Why Use Bitcoin?
Bitcoin was originally created as an alternative, decentralized payment method. Unlike international bank transfers at the time, it was low-cost and almost instantaneous. An added benefit for merchants (less so for users) was that it was irreversible, removing the threat of expensive charge-backs.
However, the improvement in domestic payment methods and the rapid development of alternative (non-cryptocurrency) forms of international transfers has reduced bitcoin’s advantage in this area, especially given its increasing fees and frequent network bottlenecks.
Furthermore, the increasing oversight and regulation to prevent money laundering and illegal transactions have restricted the cryptocurrency’s use for privacy reasons.
In some parts of the world; bitcoin is still a more efficient and cheaper way to transfer money across borders, and several remittance startups make use of this feature.
Bitcoin’s cost and speed advantages; though, are being eroded as traditional channels improve (and the network’s fees continue to increase), and liquidity remains a problem in many countries.
Also, a number of large and small retailers accept the cryptocurrency as a form of payment, although reports suggest that demand for this function is not high.
And many individuals feel more comfortable holding a part of their wealth in securely-stored bitcoin, where a central authority cannot block access or take a cut.
Recently bitcoin seems to have assumed the role of investment asset, as traders, institutional investors and small savers have woken up to the potential gains from price appreciation.
According to some sources, bitcoin is increasingly being used for money laundering. But we know that you wouldn’t do that. And anyway, bitcoin is not, as is commonly believed, a good vehicle for money laundering, extortion or terrorism financing, since it is both traceable and transparent – as a spate of recent arrests can attest.
How Can I Buy Bitcoin?
So you’ve learned the basics about bitcoin, you’re excited about the potential and now you want to buy some*. But how?
(* Please, never invest more than you can afford to lose – cryptocurrencies are volatile and the price could go down as well as up.)
Bitcoin can be bought on exchanges, or directly from other people via marketplaces.
You can pay for them in a variety of ways, ranging from hard cash to credit and debit cards to wire transfers, or even with other cryptocurrencies, depending on who you are buying them from and where you live.
1 – set up a wallet
The first step is to set up a wallet to store your bitcoin – you will need one, whatever your preferred method of purchase. This could be an online wallet (either part of an exchange platform, or via an independent provider), a desktop wallet, a mobile wallet or an offline one (such as a hardware device or a paper wallet).
Even within these categories of wallets there is a wide variety of services to choose from; so do some research before deciding on which version best suits your needs.
The most important part of any wallet is keeping your keys (a string of characters) and/or passwords safe. If you lose them, you lose access to the bitcoin stored there.
Please make suitable backups.
All bitcoin wallet software allows you to make a paper printout of your wallet, make multiple copies — store them in a safe deposit box, safe or in an offsite location for extra security.
1 – open an account at an exchange
Cryptocurrency exchanges will buy and sell bitcoin on your behalf. There are hundreds currently operating, with varying degrees of liquidity and security, and new ones continue to emerge while others end up closing down. As with wallets, it is advisable to do some research before choosing; – you may be lucky enough to have several reputable exchanges to choose from; or your access may be limited to one or two, depending on your geographical area.
Most exchanges accept payment via bank transfer or credit card, and some are willing to work with Paypal transfers. And most exchanges charge fees (which generally include the fees for using the bitcoin network).
Each exchange has a different procedure for both setup and transaction, and should give you sufficient detail to be able to execute the purchase. If not, consider changing the service provider.
Once the exchange has received payment, it will purchase the corresponding amount of bitcoin on your behalf; and deposit them in an automatically generated wallet on the exchange. This can take minutes, or sometimes hours due to network bottlenecks. If you wish (recommended), you can then move the funds to your off-exchange wallet.
BUYING WITH CASH
There are two excellent reasons:
- Although cash purchases are private, recent changes in Australian law require you to present 100 points of identification in order to purchase Bitcoin — however, if you can fulfill this requirement, bitcoin purchases can be as simple as a bank teller transaction.
- Cash purchases are faster for first-time buyers. This reason exists mostly because there’s no waiting for the arrival of bank transfers, or for verification by an online bitcoin exchange. Deposits usually take 1 to 3 business days, and verification can take 1 to 3 weeks. Cash trades save a lot of time.
When Bitcoin’s price is as volatile as they have been in 2018, moving hundreds if not thousands of dollars at a time, even a few days can equate to a lot of money!
Transfer your bitcoin to a credit card.
Coinjar allows you to transfer bitcoin to cash and cash to bitcoin. using an app , credit card or online interface, just as you would do normally with online banking.
Bitcoins ATMs are machines that will send bitcoin to your wallet in exchange for cash. They operate in a similar way to bank ATMs; feed in money, then hold your wallet’s QR code up to a screen and corresponding amount of bitcoin are beamed to your account.
You could also attempt to mine your own bitcoins. The technicalities of mining are beyond the scope of this article, but the process involves:
- Creating a Wallet (covered above)
- Finding and Joining a Mining Guild
- Linking your Wallet to Your Guild
- Configuring Your Mining Software to Link to Your Guild
- Running The Software.
We would advise caution when attempting to mine your own bitcoins, or any other form of cryptocurrency. Because the process is involves solving an increasingly difficult mathematical process, the amount of computing power (and, by extension, power consumption) you need is becoming a barrier to profiting from mining.
- In 2012, the difficulty curve to find 1 entire bitcoin took a standard computer of the day roughly 6 days.
- In 2015, the curve had increased to approximately 800 days, for the same computer.
- As of 2018 (June), the most highly specialised desktop computer would find a single coin in approximately 17.5 years.
Other Mining Methods
Aside from your desktop computer, there are two other ways to mine coins.
- Cloud Mining
Cloud mining involves a process where you pay a small monthly or yearly transaction fee in order to use someone else’s computing power in order to mine bitcoins. This allows you to passively mine coins for a percentage of their value.
- ASIC Mining
An ASIC miner is a highly specialized piece of hardware that contains many CPUs (and several fans) in order to mine coins as fast as possible. The downside of running ASIC miners are that the chips generally can only be used for Bitcoin mining. While there are rare exceptions – for example chips that mine both two types of cryptocurrency – this is often because the chip package effectively has two ASICs: one for Bitcoin and one for an alternative cryptocurrency.However, if you would like to see what profitability there is in ASIC miners, we highly recommend looking at a site like ASIC Miner Value first, which allows you to input your cost per kilowatt hour for electricity (found on your power bill) and your budget for miner purchases and calculates your profit (or loss) accordingly.