The idea of buying cryptocurrency can be daunting. After all, it's not like going to a bank and opening a checking account.
But for most people, setting up a cryptocurrency account is actually easier than going to a bank. This guide will help you purchase and send Bitcoin for the very first time.
I'll also show you the benefits of using cryptocurrency and give you a basic idea of how it works.
To buy Bitcoin for the first time, open an online account with a reputable cryptocurrency exchange. Link a payment method to your account, such as a bank account, PayPal or debit card. Most exchanges will require you to verify your identity (KYC or Know Your Customer) before you buy. Once you're approved to buy, click the buy button in your account and enter the amount of Bitcoin you want to buy, in your local currency.
More detailed steps and tips are provided below.
The Benefits of Using Cryptocurrencies Like Bitcoin
Before we get started on how to buy Bitcoin, let's take a quick look at why Bitcoin is useful.
The biggest benefit of Bitcoin is that it's decentralized.
That means that no central authority controls it, so gatekeepers cannot control who you send money to or receive money from.
You don't have to pay a bank a huge fee to screw up your money wire, or wait 7 days for your money to be sent between banks.
Your cryptocurrency will be sent within about 30 minutes or less and you don't need to ask anyone for permission.
How Bitcoin Works (Layman's Version)
Now that you understand the benefits, you're probably wondering how it works.
I won't bore you with the unnecessary details, but the Bitcoin blockchain is a database. This database stores all of the Bitcoin transactions ever done on the blockchain.
Banks use their own databases to store your account information. But that database is stored on their servers.
The Bitcoin blockchain is stored on thousands of computers across the world.
This may seem unsafe, but it's actually safer.
Every time a transaction happens on the Bitcoin blockchain, all of the copies of the database get updated. You can think of it as the database getting backed up on thousands of computers.
If someone wanted to alter Bitcoin transactions, they would have to change at least 51% of all of the copies out there.
This is because the Bitcoin network is built to use the version of the blockchain that most of the computers on the network agree on. So the more copies if the database there are, the harder it is to hack the blockchain.
Just like with your online bank account, the “password” to each wallet, also known as the private key, is only known to the owner of the wallet.
So although the database is on multiple computers, the passwords are secure.
Now that you have a little background on Bitcoin, let's jump into how to do your first Bitcoin buy.
Step 1: Find an Reputable Exchange in Your Country
To get started, find the best exchange in your country.
It might take some time to do the research, but it's worthwhile to deal with a reputable company.
Coinbase is one of the top websites to get Bitcoin in the US.
You can also check out Binance if you want to exchange your Bitcoin for tokens on the Binance network.
If you are in another country, check to see which websites are available to you. Before you open an account do your due diligence and find out which services are reputable.
Step 2: Get Verified
Any reputable website will have to verify you, in order to keep accurate records of your transactions. This is to comply with Anti Money Laundering (AML) laws.
In order to get verified, you will usually have to send in a copy of your driver's license or passport. Other information may be required, but that is generally the minimum.
To withdraw money, you'll probably have to give up a social security number.
That's just the way it goes for any type of financial account, even your bank account.
Step 3: Connect Your Debit Card or Bank Account
Now it's time to connect your debit card or bank account to your Coinbase account.
If you have a debit card that gives you miles or rewards, this can be a great way to do some travel hacking.
Coinbase also now offers PayPal and money wires and funding options.
Adding your bank account or debit card to your Coinbase account is just like adding your credit card to an ecommerce website.
Step 4: Buy Bitcoin
You are now ready to buy some Bitcoin.
If you're using Coinbase, simply enter the US dollar amount that you want to purchase.
Then click the Buy button.
That's all there is to it!
Congratulations, your account will now show that you own some Bitcoin.
How to Store Your Bitcoin Safely
After you celebrate your first Bitcoin purchase, it's time to think about securing your investment.
Never keep your Bitcoin at an exchange or in an online wallet. Your account could be hacked or if the company goes out of business, you could lose your Bitcoin.
When you put your cryptocurrency into a hardware wallet or non-custodial app, you control the private keys, or passwords.
I would suggest using a hardware wallet like the Ledger Nano. It will greatly reduce your risk of having your Bitcoin stolen.
To get more information on how to store Bitcoin safely on a Nano, read this post.
How to Send Bitcoin
To send Bitcoin to someone or to pay for something with Bitcoin online, all you need is their public key.
This is like an account number for a traditional bank account.
The public key can be really long and difficult to enter into a website or app, so QR codes are an easy way to enter the key.
Just scan the QR code with your mobile phone or laptop camera and the public key will appear on the screen for you to use.
A QR code looks like this. It's a fancier version of the barcode that's used in stores.
Once you have the recipient's public key entered, enter the amount of Bitcoin you want to send them and hit the Send button.
How to Buy Altcoins With Bitcoin
Now that you have some Bitcoin, you might want to buy some other cryptocurrencies too.
Having some Bitcoin makes it super easy to buy altcoins.
First, do your research and identify the altcoins that have the most potential. If you want to learn about what to look for in potential altcoin investments, read this article.
Once you find a coin that you want to invest in, sign up with an exchange that has the coin you want.
Then send some Bitcoin from your Coinbase account by following these steps.
- Select your account
- Click on the send button in your Bitcoin (BTC) wallet
- Enter the recipient's public key, also known as the public address
- Enter the amount of BTC you want to send in US Dollars
- Click the continue button to send your Bitcoin
The Recipient Address will come from the exchange that you signed up with.
In your exchange account, find your Bitcoin wallet address.
Then copy that address into the screen above. Click on the Continue button and verify the transaction.
Be patient, the transfer can take up to an hour.
Once you have transferred your Bitcoin to your exchange, you can buy any altcoin that is available on that exchange.
Cashing Out Your Bitcoin
If you want to turn your Bitcoin into cash, then the easiest way is to simply use Coinbase to convert your Bitcoin to your local currency.
You just have to connect your bank account to your Coinbase account.
When you are ready to cash out your Bitcoin, simply convert your Bitcoin back to cash.
Avoid PayPal
There are some companies that allow you to buy Bitcoin, but you cannot actually transfer it to your own wallet. You have to sell the Bitcoin and turn it back into fiat currency on their platform.
Remember, that if you don't own the keys to your wallet, you don't actually own the crypto in the wallet.
So avoid using services like PayPal, that don't allow you to move Bitcoin into your own wallet.
There is also the chance that they don't actually own all of the Bitcoin that they say they have on their platform.
If you cannot transfer the Bitcoin off their platform, then they don't actually need to have it.
They could be acting like a “bucket shop” that only accepts trades, but doesn't actually own the underlying asset.
I'm not saying that PayPal is doing this. All I'm saying is that companies that don't allow you to move your Bitcoin could be doing this.
Beware.
Conclusion
That wasn't so bad, now was it?
Once you make your first purchase, I think you will find that it is easier than you thought it would be.
Remember that getting Bitcoin is the easy part.
Keeping it safe can be a little more difficult.
But if you take the right precautions, your Bitcoin will stay safe until you are ready to cash it in.
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