A Bitcoin Guide for Beginners

A Bitcoin Guide for Beginners

SHARE

Getting started with Bitcoin is relatively easy. At a glance, it may seem like “magic internet money” but it’s unique in nature and offers a peer-to-peer system of banking that does not rely on any central authority to function.

Why Bitcoin?

A perfect payment option: Credit Cards were not meant to be used online as a payment option, as they need critical private information that can be easily stolen. Bitcoin, on the other hand, only requires you to send funds to a Bitcoin address and you’re good to go. You cannot charge-back a Bitcoin transaction as you can with Credit Card transactions or other common payment options (unless both parties agree). This is good since you don’t have to worry about third parties committing fraud after a payment has been completed.

Decentralized: As previously mentioned, Bitcoin’s main selling point is it not being dependent on any central authority. You control your funds as you desire without any limitations whatsoever set by banks.

Pseudo-anonymous: There’s no way to link your Bitcoin address (your pseudonym) to your identity as it doesn’t contain any private information about you. It’s not fully anonymous however, every transaction is saved on the Blockchain, a digital ledger where all the transactions and addresses are shown transparently. This makes it possible for an address to be tracked, but this can be easily solved by having multiple addresses.

Constantly growing: Bitcoin has a limited supply and constantly increasing demand as more people get into it, which means that investing early will possibly benefit you in the long run. You may end up with a return of four times or even more of your initial investment – This is just speculation, but chances are pretty high in this regard given Bitcoin’s history.

For more detailed information, check this article: Investing in Bitcoin.

Getting your Bitcoins

The best way to get Bitcoins is by buying some; you could acquire some by mining, but this process is slow and costs electricity, so it’s not really optimal for beginners.

LocalBitcoins is a peer-to-peer trading site where you can trade cash for Bitcoins, it’s safe and usually fast. Paxful is another p2p exchange with even more payment options.

Other good alternatives are Kraken, which supports USD, CAD, EUR and even JPY bank deposits and withdrawals, and BitStamp, which offers similar options to Kraken but includes credit card support.

Choose the one that makes the most sense for you and gives you the best rates to get the most out of your money.

For a longer list with more details: Where and how to get Bitcoin.

Securing your Bitcoins

This is an essential step, as some make the mistake of relying on an online wallet to secure their funds. For small quantities, this can be done in some cases, but it’s recommended to have a wallet where you are the one in full control of the private keys.

There are 3 types of wallets excluding online wallets that you might want to use:

Software wallets: These are wallet applications you download and install into your Personal Computer or mobile devices.

Bitcoin Core and Electrum are pretty solid options as Desktop Wallets. Core is a full node client, meaning that it helps with verifying and transmitting Bitcoin transactions and blocks across the network and, unless pruned, stores a copy of the entire Blockchain. This process can be very slow at first but offers better security & privacy since Core doesn’t have to rely on data from external servers or other peers on the network. Electrum, on the other hand, is a lightweight wallet that is easier to use and has other features like multi-signature wallets, integration with hardware wallets, and more.

Mycelium and CoPay are also great options for Android and iOS respectively. Mycelium is an HD (hierarchical deterministic) wallet with many advanced features, like support for hardware wallets from TREZOR and Ledger, watch-only accounts, cold storage spending, and more. CoPay is simple to use and multi-platform, making it easy for you to use the same wallet or accounts across multiple devices and platforms.

Hardware wallets: These are physical devices designed specifically to store Bitcoin and other cryptocurrencies.

The Ledger Nano S offers everything you need in a hardware wallet: the ability to send, receive, check and manage multiple addresses for a variety of cryptocurrencies (Bitcoin, Litecoin, Ethereum and more) from the same device, and offers plenty of security measures and backup. All private keys are stored on a smart chip and never get leaked outside of the device, all signing happens internally.

Paper wallets: These are private keys that can be printed out on a piece of paper and can be used as long term storages, once they are claimed they should not be reused.

Bitcoinpaperwallet is a good option, it allows you to generate paper wallets offline in case you’re worried about malicious software, and it’s recommended to do so.

Important note: ALWAYS back-up your wallets and private keys. Do not use just one address to store all your coins and split up your funds for a lesser risk of losing them.

The next step

Once you have your coins, there are a couple of things you can do with them. They not only do serve as a great payment option, you can also use them for trading, gambling, investing, etc. This is completely optional and has its risks; just holding Bitcoin has a huge benefit of its own.

Trading is all about speculating where prices will go and buying and selling accordingly; research is key when trading with cryptocurrencies. Bittrex is an exchange with detailed charts and multiple cryptocurrencies to choose from. Kraken is also a solid exchange with less variety of coins but offers you the option to trade for fiat currencies directly.

For trading, we offer cryptocurrency speculation articles here on Crypto-News. 
For investing and gambling, check this article for more information:
Gambling vs. investing in cryptocurrencies.