How to Enter the Bitcoin World – A Guide for Newbies
So, you’ve heard the hype around Bitcoin and thought about giving it a try but have no idea where to begin. You’re in the same shoes as many people right now. The world’s first global, decentralized currency has captured the imagination of tech geeks, sound money enthusiasts, and cypherpunks alike. The Bitcoin market is expanding and making its way into the mainstream.
There are essential things you need to know before you buy your first fraction of Bitcoin (yes, you don’t need to hold a full Bitcoin). It’s important to have a solid grounding in the technology itself and the financial implications of it, as well as to know how to store and use crypto. Let’s make a start!
Understand the Technological and Financial Implications of Bitcoin
Now, don’t panic. You don’t need to become a blockchain wizard to get started. Just have a read of the original whitepaper and check out some other solid resources. We recommend The Internet of Money by Andreas Antonopoulos and The Bitcoin Standard by Saifedean Ammous. These are two excellent primers into the potential of Bitcoin as the future of money. They’re also not too tech-heavy!
It’s important that you don’t approach a Bitcoin investment as a way to get rich quickly. By doing so, you will only sell your stash at the first little bit of market volatility. Bitcoin is a potentially world-changing technology and we’re right at the beginning of its existence. It’s like the Internet in the mid-90s. It wasn’t perfect, but it evolved. Crypto might make you rich but don’t use that as the reason to get involved.
Financially, Bitcoin could completely overturn the last 40 or so years (at least) of monetary policy. It seeks to replace fiat currencies eventually. Bitcoin represents a sounder form of money than anything the planet has ever known. It provides a potential standard for money that outperforms gold in many ways. It’s divisible, easy to store, easy to transfer, and completely fixed in its total supply. Gold was favoured as a form of money because it was incredibly expensive to create. Likewise, so is Bitcoin.
Learn About and Set Up Your First Wallet
After reading up on why Bitcoin is important, you might think it is now time to buy your first coins (or fractions of them). But that would be wrong. You first need to learn about storing crypto.
Confusingly, the method by which we store our Bitcoin is called a wallet. However, being a digital currency, there is nothing to actually store. There is a public key for receiving and buying crypto and a private key for having access to your coins.
Read on to learn about different types of devices for storing Bitcoin.
Hardware Wallet: A hardware wallet is quite secure. It is a small device that generates private keys offline that may cost between $70 and $200. They’re ideal for long-term storing, but also can be convenient if you want to spend your digital assets. There are a few drawbacks with hardware wallets. Firstly, you must be completely sure that your wallet comes from the manufacturer. Even then, complex security breaches are still possible. In a field that is so much unpredictable as crypto, it’s hard to find a perfect solution. But still, hardware wallets would be probably the best choice. The Trezor and the Ledger Nano S are two of the most popular hardware wallets.
Software Wallet: Software wallets are simple and user-friendly programs that interact with the Bitcoin blockchain. Existing on a device connected to the Internet, they are probably the most convenient but least secure. You can use them much easier than other types, but they are vulnerable to malware and keyloggers. Desktop and mobile wallets are absolutely no good for storing large amounts of crypto. They are mostly useful for purchasing Bitcoin at land-based shops or online, especially when you do this frequently.
Paper Wallet: This option is the most secure. Paper wallets are created using an open-source code that is verified by any member of the network who wishes to do so. They are set up offline, which means that malware or keylogging software cannot compromise your security. What’s more, these wallets are free. However, here are a few issues with paper wallets. Firstly, you must be able to ensure that the machine you use is completely free of potentially harmful software. This may be incredibly difficult and time-consuming. Another problem is that each paper serves for only one transfer. If you’re interested to hold some crypto and store it for a long time with no practical use, this should be your choice. If you do spend some Bitcoin stored on a paper wallet, you should then send the rest to a completely new one.
Online Wallet: They are found at merchant websites or at exchanges. Very rarely will an online wallet allow you to see your own private key. This means any money you leave on a website is vulnerable to scams and security breaches targeted at companies themselves. You will need to use these in-built online wallets at some point (usually when buying Bitcoin), but make sure you will transfer that BTC into your own wallet.
If you’ve done your research and set up a secure wallet, you can now think about actually buying some Bitcoin. There are loads of different places to buy from. These include exchanges, peer-to-peer markets, offline shops. Each has their own advantages and disadvantages. Once you’ve made your first purchase, you’re officially a Bitcoin owner, ready to use the most exciting technological innovation since the Internet.
About the writer: Mary Callahan
An expert on cryptocurrencies, I've found myself as a Journalist at TheCryptoCoinCenter.com and also Cex.io - cryptocurrency exchange. I write articles related to cryptocurrencies, blockchain security, bitcoin purchase guides, and bitcoin regulations in different countries.