January 12, 2023 8:53 am in Bitcoin

Buying and Storing Bitcoin: An Introduction

How do you buy bitcoins, store them, and do transactions? This introduction explains everything in easy-to-understand terminology. It also assumes that you have a basic understanding of bitcoin and cryptocurrencies and want to invest in them.

How to Buy Bitcoins

Before you can buy bitcoins, you need a bitcoin wallet to store them. It’s logical to think of a bitcoin wallet as an online bank account, which enables you to store bitcoins, transfer them to other digital wallets, and convert them into a physical currency you can easily withdraw.

Bitcoin Wallet

There are mainly two types of bitcoin wallets: hot crypto wallets and cold crypto wallets.

Hot crypto wallets are wallets accessible online. For convenience, they are sometimes called “online crypto wallets” or “e-wallets”. After buying a bitcoin, you can store your coins in these hot wallets. They are the easiest to operate because it only takes a few minutes to register your account.

Creating a hot wallet is as simple as registering an account with any other online entity like Facebook and Gmail. Sometimes, you are only required to share your name and password to create a hot wallet. Depending on local regulations, many financial companies also need users to verify their ID before making a hot wallet. If you want full privileges, you should go through the ID verification process.

Examples of online crypto hot wallets include Crypto.com Wallet, Guarda, Exodus, and Coinbase Wallet. Among these, Crypto.com Wallet and Coinbase Wallet are overseen by the popular crypto exchanges, Crypto.com and Coinbase. On the other hand, Guarda and Exodus are well-known third-party online wallets that primarily provide crypto wallet services.

While hot wallets are noted for their convenience, the other type of wallet, the cold wallet, is known to offer an additional layer of security. A cold wallet is an offline physical device that can hold your crypto assets. These devices are mainly in the form of USB sticks.

You can transfer your bitcoins to the “cold wallet” devices just as you would a file transfer. The device will generate a bitcoin wallet address when connected to an Internet-enabled computer. Then, anyone can send bitcoin to your wallet address. If you want to send bitcoins to someone else, you can also transfer the required amount to a crypto exchange or another crypto address.

Examples of cold wallets are Ledger Nano X, Trezor Model T, and CoolWallet Pro. These cold wallets are theoretically more secure than hot wallets because your private key, “password”, does not come into contact with the online server during the signing process.

On a side note, cold wallets are generally not beginner-friendly, and these devices are neither free. Therefore, if you are not fanatic about security, try the user-friendly hot wallets first because they are free and as secure as any other online platform.

Where to Buy the Bitcoin

If you have selected a bitcoin wallet, buying some bitcoins is next. There are a lot of ways to do that. Let’s take a brief look into some of the most popular methods:

Crypto Exchange

Every crypto exchange lets users buy and sell cryptocurrency. You can purchase bitcoin using your credit card. Binance, Coinbase, Bybit, and Kraken are examples of crypto exchanges.

All of these exchanges offer the ability to buy bitcoin with fiat currency at the current conversion rate. Depending on the payment method, you can buy bitcoin using credit cards. This instant conversion method is perhaps the quickest; however, it incurs a hefty charge.

Another popular method is to buy bitcoin using the crypto exchange trading platform. While this is less expensive, the process could be more convenient for first-time users because it requires a slight learning curve.

Financial Institutions

Most online financial entities like Paypal and Skrill let their account holders buy bitcoins. If you have a Paypal account, you can use it to buy bitcoins.

Another suitable method is to register with a P2P peer-to-peer platform like Paxful. These P2P platforms let their users buy bitcoins from others who already have them.

Using such financial institutions is a feasible method to own bitcoins, but watch out for the transaction fees.

Bitcoin ATM

A Bitcoin ATM, also known as BTM, lets users buy and sell bitcoins. There are thousands of Bitcoin ATMs in the United States. Like a traditional ATM, these machines are placed inside or near public places, including malls, convenience stores, and gas stations.

Most Bitcoin ATMs let users buy bitcoins, but many also allow buying and selling. Before making a transaction, you can check the facilities available at a particular BTM near you by visiting the website Coin Atm Radar. The website and other online sources like these let users track Bitcoin ATMs near them.

Using Bitcoin ATM is gaining popularity because it lets users buy bitcoins easily by depositing cash. After the deposit, bitcoins are instantly transferred to your bitcoin wallet.

How to Buy Bitcoins Using Bitcoin ATM

If this is the first time you’re buying bitcoins using a Bitcoin ATM, you will need to undergo two steps: setting up a bitcoin wallet and purchasing bitcoin using Bitcoin ATM.

How to Set Up a Bitcoin Wallet

A hot wallet is probably the easiest way to own a bitcoin wallet. As explained earlier, these hot wallets are online e-wallets that you can access by registering on the respective websites. You can also download the wallet app on your mobile or desktop for enhanced security. Here is a how-to-do it:

Search for your favorite bitcoin wallet on the Google Play Store or App Store. For convenience, type “bitcoin wallet” to find apps. Before selecting a wallet, read relevant reviews and visit the website that offers the wallet.
After downloading the app, you will be asked to enter your particulars, such as your full name and email. After verifying your email address, you can access the wallet.
Depending on the jurisdiction, you may need to verify your ID. The ID type can be a passport, ID card, or driver’s license. It may take anywhere from one day to three days for the verification to be complete. You can use this time to get yourself acquainted with the bitcoin wallet.
Once the verification is complete, it’s time to head to the nearest Bitcoin ATM to purchase a bitcoin.

