying your bank information using high-level encryption codes. All you need to do is simply input your routing and account numbers.

Coinbase will then give you the option of verifying the account immediately by logging in for you, or by making a deposit and credit of equal amounts, which will take two to three business days. Both are good options; it just depends what you are comfortable with. To verify your phone number, there are two options as well. If you have a smartphone, they will ask you to download the Authy app to verify. If you don’t have a smartphone, you can verify through text message or a phone call.

Once your phone and bank account have been confirmed, you can start buying bitcoins. By simply scrolling over to the Coinbase buy/sell menu, you plug in the amount of bitcoins you would like to purchase and it automatically gives you the US dollar equivalent cost. Press the buy button and, in a few business days, you will be the proud new owner of bitcoins! The same process works for selling bitcoins. Plug in the amount of bitcoins you wish to sell, and you will automatically receive the US dollar equivalent in your bank account in a few business days. Once you have your bitcoins, you can easily send them to your blockchain wallet from you coinbase account by plugging in your bitcoin wallet address.

Now that you have bitcoins, the next question is what do you do with them. With the popularity of bitcoin increasing recently, there are a multitude of merchants and vendors to pick from who accept bitcoin as payment. Examples include Overstock, Lord and Taylor, OkCupid, and tens of thousands of other businesses and individuals around the world. The beautiful thing about bitcoin is that the price of goods in bitcoin is the same as the price of the good in US dollars, so there is no fear of being harmed by the exchange rate. If a shirt costs $20, then the bitcoin cost will be equal to $20 as well.

Bitcoin is also great for the small business owner. By using Coinbase, you can accept bitcoin as a payment method for goods you sell online. Unlike other major credit card accepting companies, there is no fee charged to your business up to $1,000,000. Even after you make your first million, the transaction fee is then only 1 percent to cash out bitcoin. If you keep your revenue in bitcoin, even after the $1,000,000 mark, then there is a 0 percent fee, making bitcoin one of the best and most affordable payment methods on the internet. Bitcoin is a friend to entrepreneurs worldwide.

The beautiful thing about bitcoin is that it truly is the future. It can subvert governments, bank monopolies, and cross borders at the blink of an eye. Bitcoin could bring in a new era of trade, business growth, and prosperity to the world. You should make sure you are involved in this amazing phenomena that is not only life-changing, but history-making as well. The future is bright, and bitcoin is a major part of it.