Bitcoin is a peer-to-peer (P2P) payment method created in 2009 that uses a virtual currency, “bitcoins”, to establish transactions. Unlike currencies created by governments, Bitcoin is not dependent on any country or exchange and it is completely virtual, it has no connection to any central bank, company or organization. It is used for investments and to make exchanges between the users of the network. To get bitcoins, you need to be part of the network and create an account and wallet.
Part 1 of 3: Getting a wallet
Step 1. Decide on the type of wallet you want
To get bitcoins, you need to get yourself a wallet where you will keep them online or on your computer. There are several wallet options.
- A wallet is an account in which you will keep your bitcoins. It's more or less a bank account where you will put your bitcoins. Different types of wallets will give you different types of security.
- There are three main types: software wallets that keep your bitcoins on your hard drive, online wallets, and offline wallets that you download to your smartphone and use a number of keys to protect your account.
- If you keep your bitcoins on your computer, it can protect them from hackers, but you could lose them if your computer has a problem. You should regularly back up your wallet if you choose this solution.
- Mobile wallets are convenient because you can pay with your bitcoin account wherever you are and most often you can go through very simple steps to make a payment. However, they tend to take up a lot of space on the phone and you can only keep a certain amount of bitcoin at a time.
- An online wallet is extremely convenient because you can access it from anywhere and you can use your bitcoins to make a lot of purchases. However, they are more susceptible to hacker attacks. In addition, the company that makes it available to you can have access to it and there have been cases of wallets emptied by the private companies that created them. For example, an exchange called Now Gox has been accused of manipulating prices and committing fraud by stealing large numbers of bitcoins from their users. Make sure you choose a reputable site if you want to open an account online.
Step 2. Keep your wallet safe
Whichever type you choose, you need to keep your wallet safe. There are many security precautions you can take to prevent your bitcoin from being compromised.
- As stated earlier, you need to be very careful with online services. Security breaches are widespread and online services generally do not guarantee the safety of your funds. Choose online services with care and which require several types of identification to access the wallet.
- Don't keep too many bitcoins in the same wallet. One of the reasons for calling these software “wallets” is that you should think of your bitcoins as cash. As you would not go shopping with thousands of dollars in banknotes in your wallet, it is strongly recommended that you do not keep a large amount of bitcoins in your wallet. Keep some on your phone, online, or on your computer, but keep the rest in more secure environments.
- Always back up your wallet if it is on your computer. If you are backing up your online wallet, you should encrypt it to prevent theft.
- Always use a strong password and write it down to keep it in a safe place in case you forget it. A strong password should be at least 16 characters long with letters, numbers, and other punctuation marks. Avoid using words that are directly related to you in your password, such as the names of friends, family or pets.
Step 3. Understand that the price is volatile
Also be aware that the payments are irreversible. Bitcoin is still a fairly new technology, which is why prices are volatile. Once you buy them, you cannot get a refund for them.
- The average price of a bitcoin can go up or down in unpredictable ways. For example, the price of a bitcoin often varies from 100 to 500 euros per day. Do not spend too much money on bitcoin if you are not willing to take the risk of this kind of investment. Buy only enough to make the online payments you need.
- All transactions you make in bitcoin are irreversible. You should only spend them with a company you trust. If you make a wrong transaction or if you do not receive your order, you cannot get your bitcoins back.
Part 2 of 3: Buy Bitcoin
Step 1. Find a trade
In general, it is possible to obtain it in two ways: in person, at a distributor or via an online exchange site. It is important to note that cash or debit card payment is usually required, and few departments accept credit cards.
- For in-person purchases: There are platforms that connect you with sellers you can meet near you to buy bitcoin. You might be concerned about your safety and you might not trust it, which is why it is recommended that you transact in a public place and not bring large amounts of cash. Some of these platforms allow their users to register a copy of their identity document. In this case, you can request a copy of their identity card from the person you are going to meet to add some security to the transaction.
- For bitcoin distributors: there are some all over the world. Do an online search to find one near you, but they are most often found in dense urban areas, as these machines come at a certain cost. You could also try to find a store with a "virtual dispenser" that is available on a tablet or at the checkout.
