How to get bitcoins, how to store bitcoins and how to spend them.
This is part 3 in a series of 3 on Bitcoin. Part 1 covered what Bitcoin is, part 2 covered why you should care about Bitcoin and this part 3 will cover the basics of buying, selling and spending Bitcoin.
What a basic user needs to know
There are three, possibly four, basic things a user needs to know about. The rest we will get to in a minute or two, but lets start with these four things: Wallets, Public keys, Private keys and acquiring bitcoins.
A wallet is, as the name indicates, a place to hold you bitcoins. In essence this is no different from a regular wallet holding cash. A wallet can made of paper, be an app on your smartphone, a document on a USB stick or a more physical hardware wallet such as a Ledger.
In order for a wallet to functions it needs to consist of two things; public keys and private key(s). A public key is simply the public address of your wallet. It is the address people need to send bitcoins to in order to send them to you. It is therefore a unique address and sending bitcoins to this address then makes sure they are send to you, the holder of said public key. A public key for a Bitcoin wallet looks something like this: 1PZrggfGHHUYCdQZZDHzLttQsXxApuP4hZ
The above key is a public key for a wallet I control and if you wish to send me bitcoins you can simply send them to that key. Public keys are derived from a private key, but you can never reverse engineer a public key in order to get the private key. Let’s look into why that is important.
Let’s start off by simply stating that private keys are called private for a reason. They should ever remain private unless you want someone else to have access to your bitcoins. Simply put, controlling a private key means controlling the bitcoins associated with that private key. If you have a wallet and someone else has your private key they can control your bitcoins, including sending them to another wallet. This means you need to think about how you store your wallet and private keys. Most apps only have the private keys stored in the app and as such the company behind the app don’t know or control your private key. This also means that if your bitcoins are stolen they cannot help you retrieve it. Others do have access to your private keys but maintain a high degree of security. An example of this is Coinbase*. This means they operate more like a traditional bank in the sense that they store your bitcoins and through an app or web-interface you get to spend them. If you are unsure of how to handle bitcoins, are not tech-sawy in any way or all this is simply very new, then this is probably a good way to start out.
The fourth step is simply a means of acquiring bitcoins. You can mine them yourself, we’ll get into that in a bit, or you can buy them from an exchange. Many such exchanges exist, including quite a few danish ones. Personally I use Coinify and have used Copenhagen Bitcoin in the past. If you want things to stay really simple you can actually buy bitcoins through Coinbase* making it possible to use one app for all things related to Bitcoin. This is a big appeal to many, especially newcomers as this significantly lowers the barrier to entry making owning and buying bitcoins simple.
If you wish to sell bitcoins this can be done much the same way you acquire them. They can be sold through an exchange or directly between users for that matter. Both Coinify and Copenhagen Bitcoin buy bitcoins as well as sell them. Personally I haven’t sold any bitcoins as of yet. I wonder if I ever will.
The amount of stores accepting bitcoins still leaves much to desire, but use is one the rise. Denmark however does remain one the more Bitcoin-friendly countries of the world. You could try and use spendbitcoins to search for a way of buying with Bitcoin. The easiest way to spend bitcoins however seems to be getting a card, Visa or Mastercard, with someone who provides a service of linking a card with a Bitcoin wallet. There are a few different examples of this but as of late TenX have received the most attention. An honourable could also be Wirex. There are lots of videos online of various people using the TenX card to spend Bitcoin where you can normally pay by card. I do not yet own a card such as TenX but I will look into this in the not too distant future. TenX also provide an app with a basic wallet from which to pay.
In the first two posts I covered what mining is and the role it plays in both Bitcoin and some of the other blockchains out there. Most of the mining when it comes to Bitcoin is done by mining-specific computers. This also means that most personal computers aren’t going to make you a millionaire from Bitcoin mining. There are other cryptocurrencies out there though and mining does make it easier to understand what all the fuss is about.
