Bitcoin is a peer-to-peer payments network created in 2009 that uses a virtual currency, bitcoin, to conduct transactions. Unlike national currencies, it is a state-independent, exchange-independent and entirely digital network with no ties to central banks, companies or organizations. Bitcoins are used as an investment and as a bargaining chip by all members of the network. To get them you will then have to enter the Bitcoin system, creating an account and a wallet.
Steps
Part 1 of 3: Getting a Bitcoin Wallet
Step 1. Decide what kind of wallet you want
To get bitcoins, you need to create a wallet to store them online or on your computer. There are several ways to do this.
- "Wallet", or wallet in English, is the term used to indicate the account in which your bitcoins are stored. It is a kind of online bank account. There are various types of wallets, with different degrees of security.
- There are three main types of bitcoin wallets: the software ones, saved on your hard drive, the online ones and the mobile offline ones that you can download to your smartphone and use a series of keys to protect your account.
- Storing bitcoins locally on your computer can protect you from hackers, but exposes you to the risk of losing your currency if your hardware breaks. If you choose this route, make a backup copy of your wallet often.
- Mobile wallets are useful, because they allow you to use bitcoins for payments when you are out of the house, in some cases by simply holding your phone close to a cash register. However, they have a tendency to take up a lot of memory on the mobile and can only hold a certain amount of currency.
- Online wallets are very convenient, because you can access your bitcoins anywhere and use them for internet purchases. However, they are vulnerable to hacker attacks. Additionally, the company you trust has access to your account and private entities have stolen their customers' bitcoins in the past. For example, the Mt Gox bitcoin exchange service was found to manipulate prices and commit fraud, stealing large amounts of cryptocurrency from its users. Make sure you choose a reliable service if you decide to create a Bitcoin account on the internet.
Step 2. Keep your wallet safe
Regardless of which type you choose, you need to ensure the safety of your bitcoins. There are some precautionary measures you can follow to prevent your account from being compromised.
- As mentioned earlier, beware of online services. Security holes are common, and internet-based companies often don't guarantee refunds. Choose the company you want to trust carefully and make sure that different types of authentication are required to access your account.
- Don't keep too many bitcoins in one wallet. Bitcoin wallets are also defined that way because it is important to consider cryptocurrency as cash. Just as you wouldn't go shopping with thousands of euros in your pocket, it's also not recommended to keep too many bitcoins in one account. Keep the cryptocurrency you need in mobile wallets, online or on your computer and the rest in a safer environment.
- Always back up your wallet if you keep it on your computer. If you keep the copy on the internet, remember to encrypt it, so as to avoid theft by hackers.
- Always use a secure password and write it down somewhere, so you don't forget it. Choose an access key that is at least 16 characters long, with letters, numbers and special symbols. Don't use words that can easily be traced back to you, such as the names of friends, relatives, or pets.
Step 3. Be aware that prices are volatile and payments are irreversible
Bitcoin technology is still relatively new, so prices fluctuate a lot. Once you have purchased bitcoins, you cannot return them.
- The average price of bitcoin rises and falls unpredictably. For example, in November 2015, bitcoins went from $ 318 on Monday to $ 492 on Wednesday in one week, to return below $ 400 on Thursday. Don't invest too much money in bitcoins, as they are considered a high-risk asset. Only buy them in sufficient quantity for your online payments.
- All bitcoin transactions are irreversible. Therefore you should only use them for payments with organizations you trust. If you make an error in judgment or if you do not receive a product you have purchased, you will not be able to recover the currency.
Part 2 of 3: Buying Bitcoin
Step 1. Find an exchange service
You can usually buy bitcoins in three different ways: in person, in a shop (special ATMs that convert money into cryptocurrency) or on an exchange website. It is important to note that cash payment is usually required (debit cards are accepted in some cases) and that only a few services accept credit cards.
- In person: There are platforms like CoinCola or LocalBitcoins where you have the ability to find people in your area to trade bitcoins with. In this case, the reliability of the seller and your personal safety are real concerns, so it is advisable to carry out transactions in a public place and without spending too much cash. Some of these platforms, such as CoinCola, allow users to upload a document certifying their identity. In that case, you can ask for the document at the time of the transaction, in order to be more secure.
- Bitcoin ATMs: In 2016, around 400 Bitcoin ATMs already existed in the world. With an internet search you can find the one closest to you, even if they are usually only found in metropolises, due to their cost. Alternatively, you can look for shops that sell Bitcoins with "virtual" ATMs, which are installed on tablets or in cash registers.
