What is Bitcoin?

Bitcoin is a way to pay for things that exist only virtually. It is one kind of digital currency or cryptocurrency. In 2009, the currency debuted and in 2017, really broke into mainstream consciousness with its rapid rise that year. When computers that organize the currency process and legitimize transactions in the currency, coins are created, or “mined”. 

Bitcoin uses a distributed ledger called a blockchain that tracks transactions in the currency–a decentralized network of computers to manage everything. It’s like a large public record of all transactions that have taken place in the currency. And ensuring the currency’s integrity and the ownership of bitcoins, the network monitors everything.

Before you buy Bitcoin

Before buying Bitcoin, you need a place to store it first of all. That place is called a ‘wallet,’ and they come in a variety of forms in the world of cryptocurrencies. different kinds of security, storage and access options are given by Different kinds of wallets to the Bitcoin owners.



However, it is important to know that your wallet doesn’t technically store your Bitcoins. Instead, private keys, essential for accessing a Bitcoin address and being able to spend the funds, are held by it. Those digital keys are required to sign a transaction, and they essentially lose access to their Bitcoins, if the user loses them.

Things To Consider While Buying Bitcoin

The good news is that you now have many options if you’re looking to trade bitcoins. Since many major brokers offer a way to buy them, you may not even need to open a separate and specialized account to do so. (Here are some of the top brokers for trading cryptocurrency.) Plus, some unexpected players – PayPal, for example – now allow U.S. residents to buy, sell and hold Bitcoin too.



Since they should influence your choice of where to buy it or whether to ultimately avoid it altogether, as you’re considering how to buy Bitcoin, you’ll want to evaluate the following factors.

  • Ownership. What do you exactly want to own? You can own Bitcoin directly or a derivative such as a futures contract, which offers a return on the currency’s movement.
  • Upside/downside. Your potential gain is related directly to whether you own the currency via futures contract or directly. Your profit increases by a dollar with every dollar increase in the currency by owning Bitcoin directly. In contrast,  without having to front as much capital, in future, you can gain much more quickly. However, while you can lose more money with futures, your downside is more limited by owning directly.
  • Cost. Depending on how you purchase Bitcoin, Commissions can vary widely. While some brokers may charge you several cents to buy directly, Futures contracts get you a big piece of the action relatively cheaply. A few percent might not sound like a lot, but it will quickly eat away at your profits if you’re trading in and out of the market.
  • Security. Making sure that it’s secure is one of the biggest concerns with any investment. Some recent cryptocurrency players have had severe problems with security. For example, in 2019, one high-profile cryptocurrency exchange called Binance was hacked for thousands of bitcoins. More traditional brokers have been dealing with the issue for much longer, they may offer better security.

As part of commercial transactions, you may also receive bitcoins. Any transaction in the cryptocurrency is reportable to the IRS at tax time, regardless of how you came by your coins.

bitcoin wallets

bitcoin wallets


Types of wallets To Keep Your Bitcoin

  • Desktop

Providing complete control of the funds and relative budget safety, a desktop wallet is installed on the user’s computer. There are thick desktop wallets, which provide independent security management of their funds and as well as allow users to download network blocks and control their authenticity. On the other hand, to download blocks and can be easily downloaded to a portable device, thin wallets don’t require users.

  • Mobile

User’s funds are always on hand in a mobile wallet and that is the main advantage. It is an extremely convenient way of paying for goods by scanning QR-codes. In some cases, users can take benefit of their phone’s near-field communication option, which allows them to just simply tap their phone against a reader and not enter any information at all. Mobile wallets are not full of Bitcoin clients, and this is one common feature of all of them. This is because the entire Blockchain must be downloaded by a Bitcoin client, which is continuously growing and requires several gigabytes of storage.


  • Online

Users’ private keys are stored online, on a server controlled by someone else and connected to the Internet, if using a web-based wallet. There is always a risk of the server being hacked or even the organization running the service taking control of your Bitcoins, while it allows people to easily access their funds from any device anywhere in the world. , However, by implementing a variety of security measures, this risk can be significantly reduced.

  • Hardware

Dedicated portable devices that can hold private keys and help facilitate payments are hardware wallets. There are various kinds of hardware wallets, but all those allow its users to carry essentially any amount of money in their pocket.

  • Paper

A paper wallet is basically two QR-codes, generated using a designated service and it is perhaps one of the safest options for Bitcoin storage. One among them is a public key, an address that can be utilized to receive BTCs. Using which you can spend Bitcoins stored at that address, the other one is a private key.

buy bitcoin

buy bitcoin

Ways to buy bitcoins

  • PayPal

Directly using the same app that you’ve come to trust with your online payments, PayPal makes it tremendously easy to buy or sell bitcoins. For trades involving less than $, 25 you’ll pay $0.50, and from there PayPal uses a sliding commission scale that starts at 2.30 percent for trades over $25 and declines to 1.50 percent for trades of more than $1,000. Though there’s a spread markup, you can trade as little as $1 at a time and you won’t pay a fee for holding cryptocurrency in your account. Litecoin, Ethereum, and Bitcoin Cash are also tradable here.

  • Coinbase

For cryptocurrencies that allows you to own the currencies directly, Coinbase is a specialized exchange. You’ll be able to trade Bitcoin, Bitcoin Cash, Litecoin and Ethereum, and dozens of the most popular cryptos. For extra security,  a vault with time-delayed withdrawals by the CoinbaseYou are also allowed to store your coins. It charges a spread fee of 0.50 percent and with the funding source and the size of the transaction, it then adds on a transaction fee that varies. add another 1.49 percent could be typically added by This fee on to your costs but even more with a debit card.

