Every master was once a student.
So you want to invest in Crypto? This guide is meant for people who may have previously had an interest in this kind of technology, but as of yet have not dug too much deeper into this burgeoning empire of bits and code. Cryptocurrency is where millionaires are made and where dreams come true, but it’s also a place full of dangers lurking behind every corner. One wrong step here and you’ll be among many of the sad stories of lost accounts, stolen wallets, or gambled-away earnings. I’ll be your guide as I take you along this harrowing cryptocurrency journey and, with diligence and patience, you too can benefit from the fruits of this growing economy. So let’s talk basics.
What is Bitcoin?
Put simply, Bitcoin is a digital form of currency that has several advantages over your typical Fiat (paper) currency. Some examples of Bitcoin’s advantages include the ability to send it overseas to other countries with no cost (or very little), the ability to keep your funds privately, and increased security compared to things like credit cards and paper money. If someone were to steal your Bitcoin wallet, it would be useless to them without knowing the private key – but more on this later.
Why is it so valued?
Bitcoin is the first of its kind (asides from the now-closed E-Gold), created by a man named Satoshi Nakamoto. While initially, Bitcoin was worth fractions of a penny (in 2009), it slowly grew in strength and network effect, completely undisturbed by the worlds financial systems. Bitcoin would grow over time, in dimly lit computer rooms and closed off hacker communities, earning reputation and a massive influx of new users in just a few short years. As of today, the price of a single Bitcoin is now over 4’000 U.S Dollars. Bitcoin is capped at 21 million coins, making it extremely rare compared to even the amount of dollar bills in circulation.
It is also decentralized, using computers from all over the world to support the infrastructure that Bitcoin uses, known as the “Blockchain”. With blockchain technology, Bitcoin can evade the control of governments and function as a truly democratic form of currency, giving the power back to the people and away from political interests. Bitcoin is also irreplacable – many who don’t know much about it simply believe Bitcoin to be some lines of code that are randomly decided to have value – this couldn’t be further from the truth. While there are as of this post over 800 digital currencies (known as Altcoins), Bitcoin has remained the top dog in the race of decentralized currency, due to its purity of code, rarity, and network effect – no other coin even comes close to Bitcoin when it comes to the amount of users.
Who controls Bitcoin?
This is the beauty of decentralized systems – no one, not even (the as of now missing) Satoshi Nakamoto can make any changes, updates, or revisions to the code of Bitcoin without requiring a significant amount (usually over 90%) of Bitcoin miners to agree to a change. Because Bitcoin miners operate from mining rigs all over the world (and the cost of entry to being a miner is relatively cheap), it means that the system is completely democratic, and there is no “dictator” at the top leading the way. Even if the government wanted to, they could not stop the proliferation of Bitcoin, and with the recently launched Blockstream Satellite, Bitcoin is poised to be functional even outside of the boundaries of the Internet itself.
How do I purchase Bitcoin?
For most users, the easiest place to buy Bitcoins will be at coinbase.com. From there, you can enter credit card or bank details and pay for Bitcoin there. Coinbase is a legal US based company, and your money is insured up to 250’000$ USD in the event of thefts, hacks, or otherwise when it’s in a coinbase wallet (they are not, however, responsible if your password gets hacked or the error was on your end). You’ll buy coins there at the current exchange rate of Bitcoins to US Dollars, which is always reflective in the price. For example, if a Bitcoin costs 4’000$ today and you buy one, you can later sell it back to Coinbase for 5’000$ (if the current exchange price reaches that point). Bitcoin price is usually always growing, however like any growing system, there are points and times where price is in a decline. These present excellent buying opportunities for those who are looking to increase their Bitcoin exposure, and you can get some relatively cheap coins by doing this.
I have Bitcoin, now what?
Now you have a few options; you can either leave your Bitcoin in your Coinbase wallet, or move your Bitcoins to a wallet of your own that you own. There are many different types of wallets, including Web based and hardware wallets. Personally, I own a Trezor, which is a hardware based wallet. It features great security, and if you’re investing more than, say 1’000$ or so into Bitcoin, is your most secure option when storing currency.
Some common Bitcoin wallets include:
and many more!
Remember, Bitcoin gives us power over banks, but in doing so we become our own banks – this means we are responsible for the security of our funds, and it should be of utmost importance. After you’ve decided on a wallet, you can send the funds out of Coinbase using the public address key – on all wallets this will be a string of numbers and letters. For example, my Bitcoin address looks like this:
In order to send funds to my private wallet, I would set the destination address as: 1PyyinjbsWLGpbmnjQqGg49nS4ESeC88aB
If you’re looking to send Bitcoin to your own private address, yours will look similar – simply copy and paste the address from your chosen wallet into the destination address on Coinbase.
After that, wait some time – the blockchain needs to confirm your transactions which can take anywhere from 5 – 15 minutes. Once confirmed, your funds will show up in your destination address. The advantage of having a private wallet is that you own your private keys – on creation of a wallet, you will usually have a pass phrase or string of numbers and letters. This is your private key (not to be confused with your address!) – write this down and keep it somewhere safe, as it is the only way to actually use the funds in your wallet. If you lose your private key, your funds are gone.
And that’s it! You’re now a crypto investor. You can also start paying other people in Bitcoin for goods and services by sending them BTC in similar fashion to the way you sent it to your wallet – just be careful how much you send, as you don’t want to mistakenly send your entire balance.
Bitcoin is a wonderful product, as it liberates us from central banking institutions and government currency control. It is also dangerous, and security should always be your primary concern. Remember that the price of Bitcoin is always rising – with some speculators placing it above tens of thousands of even millions of dollars a coin, it’s a perfect time to start investing in this bold new technology.