Need to know how to buy and sell Bitcoins? What are Bitcoins and where do they come from? Will Bitcoin last forever?
For thousands of years currency has worked more or less the same way. It was simple in the old days of course. Money meant an egg, a cow then coins or pieces of paper which had a certain value. But this is the 21st century, and metal and paper are so retrograde, aren’t they? Now we have a new form of currency which is not controlled by any central authority at all – cryptocurrency. Well that’s true of Bitcoin but not all cryptos! Bitcoin is the gold standard in cryptocurrency, the main coin that underpins the industry. We consider making gains on other coins just a process to get more Bitcoins. You enter and exit this market with Bitcoin ie you need to buy Bitcoins to buy most other cryptocurrencies.
What is Bitcoin? What does Decentralised mean?
Bitcoin is a purely digital form of currency which is “decentralised” meaning that it is not controlled or regulated by any central authority the way old fashioned traditional Dollars and Euros are. It is traded “peer to peer” which means that people exchange it directly between one another rather than going through a middle man, such as a bank. The network that maintains Bitcoins is run by miners who validate transactions with cryptography and record them on a public digital ledger called a blockchain.
A hugely important fact you need to understand is that Bitcoin is the only truly decentralised cryptocurrency at present. No government, no company, no individual owns or can shut Bitcoin down. Bitcoin really does give financial control back to an individual. THAT’S A CENTRAL CONCEPT OF BITCOIN! The sooner you understand the philosophical side of Bitcoin the sooner you are likely to fall in love with it and support it and not just see it as a way to make quick profits.
Who Created Bitcoin?
Bitcoin was invented by an anonymous person or group using the name Satoshi Nakamoto. Bitcoin was released in 2009. Even now, nearly a decade on, Satoshi’s identity remains a mystery. Is he one person or several? Is he really a man or a woman? Is he really Japanese? Is he caped and masked? Numerous theories about his, her, their real identity have been put forward in a sort of modern-Zorro hypothetical unmasking. Some of the propositions are possible, some are a bit of a stretch, some of them are completely stupid but the fact remains that none of them are proven. All we know about the real Satoshi Nakamoto is that its not this guy. Well actually this guys name is Mr. Nakamoto but he doesn’t know too much about Bitcoin. Well he might now after all the media attention he has had.
Why buy Bitcoin?
The five main reasons people buy Bitcoins are:
- To make a profit. Bitcoin has seen huge gains since its inception and many people believe it could be worth many times more in the coming years.
- As a store of value. Bitcoins main use case at present is as a store of value. Digital gold essentially. Many believe Bitcoin is in a head to head battle with gold. In our opinion Bitcoin will win. I doubt many Millennials see Gold as an investment. They do however see Bitcoins and Cryptocurrencies as investments.
- Anonymity. Bitcoins can be bought privately and anonymously if an individual wants this.
- As a medium of exchange. Bitcoins can be used to purchase goods and services online from retailers and peer to peer. It’s use case here is growing and as layer two technologies like the lightning network are deployed in 2018 it will become easier and more efficient as a medium of exchange.
- To purchase other cryptocurrencies. Bitcoin is often used as an entry crypto coin to then purchase other coins.
How do you Buy Bitcoin? Where do you buy Bitcoin?
There are different types of markets for buying Bitcoins. Brokers and exchanges are the most common.
For more details visit our buy bitcoin with a credit card or bank account page here. We’ve listed the best options available. Please be aware that currently it’s taking up to three weeks for many brokers and exchanges to verify new customer accounts. So get registered asap if you want to buy Bitcoin and other cryptocurrency in the near future.
Here a short video showing the basic process of buying your first Bitcoin.
A broker is a website that only sells you Bitcoins and other main crypto coins like Ethereum. Most brokers let you pay with credit cards, debit cards and bank transfers. An example of a broker is Coinmama. One of the easiest brokers to use. Check out our guide to using Coinmama.
Exchanges are websites that sell Bitcoin and other main cryptos like Stellar Lumens, Ethereum, Ripple and Litecoin. They also let you trade it for other cryptocurrencies and sell them for “fiat” or regular money. You can buy with your local currency on exchanges and also convert back to your local currency when you want to sell your Bitcoins or crypto. Here is an article on converting between your local currency and Bitcoin.
Examples of exchanges are:
CEX.io. One of the popular exchanges for beginners and advanced user alike. Their interface is easy compared to most of the other exchanges, which are covered with complicated graphs and flashing numbers and are difficult to figure out. CEX.io makes it easy to buy, sell and trade. Moving in and out of your local currency and Bitcoin is easy on this site. Read our full review of CEX.io.
Coinbase. One of the oldest cryptocurrency brokers. They have a solid reputation and make it easy to store and secure your funds.Coinbase offer lots of security but is the least private place to buy if you want anonymity. Read our full review of Coinbase here.
Brokers and exchanges are the most popular way to buy Bitcoin but there are others.
eToro is becoming increasingly popular. It’s a social trading platform with over 6 million users and is used in over 120 countries and growing. eToro has been around since 2007 and in March 2018 he secured $100 million in funding to expand even more. eToro is making itself well known in the crypto space and is adding new coins on a regular basis.
