Understanding how Bitcoin works may be interesting to some, but you’re probably wanting to know how you can acquire some bitcoins of your own. There are actually a few ways you can legally get bitcoins – no matter where you live in the world. As long as you have an Internet connection and the Bitcoin software installed, you’re going to be able to begin using this virtual currency. The best news is that it’s actually fairly easy to begin to build up your Bitcoin Wallet if you have a little spare time.
First, it should be noted that it’s really difficult to purchase bitcoins with a credit card or PayPal account. This may seem odd at first, but if you think about it this makes sense. It’s really easy to issue a chargeback on a credit card. If someone buys BTC with a credit card and then reverses the charge, it’s really tough to prove to the credit card companies that the exchange really happened. Because of this, most major Bitcoin Exchanges do not allow you to purchase BTC with a credit card or PayPal account.
Okay, with that aside, let’s dive in and look at the exact steps you’re going to need to take in order to start amassing BTC of your own. It’s important to remember that the value of one BTC is very volatile right now, so you probably don’t want to invest everything you have in this virtual currency. At the same time, the popularity of Bitcoin is growing throughout the world and some people are already getting rich by building up large piles of bitcoins virtually via means and method we’ll describe below.
Step One: Get a Bitcoin Wallet
The very first thing you’re going to need is a Bitcoin Wallet – aka a Bitcoin client. No matter what type of computer you’re running, there’s going to be an installer program to get you up and running in no time at all. Most people find it takes around 5 to 10 minutes to get a Bitcoin client installed and connected to the network.
Be sure you take your time to find a client you’re comfortable with using. Most are very similar, but some have some extra bells and whistles that might make it easier for you to get started. The most popular option for Windows, Mac and Linux is currently MultiBit. Bitcoin Wallet for Android OS is also available.
Another option is to use a web based Bitcoin Wallet, although this isn’t really recommended. While you may be able to find a service that offers a high level of security, it’s not the same level you’d have if you install the software on your own computer where you have complete control. Coinbase is one of the more popular online Bitcoin wallets currently.
Whichever you choose, once it’s installed the next step is easy. You’ll generate a public and private key. This is your Bitcoin address that will allow people to send BTC to your account. After you have your Bitcoin Wallet setup, you have a few different options on how to accrue BTC in your wallet. We’re going to go over these – one by one – next.
Bitcoin exchanges weren’t around when Bitcoin first came out, but they’re now an integral part of how the whole Bitcoin ecosystem works. There are exchanges that include Bitcoin among other virtual currencies online as well as marketplaces that deal exclusively with BTC transactions.
It’s interesting to note that some of these marketplaces will hold a balance for you – outside of your Bitcoin Wallet – in order to make it easier to conduct trades. Choosing the right Bitcoin Exchange is important if you want to stay safe and not risk losing your BTC balance due to a scam or technical problems.
Here’s a look at the major factors you need to look at before choosing a Bitcoin Exchange.
- ● Security – The most important aspect you want to think about is security. If a Bitcoin Exchange is new to the Internet and is missing contact information, this is a good sign that they probably don’t care too much about the security of your personal information. It’s important to do your homework so that you can determine which Bitcoin Exchange website has the best track record when it comes to security. Luckily, if you spend any amount of time on the many Bitcoin forums and communities online, you’ll see which exchanges have problems and which exchanges are recommended.
- ● Geography – While Bitcoin is a decentralized network that spreads around the globe, you still need to think about your physical location. For example, some Bitcoin Exchanges will not allow you to withdraw funds to a US bank account. It’s a good idea to make sure whatever exchange you’re thinking about using has a way for you to convert your BTC to your local currency easily and safely. In 2013, some people began complaining about the amount of time it took MtGox to transfer funds to the US, so it’s a good idea to once again hit the forums and try to gauge public opinion about any exchange you’re thinking of using.
Next, let’s take a quick look at some of the major Bitcoin Exchanges currently operating. New ones are appearing all the time, but it’s generally a safer bet working with one that has been around for a while and has managed to build up a track record of being reputable and honest.
- CoinBase – This is one of the most popular Bitcoin Exchanges at the moment. They offer the ability to transfer funds to US bank accounts. Having said that, if you live elsewhere in the world, you may not be happy about not being able to transfer funds to your local bank account.
- MtGox – At one time, MtGox was responsible for the majority of Bitcoin transactions in the world. This has changed recently as they’ve run into some legal problems in different countries around the world, but they’re still a very popular Bitcoin Exchange that many people use on a daily basis.
- BTC-E – This website is based in an unknown city in Bulgaria, so you might be cautious about keeping any BTC here. The prices per BTC are generally a lot lower here, but this is because it takes a ridiculous amount of time to confirm a transaction. Still, it’s an option you might look at depending on where you live currently.
- Bitstamp – This exchange is similar to CoinBase in a lot of ways. The main difference is that they do routinely work with people in countries other than the United States, making it easy to transfer BTC to foreign currencies. If you’re looking for a truly global Bitcoin Exchange, this is a good place to start.
- Cryptsy – This isn’t a pure Bitcoin Exchange. By that we mean that you can trade other cryptocurrencies as well. For example, you can exchange your BTC for LTC (LiteCoins) and vice versa. If your virtual currency investments go beyond Bitcoin, you’ll want to check out Cryptsy.