Before you visit a nearby Bitcoin ATM, its essential that you fully understand your bitcoin wallet address.

Understanding the Bitcoin Wallet Address

Also known as a public key, every bitcoin wallet has a unique address. It is a long string of letters and numbers. A typical bitcoin wallet address may look like this:

1Lbcfr7sAHTD9CgdQo3HTMTkV8LK4ZnX71

The easiest method to locate your bitcoin wallet address is to go to the “Receive” bitcoin section on your app. You will find the bitcoin address in this section.

Don’t try to remember the bitcoin address or enter it manually. Instead, you should copy or paste the address into a browser. Even better, scan the QR code on your mobile phone to quickly enter it at the Bitcoin ATM. Once checked, give the scanned code a name such as “My Bitcoin Wallet Address”.

How to Use a Bitcoin ATM to Buy Bitcoin

After setting up a wallet, follow these steps to buy bitcoins:

Locate a nearby Bitcoin ATM.
Almost every Bitcoin ATM in the United States will ask you to verify your phone number. Once prompted, you can just enter your phone number and wait for the verification text on the mobile phone. The verification text is usually a five-digit code that you need to enter on the BTM screen.
Once your identity is established, enter the required number of bitcoins to buy. You can also click “Buy Bitcoin” to purchase the needed amount. At this time, the machine will ask you to scan the QR code of the bitcoin wallet on your mobile.
Insert the cash to initiate the transaction.
The final step is to confirm that you have received the transaction. It would be best if you remembered that the transaction will take some time to show in your wallet. Depending on the network, it can take anywhere between 5 and 60 minutes before the transaction is completed.

Since the transaction takes some time, it’s a good idea to keep your transaction receipt until the funds are deposited safely into your wallet.

Best Practise for Storing and Securing Bitcoin

Despite enhanced security measures, hacking is a genuine threat. People lose millions of dollars annually to criminals who regularly try to breach crypto networks.

For that reason, a little due diligence can ensure that your crypto remains safe. Depending on your investment objectives, here is how you can protect your assets:

Regular Users

If you intend to do regular crypto transactions, dividing the assets into active and passive investments is better. When needed, you can move some of the funds t an online “hot wallet”. Store your passive investment in cold wallets, so it is immune to hacking and liquidity crises.

Active Traders

If you are an active trader intrigued by the variety of lucrative investment opportunities a crypto platform offers, seek crypto insurance. Lots of crypto insurance companies have popped up in recent years. Crypto Sheild is just one of many well-known insurance products.

Investors

If you need to hold bitcoin long-term, use non-custodial “cold” wallets. These are offline wallets in the form of USB sticks that can easily connect to an online crypto platform. These cold wallets are usually impervious to hackers because the signing of transactions, “password verification”, happens within the device itself. Trust Wallet, Exodus, and MetaMask are some options to consider.

Important Concepts and Terminology to Remember

Before you buy a bitcoin, please take your time to understand the following concepts. These concepts are thrown around a lot; therefore, it’s critical to remember the terminology.

Private and Public Keys

Your private key is your password. Similarly, a public key is the wallet address you can share with others.

2-Factor Authentication

When opening a crypto account, you will likely hear much about 2-Factor Authentication. It is an added security measure to verify your identity. If enabled, the system will verify your ID after you have entered the password.

For instance, you may get a four-digit security code on your mobile. Fingerprints, facial recognition, and Google Authenticator are some of the widely used 2-FA access management security methods.

Bitcoin Address

A bitcoin address is a virtual location where you can receive bitcoin. While every bitcoin wallet has a unique address, some applications may generate a new wallet address for each transaction. You should always copy the entire address or scan the QR code.

Blockchain

You can think of a blockchain as a network that process bitcoin transactions. It is a ledger that records transactions.

Bitcoin Mining

Bitcoin mining is a process that lets ordinary people, “miners”, validate bitcoin transactions. Whenever you send or receive a bitcoin, the transaction will be grouped with other transactions into a block. The block is validated “mined” by the bitcoin miners. People mine bitcoins because they get a reward for validating each transaction.

Transaction ID

Blockcypher and Blockchain.com are two websites that offer detailed insight into each crypto transaction. The system generates a unique transaction ID whenever you send or receive a bitcoin. You can view your transaction’s status on the blockchain by visiting the blockchain explorer.

Blockchain Confirmations

When receiving or sending bitcoins, the number of blockchain confirmations can often hint at the time it takes for the transaction to complete on the blockchain. As a rule of thumb, one block confirmation on the bitcoin blockchain takes approximately 10 minutes. You can view the number of confirmations on the blockchain explorer, described in the previous section.