Since its inception on January 3, 2009, Bitcoin (BTC) has grown from a digital currency traded among cypherpunks in the dark parts of the internet to becoming a globally traded asset. Many argue that Bitcoin will one day replace the paper money in our wallet today as trading Bitcoin for various purposes has become increasingly popular worldwide.
How do Bitcoins work?
Bitcoin network runs through a decentralized blockchain technology invented by an unknown developer under the pseudonym Satoshi Nakamoto. It validates transactions without a centralized power, ensuring that no censorship is possible for the digital asset.
To reward network validators, also called miners, a mining reward is distributed after each new block. To reduce inflation that this process causes, Bitcoin halving was implemented to reduce reward over time. This set of features have made Bitcoin unique as reflected in bitcoin’s value over time.
How do I buy and store Bitcoin?
Before any cryptocurrency exchange, the only way to secure Bitcoin was by trading it on forums or through Internet Relay Chats (IRC). This meant having to rely on the other party holding up their end of the deal since escrow services were few. However, it didn’t take long before dedicated cryptocurrency exchanges began popping up.
Today, there are hundreds of different exchanges available to purchase Bitcoin and a variety of other cryptocurrencies. Many like Coinbase, Kraken, Gemini, Bitpanda, and others offer painless ways to buy or send funds into Bitcoins and other cryptocurrencies with a credit card.
Choosing your Bitcoin wallet
It’s best to start by distinguishing between the various types of Bitcoin wallets. There are two main types: software wallets and hardware wallets.
Software wallets function like an app on your mobile phone or computer. This is why they are known as a hot wallet or mobile wallet in case a mobile device is used. Software wallets are used to store your keys and addresses on your hard drive. Mobile wallets allow you to keep your cryptocurrency with you at all times.
On the other hand, Hardware wallets are physical devices that tend to look like USB flash drives. These devices offer the highest level of security as they are almost perpetually offline. These come with built-in security features, giving you a little more peace of mind as you know it’ll be more challenging for anyone trying to access your. An additional option is to use a simple paper wallet
How to use Bitcoin wallets
Using Bitcoin or any other blockchain wallet is relatively simple as you only need to choose the wallet you like and set up an account there. From there, save your Bitcoin wallet key and/or login information and start sending or receiving cryptocurrency using the address generated.
Choosing an exchange
Once you have set up your preferred Bitcoin wallet, it’s time to make an account with an exchange. It’s important to address that many cryptocurrency exchanges have to follow specific anti-money laundering (AML) and Know Your Customer (KYC) laws. As such, you’ll be asked to share personal information, like your email address, physical address, and identification number.
Things to consider when choosing a Bitcoin exchange
When buying Bitcoin, make sure to choose a large and reputable cryptocurrency exchange as they offer the best security, liquidity, and trading fees.
Reliable exchanges you can try
Transfer your Bitcoin to your wallet
After you buy Bitcoin, your Bitcoins are stored on the exchange. It’s advisable to transfer them to a more secure wallet where you own the private key to it as this is more secure than leaving them on the exchange. In order to send your Bitcoins, you’ll need to open the wallet and choose the receive option. The wallet will then generate a crypto address that will let you receive the funds into your wallet.
Generate your Bitcoin address
You’ll then need to give this Bitcoin address to the exchange by copying it or tapping on the provided QR code. The QR code contains all the information required for your online wallet. You then need to provide this address to the exchange to send the funds to the wallet provider. It’s important to note that the transaction may take some time to complete because Bitcoin addresses need to be recorded on the blockchain before they can be processed into your cryptocurrency wallet.
Send Bitcoin from your address to someone else
To withdraw Bitcoin from your wallet, a private key that acts as a second password is needed. It protects you from unauthorized access to your wallet and can be seen in several forms, usually a series of alphanumeric characters.
Further, to receive Bitcoin, you need to know your Bitcoin wallet address. This is unique and can be shared with anyone as it is only possible to send Bitcoin to it. It also comes in a format of alphanumeric characters and is fully recorded and seen for anyone on the blockchain.
Where to use Bitcoin
Thanks to the efforts of a growing number of online retailers that are beginning to accept Bitcoin as a form of payment, you can use BTC to purchase online. While e-commerce sites that offer crypto payments are relatively rare, this will likely change as online retailers begin to realize the potential of the industry.
Buy gift cards
Thanks to the mobile app Gyft, you can now turn your Bitcoins into gift cards and then use those to make purchases. Your choice of where to spend your Bitcoins is almost limitless. Sites like eGifter, that act as a payment processor, let you buy gift cards from hundreds of sites with your Bitcoin. You can even convert it back to Bitcoin with Paxful.
Pay for airline tickets and other travel expenses
As cryptocurrencies rise in popularity, more companies are beginning to accept Bitcoin transfers as payment, including airlines. Bitcoin holders can rent accommodation with Bitcoin or Bitcoin Cash as a payment option, thanks to services like Travala. Using bitcoin payment can really make everything easy for those who love to travel and do not want to spend their fiat currency or use a bank account abroad.
Get a Bitcoin debit card
You can store your Bitcoin on a debit card and can spend them anywhere that accepts debit or credit card payments, allowing you to spend your Bitcoin almost anywhere you want. BitPay allows Bitcoin users to send Bitcoin to a card that can then be used anywhere Visa is accepted. Wirex is a similar service and even gives you 0.5% cashback in the form of Bitcoin to their bank account.
Can Bitcoin be converted to cash?
When using a peer-to-peer platform, you buy Bitcoin directly from another user in exchange for cash. LocalBitcoins is a popular peer-to-peer platform and lets you decide between different payment methods like cash deposit, a bank account transfer, or you can meet in person and collect the cash yourself.
If you’re looking to cash out a small sum, a Bitcoin ATM is another option. There are almost 8,000 Bitcoin ATMs, the majority of which are located in the United States, and they also come with a high transaction fee, typically ranging between 7% and 12%. Bitcoin ATM map can help you quickly find the nearest Bitcoin ATM.
How do I make money with Bitcoin?
There are several options to make money with your Bitcoin. Bitcoin trading is the most obvious one. However, Bitcoin trading requires time, patience, and knowledge of the market. Therefore, let`s explore some other options.
Bitcoin mining is another way to make some money, although it’s become considerably more competitive. In the early days, you could build a Bitcoin miner with nothing but your home computer. Today, however, it’s a complicated process as it requires substantial investments into ASIC miners as Bitcoin transaction processing has increasingly become more popular.
Earn interest on your Bitcoins
If you are planning to hold your Bitcoin or any other virtual currency for the long term, lending in and earning interest in return might be a good option. Effectively this means that you transfer your Bitcoin to a specific digital wallet on a specific platform for a period of time, just like a term deposit in a bank. Additionally, you can still keep any profit in case the Bitcoin price increases.
Get paid with Bitcoins
Some companies allow you to complete a variety of small tasks like completing surveys, replying to emails, doing some freelance work, or providing reviews in return for a small amount of Bitcoin to your crypto wallet. Check out our article on Bitcoin faucets to learn more.
Wrap Up/Final Thoughts
You should now have all the information you need to buy Bitcoin with a credit card or an exchange account, store using a software or hardware wallet, and maybe even make some money by trading on a crypto exchange. However, keep in mind, Bitcoin and cryptocurrencies are extremely volatile. Make sure you’ve done your research before navigating the Bitcoin ecosystem.