Bitcoin is well known as “the currency of the internet”. So it should be super easy to buy it for a beginner? Well, yes and no. Buying Bitcoin is not complicated, but you also have to choose a wallet and learn the basics of crypto security.
This guide will help you at the beginning of your crypto journey and teach you how to buy your first Bitcoin.
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Step 1: Choose a wallet
Before you rush to join the Bitcoin club you should first decide where to store your crypto – in other words, where to store your private keys.
Private Key: A “password” to your crypto wallet. You need your private key to be able to receive the crypto someone sends you and access your funds. It is functionally similar to a password to your email account. There is also a public key, which is essentially your wallet address.
There are 4 main types of wallets which balance on the scale between convenience and security.
Online exchange wallet
The web-based wallet is the most convenient and least secure option. In this case, you store the private keys on the centralized server of the crypto exchange.
It is very useful because you can access and sell/transfer your funds very quickly. However, if the hackers get to the exchange you will most likely lose all your Bitcoins.
Software wallet
There are two main types of software wallets – Mobile and Desktop. They both share the same basic principle of storing your Bitcoin on your device.
The software wallet is more secure than the online option, but it also has risks. Hackers can install the malware on a PC or smartphone or the device can simply get lost. That’s why if you plan on using a software wallet, you should follow basic crypto security measures. to be completely safe.
This type of wallet is a good choice for a beginner who owns a small number of Bitcoins. Software wallets are also popular among experienced traders – they use it to keep a small operational portion of assets on the quick access while the bigger bulk is stored offline.
Hardware wallet
Hardware wallets are physical portable crypto storage devices. They come in all shapes and sizes but usually look like a USB stick with the tiny screen. A hardware wallet is one of the safest ways to store your crypto because the keys are stored offline on your device, so-called “cold storage”.
They usually come with built-in encryption which adds another level of protection. The only way to lose the Bitcoin from the hardware wallet is to lose the device itself, but even in this case they always have the backup key.
Most of the traders and investors choose the hardware wallet because of high security. When they need to access the funds the device can be connected to the software wallet on the PC and serve as the physical key.
Paper wallet
If you are a crypto beginner then you may think that a paper wallet sounds too simple to store the next-gen currency of the internet supported by the innovative technology. But the experienced Bitcoinists know that it is actually one of the most secure options.
In this case, you simply write down or print out your private and public keys on the piece of paper and put it in the most secure place, like a safe.
Paper wallets can still be damaged in a fire, water, or simply get lost. It is recommended to use the paper wallet as an extra layer of protection in case your crypto or hardware wallet fails.
Now you know what are the main types of crypto wallets, but if you need some more research check out the “4 Best Bitcoin Wallets” guide.
Step 2: Backup your wallet.
It is essential to create a backup as the cryptos main advantage of decentralization also involves a huge risk. In regular banking losing a card is not a big deal – you just call your bank and they make you a new one.
Cryptocurrencies have no bank or any other type of centralized governance, so there is no one to return your Bitcoins if you lose your wallet. Crypto media is full of stories where people accidentally threw away the hard drive and lost millions of dollars just because they had no backup.
No matter if you use the software or a hardware wallet creating a backup is a must-have protective measure. Even if you have just $100 worth of crypto you should get used to backing up your wallet right from the beginning of your crypto journey.
We will not explain all the backup options for each type of wallet in this article, but if you want to learn more we strongly recommend this explanatory backup guide.
Step 3: Buy Bitcoin
There are many options to buy Bitcoin, some of which don’t even require internet access or a BTC wallet.
Bitcoin ATM
Using a Bitcoin ATM (BTM) is one of the most convenient ways to buy Bitcoin. The total number of those machines exceeded 10,000 and they keep mushrooming in public locations all over the globe. You can find the nearest one next to you using the CoinATMRadar tool.
Be aware that the BTMs charge extra fees. They usually stand around 4-8%, but can go even higher. Some operators even have hidden fees in their machines. Be sure to read all the information carefully and check if the price in the BTM matches the exchange.
Exchange
Another simple way to buy Bitcoin is to purchase it online from the cryptocurrency exchange. This method is the most popular among the crypto community, but it also has complications.
For example, you can not use a credit card or PayPal – most exchanges do not accept them and require you to connect the bank account. This is because the buyer can ask the bank for a chargeback, which is impossible to make since it is impossible to reverse the Bitcoin transaction. Most exchanges will also require you to provide personal information and pass the KYC in order to start trading.
Gift Card
You can purchase Bitcoin using a gift card of a popular retailer, like Target, Best Buy, or Amazon. Many exchanges accept them, but every exchange has different security measures, so don’t lose your receipt from the store just in case.
Be sure to choose only the trusted seller as crypto space is full of scammers and phishing websites.
P2P
Even though it kind of contradicts with the principle of Bitcoin as “the currency of the internet”, you can still buy BTC for cash by meeting face to face with the local seller. This option fits you if you prefer full anonymity.
There are many platforms for facilitating such transactions. The more advanced of them even offer security services to protect both parties of the trade. Be aware that there are a lot of scammers in this field, so choosing a good platform and a safe public place is very important.
Step 4: Transfer your Bitcoins From The Exchange
Most likely you will buy Bitcoin on the exchange, which is a standard choice for both beginners and pros. As soon as you buy crypto which you are not planning to use for active trading you should transfer it away from the exchange.
It is not safe to store your Bitcoin online since the exchanges get hacked all the time — just recently hackers stole more than $280 Million from the KuCoin exchange. Moreover, some online crypto exchanges are still on a regulatory edge and don’t have obligations to get insurance — monetary protection is usually very limited or non-existent at all.
If you are just starting with crypto, you probably do not have a hardware wallet as they can get really pricey. At this point, the software wallet should be the best choice for your current needs. Don’t forget about the security measures and do your best to protect your devices from unauthorized access.
The Risks To Keep In Mind
When you deal with crypto there are a couple of important things to remember.
Always triple check the address
If you send your Bitcoin to the wrong address it will be gone forever because there is simply no one to return it. This is the other side of being your own bank – you are now responsible for all the mistakes.
A wrong address is a very common problem in the Bitcoin community – more than 1.5 Million coins are already lost forever. That’s more than 7% of the overall Bitcoin supply.
Keep in mind the crypto regulations in your country.
When you deal with Bitcoin you need to understand that the government may not share your optimism about cryptocurrencies. The legal framework may change depending on where you live, who you are and what you want to do with your crypto. Some of the countries that banned Bitcoin are India, Saudi Arabia, and Vietnam.
Generally, the regulations are pretty simple – if you do not use your Bitcoins for some criminal activity you are fine. However, the taxation may get complicated as different governments classify Bitcoin very differently. Some consider it a commodity like Canada and Singapore, others think of Bitcoin as “virtual currency” like Norway and Poland.
Check out this article to know if your government welcomes Bitcoin and how far this love (or hate) goes.
Welcome to the Bitcoin club!
You are now ready to buy your first Bitcoin and join the Bitcoin club! One last piece of advice – do not rush to buy hundreds of dollars worth of Bitcoin right from the beginning. Dip your toes first with the smaller amounts, get used to the network features and security measures, learn more about how Bitcoin works, and what determines its price. Only then increase your capital. Good luck!