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 it will one day replace the paper money in our wallet today. But, given that Bitcoin is the first of a new form of money, there are, of course, many questions. This leads us to the purpose of this guide – how to use Bitcoin?
Before we delve into how to use Bitcoin, we first need to know and address the common pitfalls. Then we’ll take a look at how to buy, send and store your Bitcoins as well as the various ways you can use Bitcoin, how to convert Bitcoin back to cash, and different methods of making money with Bitcoin.
How do I buy and store Bitcoin?
Before there was a cryptocurrency exchange, the only way to secure some 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 and far between. 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 transfer funds into Bitcoins and other cryptocurrencies with a credit card. However, before you can purchase Bitcoin, you need a secure a Bitcoin wallet with its own Bitcoin address. This keeps your digital assets safely tucked away from those with any malicious intentions.
Choosing your bitcoin wallet
Choosing a Bitcoin wallet can be a daunting task. It’s best to start by distinguishing between the various types of Bitcoin wallets. There are two main types: software wallets and hardware wallets. The former function like an app on your mobile phone or computer and is linked to the Internet. This is why they are known as “hot wallets.”
This reliance on the Internet means they can be susceptible to hackers. Software wallets are used to store your private keys and Bitcoin addresses on your hard drive. They can also be slightly more complicated to use but are often much cheaper than their hardware counterparts.
Hardware wallets, on the other hand, 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 some peace of mind knowing it’ll be more challenging for anyone trying to access your Bitcoins without the necessary authentication. The problem with a hardware wallet is that it tends to come with a price tag.
Bitcoin hardware wallets can start anywhere from $85 with some costing upwards of $2,000. It’s important to address those hardware wallets that also come with their own set of risks. If you lose the device, you lose your Bitcoin. Alternatively, if the device is corrupted there is no guarantee you’ll be able to transfer your Bitcoin into an alternative address.
There are several good Bitcoin wallets to choose from, depending on whether you decide to go with a hardware or software wallet. As far as software Bitcoin wallets go, Electrum is one of the most popular out there, with as much as 10% of all Bitcoin transactions originating from Electrum.
Electrum Bitcoin wallet supports multiple operating systems and can even be integrated with popular hardware wallets like Trezor, Ledger Nano, and Keepkey. The complicated interface can make it a bit daunting for first-time users, however. Blockchain.com is another widely popular Bitcoin wallet.
If you feel a hardware wallet is better suited to your needs, Ledger Nano X has been praised as a Bitcoin wallet you can’t do without. Alternatively, Trezor Wallet has also been touted as one of the best wallets available today.
Additionally, it’s good to keep in mind that all Bitcoin wallets come with at least one set of private keys. A private key is a string of letters and numbers which identifies your wallet and allows you to spend your Bitcoins. As Andreas Antonopoulos explains, a private key is critically important because, without it, you don’t own your Bitcoins.
If you were to give your private key to a third party, it would be equivalent to sending your Bitcoin to their Bitcoin address. Additionally, if you lose your private key and don’t have a backup, you cannot recover the funds from your wallet or access the services associated.
How to use Bitcoin wallets
If you opt for the Blockchain wallet, follow the steps below. The process should be largely similar to other software wallets available.
Head over to Blockchain.com, you should see “get started” on the home page – click it
You’ll then be taken to the signup page. Enter your email address and enter a secure password. After agreeing to the terms of service, click “create wallet.”
Wait a few seconds and you should see a message pop up in the upper right-hand side of the website informing you that your wallet has been created. After a few more seconds you’ll automatically be logged in to your wallet.
Choosing an Exchange
Once you have set up your preferred Bitcoin wallet, its 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.
Reliable exchanges you can try
The process to buy Bitcoin with a credit card used to be extremely complicated. Fortunately, exchanges have taken strides in making the process much simpler. Coinbase is one of the easiest ways for newcomers to buy or send some Bitcoins, though it’s only available for customers with Bitcoin addresses in the USA, UK, Europe, and Singapore. Coinmama is another highly rated exchange and available to almost all Bitcoin addresses worldwide with some of the highest limits for buying into Bitcoin with a credit card.
While using exchanges is probably the most convenient way of purchasing Bitcoins, you can also use cash straight from your wallet. Platforms like LocalBitcoins will help you find people near your address who are looking to send their Bitcoins for cash. Otherwise, LibertyX details various retail outlets across the United States to allow you to exchange your cash for Bitcoins.
Transfer your bitcoin to your wallet
Once you’ve made your purchase, your newly-acquired Bitcoins will be stored on the exchange. It’s advisable to transfer them to your wallet as this is more secure than leaving them on the exchange. To send your Bitcoins, you’ll need to open your wallet and choose the receive option. The wallet will then generate a Bitcoin address that will let you receive the funds into your wallet.
Generate your Bitcoin address
Next, you’ll 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. You then need to provide this Bitcoin address to the exchange to send the funds via the Bitcoin address to the wallet. It’s important to note that the transaction may take some time to process because Bitcoin addresses need to be recorded on the blockchain before being delivered into your wallet.
