One would be quick to assume that Bitcoin’s popularity in the financial world means that the technique of purchasing it is common knowledge. In spite of its celebrity status, this is, in fact, not entirely true. With cryptocurrency adoption constantly growing, it is a good idea to understand how to buy it. This article will shine some light on how to purchase Bitcoin.
Download a wallet
Now, before you buy Bitcoin, you have to download a Bitcoin wallet. You can do this by using such sites as Bitcoin.org, which walks you through different wallets based on your level of crypto knowledge. You can also create blockchain wallets through platforms like Coinbase or Paxful, which enable you to not only create a wallet, but use your digital assets. Alternatively, you can use a mobile app like Bitcoin Wallet for Android or Blockchain Bitcoin Wallet for iOS. To obtain this, the customer needs to fill out an online form with the most basic of details. Web3 wallets like MetaMask and Trust Wallet are browser based wallets that allow you to use your crypto on DeFi platforms while maintaining ownership of your private keys.
What is a “wallet”?
A Bitcoin wallet is a software program in which bitcoin is stored. Through a more technical perspective, Bitcoins are not actually put into storage anywhere. There’s a private key (i.e. a secret set of numbers and letters) for every Bitcoin address that each wallet owner must save and use to access the wallet safely.
These wallets simplify sending and receiving Bitcoins and grant ownership of the Bitcoin balance to the user. It comes in a wide variety of forms:
- Desktop – Available for use on a desktop computer and provides the user with complete control over the wallet. Desktop wallets allow the user to conceive a Bitcoin address for sending and receiving the bitcoins.
- Mobile – Actively overcomes the disadvantage of desktop wallets. That being that the latter is stuck in one place. Mobile apps take the form of paid apps. Once you run the app on your smartphone, the wallet can execute the same functions as a desktop wallet. Moreover, they help you pay directly from your mobile from basically anywhere.
- Web – These will allow you to use Bitcoins from anywhere. That means you can use them on any browser or mobile. The selection of your web wallet has to be done very carefully seeing as how it stores your private keys online
- Hardware – This is arguably the most secure kind of Bitcoin wallet. It stores Bitcoins on a physical piece of equipment, which is usually plugged into a computer via a USB port. They are all but immune to virus attacks and there have been very few reports of instances of Bitcoin theft. They allow users to store their Bitcoin offline as opposed to desktop, web and mobile wallets.
In general, establishing a digital wallet – in this case, a Bitcoin wallet – is important when it comes to obtaining cryptocurrency. Much like how Bitcoins are the digital equivalent of cash, Bitcoin wallets are akin to physical wallets. Rather than literally storing Bitcoins, the relevant information is actually what goes into storage. This includes the secure private key that accuses Bitcoin addresses and properly carries out transactions.
The image below shows an example of a Bitcoin wallet on a Coinbase account page. This page is very similar to online banking software that a majority of traditional commercial bank customers use.
Purchasing with regular money
At this point, you should now have your Bitcoin wallet ready to go. From here, you use a traditional payment method, which includes credit card, bank transfer (ACH), or debit card. This way, you are able to purchase Bitcoins on a Bitcoin exchange. Following the purchase, the Bitcoins are then transferred straight to your wallet.
The general availability of payment methods is subject to two things: the area of jurisdiction and the chosen exchange. The image below is a screenshot of the Bitcoin interface that shows how to buy and sell bitcoins. Not only that, but you can also buy and sell Bitcoin Cash, Ethereum, and Litecoin.
The user clicks the “Buy” tab to purchase digital currency and the “Sell” tab to sell digital currency. They then select which currency they are buying/selling and which payment method they want to use. They can use either their bank account or their credit card.
It’s important to note that the ‘Bitcoin exchange’ and the ‘Bitcoin wallet’ are not the same thing. Bitcoin exchanges are quite similar to foreign exchange markets. Exchanges are digital platforms where the exchange of Bitcoins for fiat currency occurs. They provide wallet capabilities to their users, however, it’s not their primary business.
Due to wallets needing to be secure, exchanges don’t encourage storing large amounts of Bitcoin; especially not for long periods. So, it’s a smart idea to transfer your Bitcoins to a secure wallet. Security may be your top priority when choosing a wallet, so opt for one with a multi-signature facility.
There is an abundance of exchanges that provide users with one-stop solutions with high-security and reporting. Regardless, you should exercise diligence while choosing a Bitcoin wallet or exchange.
Storing the Private Key
A traditional wallet holds your money; physical cash, debit cards, credit cards, etc. A Bitcoin wallet, on the other hand, is specifically for your private key.
You maintain your Bitcoin balance by using public and private keys. These are long strings of numbers and letters that link together through the mathematical encryption algorithm that creates them. The public key is similar to an international bank account number (IBAN). It functions as the address that’s shown to the world, and to which other people send bitcoins to.
The private key is akin to an ATM PIN number. It’s only for authorizing Bitcoin transmissions and should essentially be kept as a secret. This is primarily why the Bitcoin wallet holds it. Several safeguards for these particular wallets include encrypting it with a strong password and choosing the cold storage option. In other words, storing it offline.
You, the user, can use your Bitcoins and private key to conduct an array of tasks. You can purchase a commodity, pay for a service, or send money to other people. These Bitcoins are sent with the use of the ‘address’ of the recipient. By selling Bitcoins on the exchange, you will earn the Bitcoin sale price in the local currency.
With the ever-growing popularity of Bitcoin, it is important that we understand how to properly purchase it, lest we risk making one mistake too many. Hopefully, this article will have given you the insight that you need.