- On an online exchange: you can deposit money into your account (usually by making a transfer or using a third-party service) and you can buy bitcoins. This method generally requires a step of verifying your identity to make transactions on the site.
Step 2. Accept bitcoin as payment
A number of businesses and services now accept bitcoin payments. If you offer online services, you can also agree to get paid in bitcoin. This can be beneficial for a small business or self-employed person (like a dentist), as there is nothing to pay to get paid in bitcoin. You can avoid card fees or arguments with payment card companies that lose money because the bitcoin transaction is irreversible.
- You can make the payments yourself manually, but it can be difficult without the right skills. You can use different services to help you with your transactions if you are selling things online. The Bitcoin website can help you find sites that can work with you depending on your location, domain, or bank.
- You need to make sure that people with a Bitcoin account can find your site and spend their bitcoins on it. You can subscribe to various SEO directories that bitcoin users can visit. Follow the instructions that appear on the respective sites. You can also download and display the Bitcoin logo on your site to indicate to its users that you accept bitcoin as a form of payment.
Step 3. Spend your bitcoins online
Once you have bitcoin, you can spend it in stores that accept it. Paying with bitcoins is a fairly straightforward process and sometimes you just need to enter your credit card number.
- Some sites like Reddit, WordPress or Mega offer this form of payment. However, these companies often accept them by going through an intermediary like BitPay or Coinbase which converts the bitcoins into another currency.
- They are also often accepted abroad, because they do not have to make long and painful currency conversions.
- Make sure you only do business with people you trust, as bitcoin is often stolen during these kinds of transactions.
Part 3 of 3: take precautions
Step 1. Don't mine bitcoins
Bitcoin mining software is designed to perform series calculations to find unconfirmed bitcoin online. While it's not illegal, it's probably a waste of time. Lots of people are mining it right now, and there is a limited amount online. You are unlikely to find a lot of them and if you do find it is not going to make up for the money you spent on materials and electricity.
Step 2. Know how to find your wallet
If it were to be compromised, you must know how to find it. A strong password and certain information to prove your identity will then be very useful to you.
- Remember or write down the data associated with your account, for example password, URL and answers to secret questions. This can be useful if you have a problem and need to restore your wallet in an emergency.
- You should keep a list of all your account information in a safe place at home. Consider investing in a safe to store your Bitcoin account information.
Step 3. Beware of the people you do business with
When buying bitcoin online, you need to be careful of who you contact. Bitcoin is very vulnerable to hackers and you wouldn't want your information to end up compromised.
- If someone says they want to buy your bitcoin, beware. If someone offers you bitcoin without asking for anything in return, like your Bitcoin name or address, they might just be trying to steal it from you. Don't send him anything unless he sends you the money first.
- Only do business with people you know or trust. Since this is a new technology, there are many security holes and information can be stolen.
Step 4. Avoid scams
Since Bitcoin is something new and not everyone fully understands how it works, you are opening yourself up to scams. Here are several things you should be wary of.
- Ponzi schemes: beware of promises of extraordinary returns on investments based on a new phenomenon, especially if that person promises you little risk. You should also watch out for “investment opportunities” that require little knowledge or involve complicated structures or strategies.
- Phishing: You might receive emails that tell you you've earned bitcoins. Usually, you will see a login link there and you will be asked for your Bitcoin wallet information. Do not give them to anyone! These emails are scams.
- Exchange scams: Make sure the company you are doing business with is publicly registered. When possible, check all the companies you deal with. Search forums or other sites to see if anyone is complaining about a scam coming from the company you want to work with. If you're having trouble getting in touch with a company representative or if no one is answering your questions, don't do business with them.
- Bitcoin transactions take time, from a few minutes to several hours. During this time, it is possible to cancel the transaction, but not once it is confirmed. Large transactions must go through several confirmations before they are completed.
- The Bitcoin system has advantages and disadvantages. Among the advantages, you can choose which fees to pay, it is an easy payment method for people who do not have a bank card, and you can send payments without attaching your identity to it. On the downside, it is a new form of currency, they are still very rare and the anonymity of transactions means you don't know who you are dealing with.