ATMs provide another means to trade your cash for Bitcoins. The process is quite similar to a standard bank ATM: you send in the bills, hold up your wallet’s QR code for the ATM to scan, and the equivalent amount in Bitcoin will be transferred via a Bitcoin address to your wallet.
Where to use Bitcoin
Thanks to the efforts of companies like Overstock, Microsoft, Newegg, and many others, a growing number of online retailers are beginning to accept Bitcoin as a form of payment. While e-commerce sites that have Bitcoin addresses are relatively rare, this will likely change as firms begin to realize the potential of the industry.
Ecommerce platforms that only accept cryptocurrencies are also beginning to emerge. OpenBazaar is the largest peer-to-peer marketplace where you can buy, sell and then send almost anything from around the world, safely and securely.
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 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 it as payment, including airlines like airBaltic. The airline began accepting Bitcoin way back in 2014, and offer flights to more than 70 destinations around the globe.
You can pay for your accommodation in Bitcoin, anything from hotels to houses, thanks to services like Travala. From over 500,000 properties in 210 countries, you’re sure to find what you’re looking for. Using bitcoin can really make everything easy for one who loves to travel.
Get a Bitcoin debit card
You can store your Bitcoin on a debit card and can spend them anywhere that accepts debit cards, allowing you to spend your Bitcoin almost anywhere you want. BitPay allows you to send Bitcoin to a special debit card that can then be used anywhere Visa is accepted. Wirex is a similar service and even gives you 0.5% cashback in Bitcoin.
Can Bitcoin be converted to cash?
Yes. However, there are several things to address before cashing out. For instance, sometimes the most convenient way of cashing out is also the most expensive, or you might not want to wait the 1-5 days banks need to send your money. Fortunately, you have several options available depending on your requirements.
Possibly the easiest way of selling your Bitcoin is through the same method you bought it: an exchange. It’s important to know that, to comply with certain laws, you’ll have to withdraw the money into the same account as you deposited with. This isn’t the most efficient way as the whole process can take several days to reflect on your account, and you will also be liable to pay any associated banking fees. If you’re looking for a more anonymous and less time-consuming method, consider using a peer-to-peer platform.
There are several exchanges you can use to cash out your Bitcoin. The first and most popular is Coinbase. The exchange will allow you to convert your BTC into cash and send it to your bank account. However, you can only do this if you have used your bank account to buy Bitcoin on Coinbase. Kraken, another popular exchange, will also allow you to sell your bitcoins for cash.
You will also be charged fees depending on the country that your bank is located in. For instance, if you’re in the US a wire transfer will cost you $25 whereas in the EU it costs about $0.15. Check out Coinbase’s help section for more info on their fees. Kraken has the added benefit of very low fees, costing $5 for customers in the US and €0.09 for those in the EU.
Further, withdrawing your money from Coinbase will likely take several days depending on where you live. In the US, withdrawal times typically take between 4-6 working days while in the EU it’s between 1-3 working days. Kraken’s waiting times are typically 1-5 working days.
When using a peer-to-peer platform, you exchange your Bitcoin directly with 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 transfer, or you can meet in person and collect the cash yourself. Selling your Bitcoin this way is safe so long as you do due diligence, though fraudsters are still out there. LocalBitcoins provides a good level of security with their escrow services, keeping your Bitcoin address safe and secure until you can confirm, and payment will send.
If you’re looking to cash out a small sum, Bitcoin ATMs are 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%. To convert your Bitcoin using an ATM, you’ll need to hold the QR code up to the screen. Alternatively, you can use these ATM’s to send Bitcoin to others.
How do I make money with Bitcoin?
There are several options to make money with your Bitcoin. Bitcoin trading may hold the most potential for making serious money. However, Bitcoin trading requires time, patience, and knowledge of the market. This is made all the more difficult given how volatile and unpredictable Bitcoin can be.
Mining Bitcoin is another way to make some money, although it’s become considerably more competitive. In the early days, you could mine Bitcoin with nothing but your home computer. Today, however, it’s a very different story. Specific machinery designed to mine Bitcoin has been introduced, and, thanks to ever-increasing demand, prices have been rising accordingly. This leaves necessary equipment out of reach of many average consumers on a budget.
It’s possible to join a mining pool, where a team of miners combines their processing power to try to solve each transaction first. This is the most desirable method for the average miner. It’s important to address that the majority of all Bitcoin mining pools are located in China. A couple of the best Bitcoin mining pools include Poolin and Slush Pool. The rewards are then split between the members in proportion to their contributed mining power.
Earn interest on your bitcoins
Why leave your Bitcoin sitting in your wallet when you could be earning compound interest? With products like the BlockFi Interest Account, it’s possible to do just that.
Get paid with bitcoins
Some companies allow you to complete various small tasks in exchange for a small amount of Bitcoin, like completing surveys, replying to emails, doing some freelance work, or providing reviews.
You should now have all the information you need to buy, store, use, and maybe even make some money with your Bitcoin. Please keep in mind, Bitcoin and cryptocurrencies are extremely volatile. Ensure you’ve done your research before spending any money, and remember, never invest more than you can afford to lose!