Bitcoins surfaced in 2009 when a mysterious developer named Satoshi Nakamoto introduced the white paper on bitcoins. Since then, the world has come a long way and bitcoins have cemented their place in the global financial system. So how does one buy and transact in bitcoins? This is a question that many people ask and in this article we will try to understand what do you need to buy bitcoins and how can you build up your own stock of bitcoins.
Purchasing bitcoins is very simple but many people are unaware of this simple process mainly because bitcoins are an alternative currency on their own and while many people use them around the world, their usage hasn`t become that main stream. Partly because governments cannot control it, which is the basic purpose of a cryptocurrency, it is supposed to be decentralized and out of the control of the government.
Let us now look at the breakdown of the process through which anyone can purchase bitcoins.
Where do you keep your cash? In your wallet right, if you have got any savings then you keep the savings in your bank. Now, bitcoins do not have any physical substance so you cannot keep them in your wallet and banks do not offer bitcoin accounts, so they are out of the question. So where do you keep your bitcoins? In your digital wallet. This is the first thing you will need to have before you can purchase any bitcoins. In order to understand the concept of a digital wallet, let us look at how transactions in bitcoins happen. Because when you have got physical and tangible cash, you can simply keep it in your wallet, but how can you identify a bitcoin in order to keep it in your digital wallet?
Each bitcoin is assigned a key, every bitcoin has a distinct key and this separates the duplication of coins. There are two types of keys associated with bitcoins. Public key and Private key.
The digital location where bitcoins are deposited and are withdrawn from. Your public key is your digital bitcoin ownership identity. Remember, your bank account carries your name but the point of bitcoins is to keep the identity of coin holders anonymous, for this reason your public key will not have your name or any other identity data, instead every public key is a unique string of numbers. So in simple words your public key is your digital signature which will be used every time you make a transaction using bitcoins. Through this public key your funds will be withdrawn from or deposited into your account.
Your private key, is your password and at no cost should it be shared with anyone. You will use your private key to authorize your bitcoin transactions. Some bitcoin owners go the extra mile by encrypting their private keys or storing their digital wallets offline.
If you are in the U.S then you will have to verify your identity at the time of registering your digital wallet, this is a part of the anti money laundering policy of the United States because being decentralized makes bitcoins susceptible to be used for illicit activities. The same applies for other countries that have recognized bitcoins as legal tender. Some countries however have not legally recognized bitcoins and you may be penalized for having bitcoins, so please check up your local laws and regulations.
Next thing you will need is a secure internet connection. If you are going to transact in bitcoins, then you will need to do it over a secure connection. Ideally any financial transaction should take place over a private and secured connection to prevent the risk of loss of financial data and personal information. At any cost, avoid trading bitcoins over public wifi or public networks.
Bank or Cards
So now that you have got a digital wallet, personal verification and a secure internet connection, you can move on to the actual transaction bit. In order to buy bitcoins, you will need an equivalent amount of cash in bank or in your credit or debit card. You can buy bitcoins through a bitcoin exchange.
Buying bitcoins through banks is the easiest, cheapest and safest way but it takes longer because there are a lot of verification processes involved. Credit and Debit cards are the best way to buy bitcoin instantly but they carry higher fees.
So what is a bit coin exchange? It is similar to a Forex exchange where you go to get your currency converted into foreign exchange if your choice. A bit coin exchange is a digital exchange that can convert your fiat currency into bitcoins. Some exchanges also offer other virtual currencies such as Etherium. So a bitcoin exchange is a digital exchange that allows users to buy and sell their bitcoins.
The services offered vary from one exchange to another and the availability of exchange also depends on your jurisdiction, as mentioned above, please check if the laws applicable on you allow you to purchase bitcoins legally or not.
There are many exchanges with a good reputation out there. If you are looking for an exchange then we will suggest you to carry out proper due diligence on your part first. Coinbase and Coinmama are some of the most well known bitcoin exchanges where you can purchase and trade your bitcoins.
So, this was a brief explanation of the steps that you will need to follow in order to purchase your own stock of bitcoins. Once again, allow me to reiterate that security is of utmost importance so make sure that you carry out your transactions over a secure network and always keep your private key secure.