Minergate: Mine your own cryptocurrencies through the simple, elegant and easy to use mining tool called Minergate. I use Minergate myself and have had no trouble transferring my earnings out of Minergate. Don’t expect to become a millionaire overnight, this is a way of getting into and understanding the mechanics of blockchains a little. It also doesn’t hurt that you can make a little on the side while getting smarter.
Genesis mining: Genesis mining is a cloud mining service. This basically means you buy hash power, mining power, and receive cryptocurrencies as a mining reward. I invested a small amount back in august 2016 and have received regular payouts since. I would like to point out though, that I have yet to make a return on investment as I haven’t broken even yet.
I mentioned that you can use Coinbase to buy Bitcoin, but there a lot of alternatives out there. These are the ones I have experience in using.
Coinbase*: Like mentioned above Coinbase is an all-one-solution. As such they also function as a sort of exchange and you can buy Bitcoin directly from the Coinbase app or webplatform. If you sign up for Coinbase through my affiliate link, and buy bitcoin for a minimum of 100$, we both get a 10$ bonus. I use Coinbase myself.
Coinify: A rather big danish exchange. Here you have the option of buying or selling bitcoins trough both bank transfers and by card. They also facilitate businesses being able to accept bitcoin as payments. If you choose to buy via a bank transfer the fee is
0% 0.25%. If you buy using a debit- or creditcard the fee is 3%. They accept DKK, USD, EUR and GBP. I use Coinify myself.
Copenhagen Bitcoin: Copenhagen Bitcoin is also a danish exchange. I have used them regularly in the past and the experience have always been great. They only accept bank transfers and charge a fee of 3.9%. You can both buy and sell bitcoins here. I have used Copenhagen Bitcoin myself.
Poloniex: Poloniex is an exchange that offers the opportunity to buy a lot of different cryptocurrencies. I don’t trade cryptocurrencies and therefore don’t buy a lot of different ones but I use Poloniex to withdraw my mining rewards from Minergate.
Coinbase*: Coinbase is one of the major players in the Bitcoin-crypto-blockchain space. They offer a wallet with the possibilities of holding three different cyprocurrencies, Bitcoin, Ethereum and Litecoin. Coinbase can be accessed both via web and app from your smartphone. Using Coinbase is easy, simple and also offers the opportunity of buying the three aforementioned cryptocurrencies directly from your Coinbase account. This makes Coinbase an all inclusive experience which is valuable for those not wanting to use several platforms and apps.
Breadwallet: Breadwallet is a super simple bitcoin only wallet.
Jaxx: Simple and elegant wallet with the possibility of holding an increasingly growing number of cryptocurrencies.
Paperwallets: Paperwallets are a simple way of taking your bitcoins out of your phone/computer and thereby decreasing the potential for digital theft via hacking. They are also a simple way of gifting bitcoin for birthdays etc. An example of a wallet generater can be found at walletgenerator.net.
With this being the 3rd of a small series in 3 parts on Bitcoin, it means we are at an end for now. I will of course stay on top of things, as much as possible, concerning Bitcoin and write more about it as increased use and further development becomes a reality. I have concentrated on Bitcoin in this series but it is possible I will cover other blockchains in the future. I believe the blockchain technology to be a core technology of the future and as such there are bound to be other interesting projects out there besides Bitcoin.
Again, give this site a try: https://anders.com/blockchain/ if you wish to understand blockchains in general better. It is simply unparalleled in explaining blockchains and it gives you the possibility of playing around in a clickable environment in order to better understand what all the fuss is about.
I consider Bitcoin it’s own thing in my quest for financial independence and this means the topic has it’s own page on https://www.frinans.dk/bitcoin/.
As always comments are most welcome and I will do my best to answer all questions. You can follow or like the facebook page or follow frinans on twitter to get notified of new posts as well as interesting links and stories I stumble across. If you are interested in getting into Bitcoin you can sign up for Coinbase through my affiliate link, if you buy Bitcoin for a minimum of 100$, we both get a 10$ bonus. If you are interested in diversifying your investments further, then how about signing up for crowdlending through my Mintos affiliate link and gain an exclusive % on your investment.
* Affiliate link