How to buy bitcoin: a step-by-step guide for beginners
Do you want to get some bitcoins, but you do not know how to? It is much easier than it may seem, primarily because of absence of lengthy bureaucratic setup procedures. No doubt, there are lots of issues you need to understand about cryptocurrency wallets, exchanges and transactions. However, after your first purchase you will buy bitcoins without any troubles.
Step 1: Get a Wallet to Move Your Bitcoin to.
Simply put, a bitcoin wallet is a place to receive and store your new bitcoins and monitor bitcoin balances. Just like you need a bank account to manage your finances, you need a bitcoin wallet to manage your bitcoins.
Your choice of wallet depends on your aims. In fact, there are two main types of wallets: cold storage (offline) wallets and hot storage (online) wallets.
These wallets are not very popular yet, because they are suitable only for long-term (cold) storage for investment purposes. However, offline wallets are much safer, than online ones.
Among cold wallets are Hardware wallets (Trezor; Ledger), programs that store a user private keys in a hardware device, and Paper wallet, simply a piece of paper that contains a cryptocurrency address and a private key.
Hot or online wallets are connected to the Internet. They provide online storing of your private keys on a computer controlled by someone else. An undoubted advantage of online wallets is that you can access them from anywhere. For this reason, they are the most popular type of bitcoin wallet.
However, hot wallets are not recommended for storing large amounts of bitcoins or storing bitcoins for a long time, because of possible vulnerabilities in the systems of a wallet platform.
You may also hear something about software wallets, applications downloaded to your phone, computer or tablet. Among them are desktop wallets (ArcBit; Armory; Bitcoin Core; Bitcoin Knots; Bither; Electrum; Green Address; mSIGNA) and mobile wallets (Android-based Bitcoin wallet, Mycelium, Xapo, Blockchain).
Step 2: Choose an Exchange and Buy Bitcoins
Bitcoin newcomers will find lots of exchanges and wallets competing for their business.
Some are full-blown exchanges for institutional traders, while others are simpler wallet services with a more limited buying and selling capabilities.
Do not forget that all exchanges and wallets can not provide the such protections as banks do. You do not have any guaranteed way to recover your funds, if the exchange you chose goes out of business or your personal wallet is stolen by hackers.
The best exchange option often depends on where you are located. For more information, you can check out this list of major bitcoin exchanges/wallets around the world, and the payment options they allow.
It is also necessary to mention the LocalBitcoins exchange, which is used for face-to-face trades with local sellers. LocalBitcoins is the primary site where such transactions are arranged and prices negotiated. The site also provides an escrow service as an added layer of protection for both parties. At the moment you transfer money LocalBitcoins freezes seller’s bitcoins until successful exchange is complete. So you have no reason to fear scammers. Usually waiting for getting bitcoins takes a couple of minutes.
Step 3: Move Your Bitcoins from an Exchange to Your Wallet
Well, now bitcoins you bought are transferred to your exchange account. Nevertheless, it is not the end. Unfortunately, exchanges can close in an instant and you can lose all your bitcoins. Therefore, funds need to be transferred to your wallet.