Bitcoin (BTC) is the original and most well-known cryptocurrency. It has been around since 2009 and has seen tremendous growth in value and adoption over the years. For someone new to crypto, Bitcoin can seem complex and intimidating to buy and use. But it doesn’t have to be!
In this beginner’s guide, I’ll explain in simple terms what Bitcoin is, the different ways you can acquire BTC, how to store it securely, and how to convert your Bitcoin to other cryptocurrencies like Ethereum (ETH). My goal is to provide useful information to help you get started with Bitcoin, even if you have zero prior experience. Let’s dive in!
What Exactly is Bitcoin?
Bitcoin is a digital currency that only exists electronically. It was created in 2009 by an anonymous person or group called Satoshi Nakamoto.
Bitcoin runs on a decentralized network called blockchain technology. There is no central authority like a government or bank that controls Bitcoin. Instead, it is maintained by a global network of computers.
The total supply of Bitcoin is limited to 21 million coins. New Bitcoins enter circulation as a reward to people who contribute computing power to process transactions on the blockchain network. This process is called mining.
Bitcoin can be used as a payment method for goods and services. More and more major companies now accept Bitcoin as payment. However, most people treat Bitcoin as a long term investment. They hope it will increase in value over time.
Why Do People Want Bitcoin?
There are a few key reasons why Bitcoin is popular:
- It allows fast, low-cost, borderless payments – Bitcoin transactions are processed quickly around the world without high fees. This makes it very useful for payments, especially international transfers.
- It is decentralized – No single authority controls Bitcoin. It is maintained by a distributed network of users which makes censorship very difficult.
- It has a limited supply – Only 21 million Bitcoins will ever exist. This scarcity creates value and aids price appreciation over time as demand rises.
- It is pseudonymous – Transactions are not directly tied to personal identity. User funds and activity are relatively private.
- It is transparent – All Bitcoin transactions are recorded publicly on the blockchain so they cannot be altered. This allows for transparency and accountability.
For these reasons above, millions of people around the world now use, invest in, and transact with Bitcoin. Now let’s look at the different options for acquiring your first Bitcoin.
How to Get Started Buying Bitcoin
Here are the main ways a beginner can buy Bitcoin:
Buy from a Bitcoin Exchange
This is the most common route for beginners. Bitcoin exchanges allow you to use regular fiat money (USD, EUR, GBP etc) to purchase Bitcoin. Some popular exchanges include Coinbase, Kraken, Gemini, and Binance. While doing so, try to carefully monitor the cryptocurrency exchange rates in order for the transaction to satisfy both parties.
The process typically includes:
- Verifying your identity by submitting scans of ID documents
- Adding a payment method such as bank account or debit card
- Placing a buy order for the amount of Bitcoin you want
- The exchange will convert your fiat money to Bitcoin
- Easy and fast way to buy Bitcoin with fiat currency
- Very beginner friendly on platforms like Coinbase
- Allows you to easily trade into other cryptocurrencies
- Some exchanges have higher fees than others
- You don’t have full control over the Bitcoin held on an exchange
Use a Bitcoin ATM
A Bitcoin ATM allows you to insert cash which is then converted to BTC and sent to your crypto wallet. The BTC ATM company applies a fee for the convenience.
To use a Bitcoin ATM you typically need to:
- Locate your nearest Bitcoin ATM using an online directory
- Create a mobile crypto wallet on your smartphone to send the BTC to
- Insert fiat money into the ATM and input your wallet address
- Scan the QR code on the ATM to link your wallet
- Quick and private way to turn cash into Bitcoin
- No ID required in most cases
- Transaction fees are usually high (5% or more)
- Bitcoin ATMs have limited availability in some regions
Accept Bitcoin as Payment
If you provide freelance services or operate an ecommerce store, you can start accepting BTC directly from customers as payment. All you need is a Bitcoin wallet to receive the funds.
Many payment processors like BitPay and Coinbase Commerce make it easy to accept Bitcoin. They handle the payouts in fiat currency of your choice.
- No fees and fast payments from customers
- Gives your business an edge in the crypto space
- Volatility risk if you don’t convert BTC to fiat right away
- Customers unfamiliar with crypto may prefer traditional payment methods
Mine Your Own Bitcoin
Bitcoin mining involves using specialized computer hardware and software to help validate transactions on the blockchain in exchange for earning newly minted Bitcoin.
For beginners looking to earn a small amount of Bitcoin as a hobby, certain apps like Phoneum allow you to mine using just your phone.
- Fun, rewarding way to earn free Bitcoin
- No extra costs if using an app that mines via phone
- Very slow and unlikely to produce significant income
- Mining hardware rigs are expensive for serious miners
So in summary, buying Bitcoin from an exchange is the easiest option for most beginners. But accepting BTC as payment, using a Bitcoin ATM, or casual mining are alternatives to consider too.
