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How To Start Using Bitcoin

You’ve learned what Bitcoin is and how it works. So now, why not actually start using bitcoins? It’s incredibly easy to send and receive BTC, and this guide will show you how to get setup as a regular Bitcoin user or a Bitcoin merchant. Let’s get started.

How to buy Bitcoin?

After learning about Bitcoin for the first time, the next thing a person usually wants to do is learn how to buy Bitcoin. Although a common misconception is that Bitcoin is some kind of company with stock available for trade online, the reality is bitcoins are nothing more than a digital currency. This means bitcoins can be purchased or earned in ways similar to any other currency in the world. Here are some common ways you can buy bitcoins today.

How to buy Bitcoin locally

One of the best ways to gain access to the Bitcoin network is through other, local Bitcoin users. Certain apps, such as LocalBitcoins, allow buyers and sellers to find each other for the purpose of trading cash for bitcoins. This is the way bitcoins were intended to be traded. There is no need to store your bitcoins on a centralized server when you can simply meet up with someone in person who can fill the obligations of the other side of a trade.

In addition to trading in a P2P manner, you can also purchase bitcoins at different Bitcoin ATMs. There are already hundreds of these special ATMs in various countries around the world, and the number of them available to the general public is bound to increase over the next few years. The availability of these Bitcoin ATMs will usually depend on a country’s regulations on the digital currency, which means they may not be as plentiful in a place like the United States.

How to buy Bitcoin from a clearing house

For many individuals, purchasing bitcoins through a clearinghouse is going to be the most practical option. The best example of this method for purchasing bitcoins is Coinbase. This is a website that will always have bitcoins for sale, and they’ll even help you store them in a secure manner after the purchase has been made. Coinbase currently charges a 1% fee on every purchase of bitcoins through their website and mobile app, but this fee could drop as more competitors, such as Circle, enter the market.

One of the downsides of using a clearing house, such as Coinbase, to purchase bitcoins is that it removes the privacy and anonymity of Bitcoin that can be enjoyed at the protocol level. There are plenty of steps for identity verification that need to be taken before you can purchase bitcoins on this kind of website, so that’s something to keep in mind before blindly searching for the simplest website to purchase bitcoins.

How to buy Bitcoin on a Bitcoin exchange

Buying bitcoins on an exchange is usually going to be the most cost-effective method of entering the market, but it can also be a bit inconvenient. These exchanges are perfect for individuals who wish to day trade, but they may be impractical for individuals who are simply looking to buy and hold. Users who are looking to take advantage of some kind of Bitcoin discount at an online store may also find that exchanges are not fast enough for these kinds of Bitcoin purchases with deadlines.

Exchanges usually come with the same identity verification requirements as clearinghouses, if not more. This is another factor to think about before opting for a Bitcoin exchange that seems to be offering the best rate on the market.

Your bitcoin wallet

As with all forms of currency, you need a place to keep your money. With traditional (fiat) currency, most people keep a small amount of money in a wallet or purse while keeping the rest of their savings at the bank. Let’s see how to do something similar with bitcoins. While there are many different ways to store bitcoins, this guide will examine some of the easiest methods for new users.

In simplest terms, bitcoins are stored in digital wallets. A Bitcoin wallet is simply a piece of software that can store, send, and receive BTC. However, there are many different wallets to choose from, each with its own pros and cons. Regardless of what you choose, it’s a good idea to keep two wallets – one for spending and one for your savings. Bitcoin doesn’t rely on financial institutions like banks, and instead, users have complete control over their money. While this might sound like a huge responsibility, this guide aims to show how easy it is to be your own bank.

YOUR SPENDING (HOT) BITCOIN WALLET

Your first wallet will be used for day to day transactions, similar to the physical wallet in your pocket or purse. This type of wallet is also sometimes referred to as a “hot wallet,” meaning that it is connected to the Internet. One very popular and easy to use hot wallet is Blockchain.info, a wallet that can conveniently be accessed from anywhere in the world on any device as long as you’re connected to the Internet. To start using Blockchain, simply navigate to this page, and create an account. In just a few simple steps, you’ll have your own Bitcoin wallet!

YOUR SAVINGS (COLD) BITCOIN WALLET

Now this is where you want to make as few compromises as possible regarding security. Your savings wallet will be similar to your savings account at the bank. Since you’ll be keeping most of your bitcoins here, you’ll want to use the best possible security. One of the ways to achieve this is by making your savings wallet a “cold wallet,” meaning that it’s not connected to the Internet. By remaining offline, a cold wallet is far less vulnerable to hackers. A very easy to use cold storage solution is Coinbase Vault.

Without getting into the technical details, the way the Vault works is that Coinbase stores your bitcoins offline in various secure locations around the globe. Withdrawing coins from the Vault requires multiple layers of verification, and withdrawals are time-delayed by 48 hours, meaning the transaction can be cancelled during that 48-hour window. Coinbase has been independently audited by trusted members of the community, and is used by prominent companies such as Dell, Expedia, and DISH Network.