Etoro Its simple to use. You can follow a successful investor via their copy trade function. This is where you can choose to copy a successful trader’s moves. They state that over 78% of trades are successful when this function is used. That’s impressive. If you are new to Bitcoin and want to trade you could check out Etoro. Many exchanges are also experiencing long waiting time to get registered. If you encounter this you could also look at Etoro as an option for getting Bitcoin exposure.
LocalBitcoin.com is essentially a classified page for individual people selling Bitcoin. You find a seller with terms and rates you like and send the money directly to them via the method they specify (bank transfers are the most common.) The website holds the coins in escrow and gives them to you after the seller reports a successful payment.
Then you’ve got the good old-fashioned street wallah option – buying bitcoins directly from someone else in person. If you can find someone willing to sell to you, meet them, hand them some cash, and they send Bitcoin directly from their wallet to yours. Bitcoin meet ups are great places for this so you can build trust with likeminded people.
How do I keep my Bitcoin safe? What is a Bitcoin Wallet? What options are available for keeping my Bitcoin safe?
Old fashioned coins don’t go very well in old fashioned wallets. They make them bulge out and close improperly, and then you have a big conspicuous lump in your pocket that makes people think you’re packing heat. For Bitcoins though, you can keep it in a wallet. Many Bitcoin exchanges let you keep your coins on their website so you can easily trade them for other cryptos or sell them. Bitcoin wallets can be broken down into three major categories:
1. Web Wallets: The are wallets operated by websites. You create an account and store your coins there, which means that you will need to have an internet connection to check your balance.
2. Software Wallets: These are computer programs which let you store your coins directly on your computer.
3. Hardware Wallets: These are physical wallets, which look like USB sticks, and let you store your coins entirely offline. The Trezor and Ledger are the two industry leaders. Hardware wallets are advisable to use in our opinion if you are not trading your Bitcoins on an exchange. It means you are in control of your coins (private keys) not the exchange. Its is tempting and easy to leave coins on an exchange but be aware they could get hacked. You need to weight this up against your ability to figure out how to send your Bitcoins to your wallet.
Find more information our detailed guide to wallets section.
How do I change Bitcoin back into my local currency?
How do I cash out? That’s what every beginner wants to know. The easiest way to do this is to use an exchange to sell it in exchange for fiat (your countries currency) money which you then transfer to your bank account. Cex.io and Coinbase are examples of exchanges where you can buy Bitcoins with your local currency and also convert it back to your local currency; hopefully after you’ve made a profit!
To learn more about cashing in your Bitcoins read our article on Changing Crypto Back to Fiat.
How Does Bitcoin Work? Still confused?
This is probably the most difficult thing for beginners to understand (and when you get deep into the underlying cryptography and programming, it isn’t that easy for experienced people either). Basically, the entire Bitcoin network relies on the blockchain, a digital ledger that records all Bitcoin transactions so that the computers running the network can verify that people are spending coins they actually own, and that coins haven’t been spent twice. Transactions are crammed together into bundles called blocks before they are confirmed. Confirmation is done by “miners” whose computers solve cryptographical problems and come to an agreement that the block being verified is legitimate. Once the miners verify the block, it gets added to the blockchain and appears as transactions in the ledger. It’s a tough one to get your head around. You can find more information in our video guides section.
What are Altcoins? What is a Hardfork? And why you need to understand Hardforking.
Altcoins (alternative coins) are other cryptocurrencies, such as Litecoin, Ripple, Monero, Stellar Lumens and Cardano. Those are some of the most popular ones but there are hundreds of others and most work on the same blockchain technology as Bitcoin. Many coins are, in fact, derived from it. The process of creating a new coin is called “hard forking” which means (get your mind out of the gutter) that a blockchain has split and a new blockchain has been created.
2018 is the year of Hardforking
Hardforks are very common. When a hardfork happens you are given coins for free. For example if you owned Bitcoins when it Hardforked to Bitcoin Cash you got Bitcoin Cash for free, Bitcoin Gold, Bitcoin Privacy the list goes on and on as there have been many hardforks in the last few months and many are to come. Most people are totally unaware of this or don’t know how to claim their free money/coins/tokens. Hardforks can also be disruptive.
The hardfork of Bitcoin Cash was by no means friendly and created uncertainty and price fluctuations. As mentioned earlier we currently have what could be described as a civil war raging between maximalists and believers in Bitcoin cash, often called big blockers as they think Bitcoin needs to have larger block sizes to enable faster small payments. Bitcoin maximalist or core, as some people call them, would argue that the current block size is sufficient. It will be very interesting to see how the lightning network is adopted and if this makes Bitcoins usable for fast small payments.
Arguments aside, many see Bitcoins as a great investment as all these Hardforks could be viewed as dividend payments. This may entice Wall street and institutions to buy Bitcoins as they may view them as a dividend producing asset not just as a speculative asset or store of value.
Learn more about Hardforks and how to claim your free coins here.
What will Happen with Bitcoin in the Future?
What happens to Bitcoin is very much up to you. Owning Bitcoins, storing them properly, and understanding how to claim coins during hardforks or even which hardforks to avoid claiming coins in, is important. We also think that having a philosophical understanding of Bitcoin is important. Many people new to bitcoin simply are buying to make profits but as we have learnt Bitcoin is more than this, it a beautiful piece of technology that offers many benefits with individual financial freedom being just one. We hope you come along on this fascinating journey with us.