- Online exchange services: you can create an online trading account and transfer funds to it (usually with a wire transfer or another banking service) with which to buy bitcoins. This method usually requires you to verify your identity before you can perform transactions.
Step 2. Accept bitcoins as payment
More and more businesses and services accept this currency. If you offer products over the internet, you can too. It can be useful if you run a small business or if you are a freelancer (like a dentist), because there are no costs related to payments via bitcoin. You can also avoid credit card chargebacks or customer disputes that cause you to lose money, as bitcoin transactions are irreversible.
- You can accept payments yourself manually, but it can be difficult if you are not a computer savvy. Alternatively, you can take advantage of many merchant services that facilitate bitcoin transactions. The Bitcoin site itself offers a list of merchants willing to work with network members based on geographic location, industry, and bank.
- Make sure that Bitcoin account holders can find your site and spend the virtual currency on your services. You can subscribe to many directories on the internet dedicated to Bitcoin users. Simply follow the instructions to create a profile on those sites. You can also download and add the Bitcoin logo to your website to signal to visitors that you accept that payment method.
Step 3. Spend your bitcoins online
Once you have the virtual currency, you can use it to purchase goods in stores that accept it. Paying with bitcoins is a fairly simple operation, in some cases even easier than entering your credit card information.
- Sites like Reddit, WordPress, and Mega often accept bitcoins as a form of payment. However, they usually turn to an "intermediary", such as BitPay or Coinbase, who converts the virtual currency into another.
- Bitcoins are often accepted for payments from abroad, because they simplify transactions, not having to consider exchange rates.
- Make sure you only do business with people and businesses you trust, as bitcoins are often stolen in the course of internet transactions.
Part 3 of 3: Taking Precautions
Step 1. Do not attempt to mine bitcoins
Mining programs perform a series of calculations in order to mint new currency. While it's not illegal, it's probably a waste of time. Many users and companies have invested huge resources in mining, so competing with them is almost impossible. You wouldn't be able to generate many bitcoins with this method, so save time and money.
Step 2. Learn how to recover your bitcoin wallet
If your account is hacked, make sure you know how to recover it. You may find it helpful to create a secure password and add other information for authentication.
- Memorize or write down all the information associated with your Bitcoin account, such as passwords, URLs, and answers to secret questions. You will need to use this data to recover your wallet and find your bitcoins.
- Hide the list of your Bitcoin account information in a safe place in the house. You could even buy a safe or keep the list in a safety deposit box.
Step 3. Think carefully before doing business with someone
When you shop online with bitcoins, you need to be careful who is on the other side of the screen. The network is often hit by hacker attacks, so don't risk your personal information falling into the wrong hands.
- If anyone wants to buy your bitcoins, be careful. If he offers you some money for the virtual currency without asking for any personal information, such as your name and Bitcoin address, it could be a thief. Don't send cryptocurrency if you don't get paid in advance.
- Do business only with people you know or businesses you trust. Since bitcoins are so recent, information is often stolen due to system breaches.
Step 4. Avoid scams
Since the Bitcoin network is new and not yet fully understood, it is a breeding ground for scammers. Here are some strategies to watch out for:
- Pyramid schemes. Pay attention to those who promise you very high profits by entering the "base level" of a new phenomenon, especially if that person guarantees you that the risks are zero or very low. You should also be on the lookout for any "investment opportunities" that do not require minimum qualifications for investors, have strategies or pay.
- Phishing. You may receive spam emails indicating you as the bitcoin winner. Usually in these messages you will find a login link asking you for the credentials of your Bitcoin wallet. Do not disclose this information to anyone! These are scam attempts.
- Exchange scams. Check that the company you want to do business with is regularly registered with the relevant authorities. If you can, investigate the company's reputation as well. Search Bitcoin forums and other sites, looking for users who may have been scammed. If you can't get in touch with a company representative or if you can't find answers to your questions, don't trust them.
Advice
- Bitcoin transactions are confirmed slowly, often in around 10 minutes. In this interval they can be canceled, but they become irreversible after confirmation. Multiple confirmations are required to complete a transaction with a lot of currency.
- Bitcoins have advantages and disadvantages. Pros include the ability to choose costs, easily accept payments from users who do not have a credit card, and send payments without linking personal information to the transaction. The cons include that it is a very recent currency, which is not accepted by many businesses, and that the anonymity guaranteed by transactions prevents you from knowing who you are dealing with.
