How to Buy and Sell Bitcoins.
So you want to buy some Bitcoin? Digital Cryptocurrency has recently experienced some crazy ups and downs; more and more people are beginning to accept Bitcoin as a currency that might just stick around for a long time. Before buying Bitcoin or any other Crypto, you must ensure to have a safe ‘wallet’ to store it securely.
Bitcoin Wallets
Bitcoin wallets are secure ways for you to store your Bitcoin, as well as confirm and validate your Bitcoin transactions as you use Bitcoin. The wallet helps to keep the private key secret, as this is what is used to validate Bitcoin transactions when you purchase something online with them. Most online Bitcoin exchanges will have in-built wallets as part of their account features — you must confuse this with an actual Bitcoin wallet.
The shared Blockchain ledger that records and confirms all Bitcoin transactions is merely a record of exchanges between wallets. When you buy something using Bitcoin online, you are sending Bitcoin value from your wallet to the seller’s.
So, the owner of each wallet will have to key in a secret code to validate and record the transaction. This secret code for each user provides mathematical proof that these two parties indeed own their Bitcoin.
To go off on a slight tangent, the specialized computers that validate these transactions by solving the mathematical problems occasionally get rewarded with one Bitcoin each, in a process that is known as Bitcoin Mining.
Your Bitcoin wallet can store as much Bitcoin as you like; no upper limits exist. If you are using a Bitcoin exchange’s built-in wallet, you likely pay a tiny transaction fee every time you transact. Outside popular Bitcoin exchanges, however, you will be charged anywhere from $0 to $200 to acquire a Bitcoin wallet.
For your Bitcoin wallet needs, the most important factors that you should consider before acquiring one are; the wallet security, cost, and what other people are saying about them. The best wallets are generally the safest. Once you ensure that a wallet is safe, feel free to purchase one within your desired budget range.
Examples of the most recognized Bitcoin wallets are; Exodus, Electrum, Mycelium, Ledger, and Trezor.
Types of Bitcoin Wallets
Generally speaking, Cryptocurrency wallets are more secure ways for you to store your digital assets in. A key advantage to having a personal external wallet outside the Bitcoin exchange’s in-built wallet is that you are not sharing your private security key with anyone else.
Only YOU retain access to the private key to the funds, which also insulates you against potential hacks launched on the Crypto exchanges. Many types of Bitcoin wallets exist in the market, with some having more features than others. In general, however, Crypto wallets bifurcate into two main groups; Hot Wallets and Cold Wallets.
Hot Wallets
Hot wallets require an internet connection to work. They run on internet-connected gadgets such as computers and mobile phones. Considering that these wallets generate private keys to your Bitcoins on these devices, hot wallets remain a vulnerable prospect, despite being convenient, and allowing the quick movement of Bitcoin assets.
Although hot wallets are susceptible to hacking and getting your funds stolen, it is possible to have a fairly safe Hot Wallet. The minimum requirement for effective Hot Wallets is; having safe browsing habits, using strong passwords, and two-factor authentication procedures.
It is also advisable to only have Bitcoin that you are currently spending, or planning to spend, in your hot wallet. The rest of your Bitcoin would be far better off being stored in a Cold Wallet.
Cold Wallets
Cold wallets are those that are not connected to the internet whatsoever. They are also commonly referred to as hardware wallets or offline wallets. Cold wallets are generally safer, with a far lesser risk of being hacked or otherwise compromised.
The private key is stored on a drive or in software that does not require the internet to operate. This means that as a user, you can use and manipulate your portfolio without putting it at the risk of hacking.
A common version of the cold wallet is a paper wallet. This means that the private keys are generated and stored on a piece of paper for future reference. This is perhaps amongst the safest way to store Bitcoin offline. It is only possible to access the Crypto funds if you have the keys stored on that piece of paper. Most people tend to laminate and properly store such pieces of paper in safe-boxes.
Another form of Cold Wallet is the hardware wallet, typically a flash drive that stores the private user keys offline. A key advantage that you enjoy with this type of cold wallet is that there is little risk of infection with viruses. The users of hot wallets do not enjoy similar advantages. Hardware wallets like this rarely come into contact with internet-connected software and devices.
A major drawback of cold wallets is that they require some knowledge to set up. The security offered by such wallets is however worth every bit of the slight learning curve required.
I would advise the users of Bitcoin to have both cold and hot wallets. The hot wallet for holding small to medium amounts of crypto, for trading or selling, and the cold wallet to hold larger amounts of Bitcoin for long-term use.
Buying and Selling Bitcoins
You will need a digital currency exchange to buy, hold and sell Bitcoins. In the USA, for instance, the most well-known Bitcoin exchange is Coinbase. Other exchanges where you can buy and sell Bitcoin and other digital currency include Kraken and Bitfinex.
In line with the Bitcoin ethos of individual sovereignty and decentralization, most exchanges will allow you to sign up anonymously, while others will require that you have personal identification documents.
Signing up for a Crypto exchange allows you to buy and sell Bitcoins, just so long as you have a payment method for the exchange and a secure connection to the internet. To be safe, it is recommended that you have a separate Bitcoin wallet apart from the exchange’s built-in wallet.
Valid methods of payment through which you can buy Bitcoin in an exchange account include a credit card, a debit card, or a bank account. Lately, it is now possible to obtain Bitcoins through specialized ATMs and P2P networks.
In summary, the following are what you require to buy Bitcoin from an online exchange; personal identifying documents, a digital Bitcoin wallet, a Crypto exchange, a secure internet connection, and a method of payment. Much like stock brokerage exchanges, Bitcoin and other Crypto exchanges let you select which Crypto coins you would like to buy, hold and sell.
