Buying The Bitcoin: Challenges Faced
Even if buying the cryptocurrency Bitcoin is as simple as signing up for a mobile app, and despite receiving attention in the financial and investment world, many people still do not know how to buy it.
Even if buying the cryptocurrency Bitcoin is as simple as signing up for a mobile app, and despite receiving attention in the financial and investment world, many people still do not know how to buy it. The time is ripe to delve into the weeds and learn more about how to invest with cryptocurrency back in news. The following is a breakdown of everything to know about buying Bitcoin.
What are the necessary to Buy Bitcoin?
A Digital Wallet:
A program called wallet is run to conduct transactions on the Bitcoin network. As they are not technically ‘coins’, a Bitcoin wallet is not a ‘wallet’. An encryption algorithm used to create the Bitcoin which has public and private keys comprising of long strings of numbers and letters is used to maintain the Bitcoin balances.
The location where the transactions are deposited to and withdrawn from is known as the public key. Unlike a username on social media newsfeed, this is the key that appears on the blockchain ledger as the digital signature of the user. To buy, sell and trade Bitcoin in a wallet, a private key is required as the password. It is necessary to guard the private key and should be used to authorize the transmissions. Users use various methods to protect private keys, either by encrypting a wallet with a strong password or by choosing the cold storage option which is storing the wallet offline. This feature comes with Coinbase that offers a secure ‘multisig’ vault to host user keys.
Users are required to verify the identities while registering for digital wallets according to the Anti- Money Laundering Policy stated by the U.S Securities and Exchange Commission. It is mandatory to verify your identity using personal documents that include driver’s license and social security number (SSN) to buy and sell Bitcoin
Secure Internet Connection:
Trading Bitcoin online demands discretion about when and where you access the digital wallet. An insecure or public wifi network is not recommended as that may make you susceptible to attacks from hackers.
Bank Account, Debit Card, or Credit Card:
With a Bitcoin wallet, a traditional payment method uses a credit card, bank transfer (ACH) or debit card to buy the Bitcoin on a Bitcoin exchange. The Bitcoin is transferred to the wallet. Depending on the area of jurisdiction and the exchange is chosen, the availability of payment methods differ.
There may be benefits and disadvantages in paying with cash, credit card or debit card or bank transfer depending on the exchange. Although credit cards and debit cards are the most user-friendly methods, they require identification and impose higher fees than other methods. On the other hand, bank transfers charge low fees taking a longer time than other payment methods.
To buy Bitcoin, an actual place is required, after the wallet is set up with a payment method. Online marketplaces called exchanges similar to the platforms used by traders to buy a stock is used to buy Bitcoin and other cryptocurrencies. The traditional currencies can be exchanged for Bitcoin through an exchange that connects to Bitcoin marketplace
Bitcoin exchanges and Bitcoin wallets are not the same. The exchanges are similar to foreign exchange markets. They are digital platforms where Bitcoin is exchanged for fiat currency, for example, Bitcoin (BTC) for U.S dollars (USD). It is not the primary business of exchanges even though they allow wallet capabilities to users. Exchanges discourage storing large amounts of Bitcoin for long periods as the wallets must be secure. This is why transferring Bitcoin to a secure wallet is recommended. Opting for a wallet with a multi-signature facility should be the priority when choosing a secure wallet.
Many well-established exchanges providing a one-stop solution with high-security standards are being reported. Due diligence should be exercised while choosing the exchange or wallet. There are many exchanges besides Coinbase namely Coimama, CEX.IO, and Gemini.
Buy Bitcoin in these ways.
There are additional ways of purchasing Bitcoin, while Coinbase remains the most popular exchange. Below are listed a few of those alternatives.
Acting as in-person Bitcoin exchanges, the Bitcoin ATMs are becoming popular. It works with users inserting cash into the machine and then purchasing the Bitcoin later transferred to a secure digital wallet. Coin ATM Radar helps track down the closest machine as Bitcoin ATMs are increasingly becoming popular.
Peer to peer exchange services provides a direct connection between users, unlike decentralized exchanges that match buyers and sellers anonymously facilitating all aspects of the transaction. An example of this is the Local Bitcoins. The exchange creates an account for the users who can post requests to buy or sell Bitcoin including information about payment methods and price. The next step is users browsing through listings of buy and sell offers while choosing the trade partners they wish to transact with.
Some aspects of the trade are facilitated by Local Bitcoins. P2P exchanges do not offer the anonymity as decentralized exchanges, it does allow users the opportunity to shop around for the best deal. These exchanges provide a rating system that allows the users a way to evaluate potential trade partners before transacting.