But of course, as mentioned above, you don’t need to trust a third party like Coinbase. It just might be more convenient, especially for newer users. To truly be your own bank, you can generate a paper wallet or use an offline hardware wallet. But these are beyond the scope of this guide.

USING YOUR BITCOINS

So you’ve got your wallets set up. Now it’s time to start using those bitcoins! If you don’t have any BTC, you can buy some from a Bitcoin exchange. There are also some free ways to get bitcoins. But of course, the most basic feature of money is that it can be used to buy things. So where can you actually spend bitcoins? The list might surprise you:

HOW TO ACCEPT BITCOINS FOR MERCHANTS?

Perhaps you’ve got your own business and are interested in accepting Bitcoin payments? If that’s the case, services like Coinbase and BitPay make it incredibly easy for merchants to accept bitcoins. Depending on how popular your business is, you’ll see little to no fees for accepting bitcoins (and the fees will always be less than those of fiat payment processors like PayPal).

All in all, it’s both easy and advantageous to start using Bitcoin. Hopefully, this guide will help you get set up. And if you have any questions, feel free to leave them in the comments.

How to trade Bitcoin?

As soon as day traders realized that Bitcoin may be here to stay, a large number of them decided to start trading bitcoins on various Bitcoin exchanges. Although the early days of Bitcoin were plagued with plenty of scams where exchanges or wallet providers would run away with the bitcoins overnight, the reality is that we are now looking at a much more mature market for trading bitcoins.

Whether you’re looking to enter your trades manually or have some trading bots do all the work for you, it’s important to understand how Bitcoin trading actually works before you dive into the deep end.

Choosing a Bitcoin exchange

The first thing you need to do when you want to learn how to trade bitcoins is to figure out where you’re going to be doing your trading. Although this is supposed to be a decentralized, P2P currency, the reality is that it’s currently impossible to do high-frequency trading without the help of a centralized server. These centralized servers have been known as a point of weakness for the Bitcoin market as a whole, but improvements in security have slowly been rolled out to various exchanges over time.

If you’re going to trade bitcoins on a regular basis, then you’ll need to have some deposits at one or two Bitcoin exchanges at all times. While platform features and unique trading options may be the most important aspects of exchanges in other markets, the reality is that security is the most important feature to think about when trading bitcoins in a hot wallet. Factors such as longevity, two-factor authentication, and proof-of-reserve are going to be the most important features to look at when choosing an exchange.

Longevity and two-factor authentication are two factors that you probably have in the back of your head for traditional exchanges, but proof-of-reserve is a new feature for Bitcoin exchanges that should be viewed with the utmost importance. Bitcoin exchanges are able to prove that they actually have the bitcoins they say they have by signing messages from Bitcoin addresses containing large amounts of bitcoins, so this should calm some of your fears when it comes to the possibility of an exchange running a Ponzi scheme. Certain exchanges that offer proof-of-reserve, such as Kraken and Bitstamp, should be at the top of your list.

Buy and hold Bitcoins?

Once you’ve signed up for a Bitcoin exchange and verified your account, you can then start to think about your own trading strategy. There are plenty of traders who try to time the market on a daily basis, but the reality is that the buy and hold strategy is the one that has paid off for the largest number of Bitcoin holders in the past. You never know when a piece of regulatory news out of China or a newly announced killer app could cause a huge price swing one way or the other, so it’s usually a good idea to throw your emotions out the window and simply purchase bitcoins on a regular basis. This will be weekly for some traders, while others will decide to pick up a few bitcoins on the first of every month.

Attempting to trade bitcoins without understanding why you purchased them in the first place can also be a huge issue. Bitcoin has been known to drop in price by as much as 50% in a single day, so you cannot be tempted to exit the market at a loss when these kinds of events take place. Trading bitcoins without a view that the price will eventually go higher as the price increases can be problematic due to the fact that you will probably end up buying high and selling low.

Report your profits

One last thing to remember when it comes to trading bitcoins is that this currency is not really anonymous when you’re using a centralized exchange. After all, the exchange knows all about your true identity due to the various AML and KYC regulations they are all required to follow. Having your bitcoins increase in value in terms of dollars is not something that will be easy to hide from your local government during tax season. These earnings are viewed as capital gains in most countries, so you should remember to fill out your yearly tax return with that fact in mind.

What are the ways to earn Bitcoin?