How to Store Bitcoin Securely
Once you acquire Bitcoin, you need a secure place to store it called a Bitcoin wallet. These are the main wallet options:
Crypto Exchange Wallet
When you purchase Bitcoin on an exchange like Coinbase, the coins will be deposited into your exchange wallet. This is hosted on the exchange’s servers.
- Convenient to easily trade and sell your coins on the exchange
- You don’t control the private keys so security relies on the exchange
- Higher risk of loss from hacking attacks on exchanges
Mobile wallets like Trust Wallet or Exodus can be downloaded onto your smartphone as apps. This allows you to conveniently store and access your Bitcoin.
- Very user-friendly and accessible on smartphones
- You maintain control via private keys
- Less secure than hardware wallets if phone is hacked
- Can have limited functionality compared to software wallets
Desktop wallets are software programs downloaded onto laptops or PCs. Examples include Electrum and Exodus. Your private keys are stored locally and you can manage BTC with more options.
- Provides increased functionality over mobile wallets
- You maintain control of private keys
- More complex set up compared to mobile and web wallets
- Requires more security diligence on vulnerable desktop environment
A hardware wallet is a physical device that stores private keys offline. Popular options include the Ledger Nano X and Trezor Model T. Hardware wallets offer very high security for larger holdings.
- Extremely secure cold storage of private keys offline
- Built with robust encryption and backups
- Can be expensive to purchase the physical device
- Less convenient to access your coins quickly
For small amounts of Bitcoin, mobile or desktop wallets provide a good blend of security and accessibility. As your holdings grow, a hardware wallet is highly recommended for added peace of mind.
How to Convert Bitcoin to Ethereum
Both Bitcoin and Ethereum are leading cryptocurrencies. Here are the main ways to convert between them when needed:
- Use a crypto exchange – All major exchanges like Coinbase and Binance allow you to easily trade between BTC and ETH. This is the simplest option.
- Atomic swaps – This uses decentralized technology to swap coins directly with another person without an intermediary. Atomic swaps allow you to exchange coins securely without handing custody to an exchange.
- Via decentralized finance (DeFi) – On DeFi protocols like Uniswap and PancakeSwap you can exchange between cryptocurrencies like BTC and ETH through liquidity pools. DeFi avoids centralized intermediaries.
- Crypto payment gateways – Services like CoinPayments facilitate crypto payments between merchants and customers of many different coins. This allows users to exchange BTC to ETH through payments.
- OTC Brokers – Firms like Cumberland and Circle Trade allow large volume or high net worth traders to exchange between cryptocurrencies directly at an agreed price.
And that covers the basics – what Bitcoin is, the main options for buying BTC securely, storing it properly, and exchanging it between other cryptocurrencies. Bitcoin can certainly seem daunting for newcomers. But hopefully this guide has helped shed some light on the key considerations for using BTC in a safe and effective manner as a beginner. With a bit of upfront knowledge, anyone can dive into the exciting world of Bitcoin and blockchain technology.
Frequently Asked Questions
What are the risks of buying Bitcoin?
The main risks are volatile prices, hacking of exchanges, losing access to your wallet, and sending coins to the wrong address. Don’t invest more than you can afford to lose. Enable all security features on exchanges and wallets.
Is Bitcoin a good investment?
For many, Bitcoin has proven to be a very strong long-term investment. But nothing is guaranteed. Do your own due diligence before investing based on your own risk tolerance.
What will drive Bitcoin’s future price?
Key factors are increased adoption, recognition as digital gold, network effects, technology improvements like Taproot and Lightning, and global economic uncertainty. But many events remain unpredictable.
How do I choose a crypto wallet?
The best wallet depends on your needs and experience. For beginners, choose user-friendly mobile wallets like Exodus or desktop wallets like Electrum. Use hardware wallets for larger holdings.
What is the fastest way to get Bitcoin?
Exchanges allow near-instant purchasing with bank transfers or credit cards. Bitcoin ATMs also provide instant conversion of cash to BTC. But fees and rates vary across platforms.
Is Bitcoin safe to use?
Bitcoin has a solid 10+ year track record as a secure network. But safety depends on following best practices like enabling wallet security features, handling keys properly, and avoiding scams.
Can Bitcoin be banned?
It is very difficult to fully ban decentralized cryptocurrencies like Bitcoin. The network is spread across the globe and controlled by no single entity. But specific countries can restrict access.
How do I get started mining Bitcoin?
For hobbyists, convenient mobile apps like Phoneum allow you to mine with just a smartphone to earn small amounts of BTC. But professional mining requires expensive, specialized hardware for the best chance of success.