- BTer – With slow transaction speeds and limits on the size of transactions, this isn’t really recommended, but we thought they deserved a spot on the list because they do serve the needs of some people who use Bitcoin.
- BTC-China – One of the fastest growing Bitcoin exchanges – according to Wired magazine – is BTC-China, which has really ramped up their efforts recently. By some accounts, they’ve overtaken MtGox as the place where most Bitcoin transactions take place on a daily basis.Face to Face / Over the Counter TradesEven though it’s a virtual currency, you can still arrange to meet someone in person and conduct a transaction with them. Having said that, finding such people might be difficult. This is where the LocalBitcoins.com website comes into the picture.LocalBitcoins is the main website people use to find people who want to meet face to face to exchange bitcoins for cash or vice versa. The website even allows them to negotiate prices beforehand. Add in an escrow service, and it’s one of the easiest and safest places to find someone to exchange bitcoins with locally.No matter the value of the money being exchanged, it’s important for you to stay safe. To do this, it’s a good idea to always arrange to meet in a public place surrounded by a lot of people. Never agree to go to someone’s home, apartment, or a field on the outside of town! In all seriousness, use your common sense when setting up a face to face Bitcoin transaction.
Even though you’re meeting in the real world, you’re still going to need access to your Bitcoin Wallet. Once you have the cash, use the other person’s Bitcoin Address to send them the predetermined amount of bitcoins. The good news is that you can use a laptop, tablet or even your smartphone to do this wherever you are as long as you have a WiFi connection.
In addition to one on one meetings, many people around the world also have Bitcoin groups that meet in public places in order to exchange Bitcoin for cash and vice versa. Websites like Meetup.com routinely have Bitcoin groups that meet in real life. In some big cities, you may find multiple groups meeting on different days of the month. Additionally, you may find so called “Satoshi Squares” or Bitcoin markets set-up in public places.
It should be noted that in most cases you’re going to pay a transaction fee of 5% to 10% (or more) to the seller in exchange for the privacy and immediacy. This is too much for some people, but for others it’s just a cost of doing business. Just be sure the local police don’t think you’re exchanging money for illicit substances!
In the very early days of Bitcoin, this was a reasonable way for an average, everyday person with a little computer knowledge to generate income. However, as more people began to use Bitcoin and realized the potential for making money, large groups of people (including some corporations) were set-up, effectively locking out individuals who want to mine for bitcoins using a home computer.
Here’s a look at what you need to get started with Bitcoin Mining.
● Bitcoin Mining Software – While early Bitcoin Clients included the ability to mine for bitcoins, this stopped as dedicated software for Bitcoin Mining was created and released. You’ll still need a Bitcoin Wallet to store the bitcoins you collect via mining, but the actual mining software will be separate from the main Bitcoin Client.
● Bitcoin Mining Hardware – As Bitcoin became more popular, people realized that graphics cards in computers were great for doing the complex math needed for Bitcoin mining. Soon, dedicated hardware was created just for mining bitcoins. Software is still needed to run them, but these devices – known as ASICs after the type of processor they use – are almost a necessity to have enough computing power to be able to successfully mine bitcoins.
Another thing to think about is joining a pool or what’s known as a Bitcoin Guild. This is a group of people who pool their computing power together in order to solve blocks more quickly. This makes it easier for smaller players (individuals) to be able to compete. Once a block is solved, the bounty is split up between members of the group based on the amount of processing power they contributed to mining the bitcoins.
Additionally, some enterprising individuals have set-up companies with entire data centers setup with multiple computers in order to mine bitcoins on a very large scale. The pure computing power available to them makes it difficult for individuals to compete these days. This is one reason Bitcoin Guilds are becoming so popular. Lone Bitcoin miners are rarely able to compete with the large companies unless they band together.
Bitcoin investment trust
Another option for generating bitcoins for yourself is to go with Bitcoin Investment Trust, which invests in bitcoins only. Using a special protocol to store the bitcoins safely for shareholders, you can make BTC much like you would make money by investing in a hedge fund. The advantage to this is that you don’t have to hold onto a large quantity of bitcoins by yourself. The BIT takes care of all the security and other details. You won’t get as much hands-on interaction with Bitcoin this way, but this is fine for some people as long as they’re making money.
A Bitcoin ATM is different than a normal bank’s ATM. Basically, you are performing a one-to-one transaction but you’re doing it with a machine rather than a person. After depositing your cash into the machine, a slip of paper is printed with everything you need to load the bitcoins into your Bitcoin Wallet. These are very rare currently, but as Bitcoin gains more prominence and begins to be used more, there’s a very good chance more of them are going to be seen all over the world. Perhaps someday they may even dispense other currencies using your BTC balance.
Acquiring Bitcoins Not Super Easy
While acquiring bitcoins is not super simple – press a button and make money – this is part of what makes the cryptocurrency so valuable. Having said that, Bitcoin is still relatively new. The number of options for getting bitcoins is increasing all the time. Plenty of incentives exist for enterprising people to come up with new and convenient ways for people to use Bitcoin.
Some ideas floating around on the Internet include Bitcoin gift cards which would work like traditional gift cards but be filled with BTC instead of other currencies. Other ideas include physical bitcoins and many others. One of the great things about Bitcoin is that it’s constantly evolving and becoming better thanks to the community of people around the world.