Bitcoin is the newest craze. You’ve heard the stories of the average Joe whose initial small Bitcoin investment turned into millions nearly overnight. Unsurprisingly, you want to get in on the action. Fortunately for you, it isn’t too late! Bitcoin is a very young currency and it’s growing every day. Many Bitcoin enthusiasts believe that people who invest even today are ‘early adopters’: people who are taking the leap to try out Bitcoin and may get large returns on their investment in the future. There are many ways to earn bitcoins. Any job that you can do to get paid for in a national currency, you can in theory get paid for in Bitcoin. Here are some things you can do to get Bitcoin:

Mine

If you’ve been following Bitcoin in the news recently, it’s likely that you’ve heard of ‘Bitcoin Mining’. And no, get that image out of your head of thousands of people traveling to a physical underground cave and mining bitcoin ore. Bitcoin mining all takes place on a computer: the computer attempts to solve a mathematical problem, and everyone who’s mining for Bitcoin competes to solve it first. Whoever solves it first gets about 25 bitcoins. It may seem like computers can solve the problem in a few seconds, but this isn’t the case. As bitcoin mining has evolved, people have been creating computers specifically made for mining Bitcoin. As the problems are solved faster, the difficulty of the problems increase and become harder to solve.

You can try to mine bitcoins, but at this point it isn’t likely you’ll make a profit anytime soon. People and companies have invested millions into mining hardware, and it’d be difficult for a small-time miner like you to compete against them. Taking into account the cost of the electricity your hardware uses to mine and the difficulty of the problems increasing, your chances of making a profit are slim, and it’d take months for you to make a return on your investment if at all. Your best bet would be to try to find a place with ‘free’ electricity; an example of this would be an apartment where the electricity comes with the rent, so you won’t be directly paying for all of the electricity the miner uses. Here are some terms you should know while doing research:

  • ROI: Return On Investment. The amount of time it’ll take to start to make a profit on the miner. This may or may not take into account shipping, electricity and/or pool fee costs.
  • Hash: How many calculations a miner runs through in a second. One hash=one calculation. Note: Every hash unit (e.g. Kilohash, Megahash) from here on out has 1,000 times the hashrate of the last.
  • KH/s: Kilohashes/second. One Kilohash=1,000 hashes.
  • MH/s: Megahashes/second. One Megahash=1,000,000 hashes.
  • GH/s: Gigahashes/second. One Gigahash=1,000,000,000 hashes
  • TH/s: Terahashes/second. One Terahash=1,000,000,000,000 hashes.
  • PT/s: Petahashes/second. One Petahash=1,000,000,000,000,000 hashes.
  • W: Watt. A measurement of the amount of electricity the miner uses. A higher wattage means the miner uses more electricity, and your electric bill will be higher.
  • ASIC: Application-Specific Integrated Circuit. In general, an ASIC is an electronic chip designed for a specific use. Specifically in Bitcoin, ASICs are powerful computer chips used to mine Bitcoin. The introduction of ASIC chips greatly increased hashrates for Bitcoin miners.
  • Algorithm: Each digital currency has an ‘algorithm’; quite a few algorithms exist. Bitcoin uses one called SHA-256. If you see a miner called a ‘Scrypt’ miner, it probably doesn’t work with Bitcoin. However, all miners that are ‘SHA-256’ miners can be used to mine Bitcoin.

Find work

As stated above, you can theoretically get paid in Bitcoin for doing anything you can get paid for in any other currency. As Bitcoin is so young and constantly growing, newly-created Bitcoin companies are almost always hiring. You can try to find a job for which you’ll get paid in Bitcoin at any of these sites:

  • Coinality.com– A Bitcoin job board. People post jobs that they’re hiring people to do and people looking for work apply for the job if they’re interested.
  • /r/Jobs4Bitcoins on reddit– Offer your services and hope someone contacts you with a job offer or browse listings of people looking for people to hire.
  • Work For Bitcoin (BitTask)– Another Bitcoin job board.
  • BitcoinTalk Services forum– Similar to a Bitcoin job board but in forum form: businesses can offer jobs and users can offer their services to work. Interested users either reply or private message the offering user.

Sell product

Invent a product or resale an already created one! Create a website, describe your product, set up an online store, get the word out about your product, and integrate a bitcoin payment processor! I recommend BitPay as it’s a very well-known bitcoin payment processor used by thousands of merchants, and can be integrated both online and in physical stores.

In summary

Bitcoins can be earned through multiple means, and one way isn’t necessarily better than another. It’s all about innovation, determination, and doing research. Think of a new project. Be confident when applying for a job and don’t give up if your application is denied. Do research before buying a Bitcoin miner, as there is no guarantee that you’ll make a profit. Bitcoin is a young currency and idea that has a ton of potential, and you can help it grow by using it.

Disclaimer: The third party services mentioned in this article, including, but not limited to, Coinbase, Blockchain, Gyft, etc. are used purely as examples. The use of the above-mentioned services should not be considered an endorsement from us. We cannot guarantee the continued availability of these services nor does we accept any responsibility for any loss, including financial loss, incurred as a result of using the above-mentioned services. While we’re fairly confident about the legitimacy of these services, you are urged to do your own research.

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