The fee structure is confusing, to say the least before you actually have to make the payments, even though Coinbase promises to show you what you’re paying.

  • Robinhood

Robinhood applies it to cryptocurrency and takes its best trick – no commissions –. You will have access to more than a dozen other digital currencies, too, a feature that other brokers listed here don’t offer, and will be able to buy bitcoins directly. While you’re on the easy-to-use platform, Of course, you’ll be able to buy stocks, ETFs, and options.

  • Interactive Brokers

You’ll be able to buy futures contracts on Bitcoin at Interactive Brokers, but won’t be able to own the currency directly. $15.01 is charged per contract by the broker charges, which gives you exposure to five bitcoins. Giving you access to securities across the world, interactive Brokers also provides a whole range of other tradable securities.

  • Bitcoin ATM

Though you’re likely to pay much more in commissions than you would elsewhere, Another option is to buy bitcoins directly through a Bitcoin ATM. Using cash or a debit card, you’ll be able to buy bitcoins and some ATMs will allow you to sell them too. But to make the transaction, you may need a Bitcoin wallet. With some ATMs charging around 7 percent per transaction, Commissions can be pricey, while the fees at others may stretch into the teens.

Name

Payment method

Security

Verification levels

Fee

Bitfinex

Bank transfer, Ethereum, Dash Monero, Zcash

2-step verification, universal 2nd factor, withdrawal protection, Advanced API key permissions, email encryption

Not required for making a deposit with cryptocurrency, deposits in USD or EUR require ID verification

0% – 0.1%

BitFlyer

Bank transfer, Credit card, Bitcoin

Real people verify transactions, cold storage

Creating account with just an email, more  features with additional verification details

0.01%-0.15%

BitStamp

Wire transfer, Credit card,

SEPA transfer, SWIFT transfers

2-step authentication, exchange regulated by the Commission de Surveillance du Secteur Financier

Identity verification (ID scans, proof of residency)

0.1%-0.25%

BTCC

Bank transfer

SSL encrypted traffic, real-time internal controls, cold storage

Identity verification (ID scans)

0.1%-0.2%

Coinbase

Wire transfer, link your bank account directly to Coinbase, Bank transfer, Credit card, Paypal

Vault feature (share an account with 2 or more users, every transaction requires the approval of all users), FDIC insurance for US residents, cold storage

Identity verification (ID scans), Credit card verification for raising limits

 

1,49%-3,99%

GDAX

Bank transfer, Credit card

2-step authentication, encrypted email service, cold storage

Identity verification (ID scans)

0.01%-0.25%

Gemini

Bitcoin, Ethereum, Wire Transfer and ACH

2-step authentication, FDIC insurance for US residents, cold storage

Identity verification (ID scans)

0.25%

itBit

Wire transfer

2-step authentication, FDIC insurance for US residents, cold storage

Identity verification (ID scans, proof of residency)

None

Kraken

Bank transfer, Altcoins

2-step verification, master key for account recovery, global setting lock, encrypted email service

Full name, DoB, Country, Phone number, Address verification

0.16% – 0.26%

Difficulties of buying Bitcoin

  • Credit card or PayPal

It may come as a surprise, but no matter which exact trading method you’re using, it’s still not easy to buy Bitcoins with your credit card or via PayPal, depending on where you are in the world. Requiring users to connect their bank account instead, exchanges avoid those payment methods. Preferring hard cash Most private sellers tend to be wary of such transactions as well.

This is because of so-called ‘chargebacks.’ By simply calling the card-issuing company, most transactions made using credit cards or PayPal can easily be reversed. Bitcoin transactions can be tough to prove that any goods changed hands in a transfer of Bitcoins and are irreversible; this payment method is generally avoided.

Warnings about buying Bitcoin

  • Legality problems in your country

Interest from law enforcement agencies, tax authorities, and legal regulators is certainly attracted by Bitcoin. How the cryptocurrency fits into already existing frameworks is what they are trying to understand. How legal your Bitcoin activities depend on what you are doing with it, who you are and where you live. Essentially, the answer for most countries is simple: you are not breaking any laws if you’re not spending your Bitcoins on anything illegal.

Most governments have had enough time to decide on its legality as Bitcoin has been around for a while. BTC is only illegal in Vietnam, Iceland, Bolivia, Ecuador, Kyrgyzstan and Bangladesh, as of September 2017.  Thailand and Russia have initially outlawed all digital currencies, but backtracked soon after, while Some other countries have not taken an official position on the issue. In order to combat illegal transactions, recently, Russian authorities have even considered officially recognizing Bitcoin and all other digital currencies.

buy bitcoin

buy bitcoin

Pieces of advice about buying Bitcoins

It is essential to treat your private key (comparable to an ATM PIN) as a guarded secret when trading in Bitcoins and only uses it to authorize BTC transactions. protecting The private key would be a smart idea and it is kept in your wallet. For example, back your wallet up or choose the cold storage options, which basically means keeping it offline, you can encrypt the wallet with a strong password. To store your keys, some exchanges even offer a ‘multisig vault’ option. To partially control the address with a public key, multi-signature addresses help multiple people. So, when a person wants to spend some of the Bitcoins stored at that address, he/she would need some of these people to sign their transaction in addition to themselves. The necessary number of signatures is agreed usually upon when people involved in creating the address.

Finally, it is very important to remember that it isn’t their primary business, while most exchanges offer wallet capabilities to their users. Moreover, instances of exchanges shutting down and running away with their users’ funds are filled up in the cryptocurrency history. For those reasons, it is recommended that you move your money to a wallet of your own and make sure that it is safe, secure and protected if you decide to buy your Bitcoins from an exchange.