Tutorial: How do I buy Bitcoin?
Ready to take the plunge? Time to buy some Bitcoin! This is how it begins…
In my experience, the easiest way to purchase Bitcoin (in North America, anyway) was with the app, Coinbase. It accepts credit and debit cards in many countries but can also be linked to a bank account, if preferred. One downside: fees. You’re going to be paying a small percent fee on any purchase you make on Coinbase. There is a handy workaround that can be a little daunting at first, however…
Coinbase runs on the GDAX exchange (recently revamped as “Coinbase Pro”). Your Coinbase account will be attached to this exchange. This results in more buying power since a portion of your purchase doesn’t get wasted in fees.
Having said that, let’s stick to the noob route to owning Bitcoin for now. The Coinbase app can be downloaded to a smartphone or iPhone or you can simply go to the Coinbase website on your web browser. Create an account and give yourself a nice, secure password that is unique. Write down your password on a piece of paper and avoid storing it digitally. You don’t want other people getting into this account, do you?
Once you have your account set up, you’re going to need to set up a buying method. For smaller purchases, you can just use your credit or debit card, depending on your bank’s policies. You could add bank account purchasing if you feel a little more brave. This would allow you to make larger purchases.
Speaking of purchasing, you’re going to be asked for proof of your ID. This feels pretty sketchy when you first sign up and I admit, this worried me, initially. The fact is, Coinbase is required to follow KYC laws (know your client) and this is done for compliance with laws regarding banking and investing. Rest assured, this is a normal procedure and should not endanger your ID security.
Now, you have a little purchasing power. You will be limited in how much you can buy at first to a small amount, like $100. This limit will increase over time and can be increased further with more ID verification and different banking methods.
Coinbase currently gives you access to five cryptocurrencies: Bitcoin, Ethereum, Ethereum Classic, Litecoin, and Bitcoin Cash (with more rumoured to be launching soon). Each have their value for different reasons, so you may need to research this a little before deciding. For now, let’s buy some Bitcoin. Set your order in the app by choosing an amount within your limit and confirm the buy order. Within moments, your purchase will be confirmed (I recommend setting up two-factor authentication to prevent others from buying and selling on your account – it’s in the settings when you first join). Your purchased Bitcoin will be sent to your Coinbase wallet.
Which brings me to the topic of wallets. There are many, many wallet solutions out there. What happens when you buy Bitcoin is you receive a public and a private key that gives you access to your Bitcoin. It’s not really “stored” in your wallet. What is stored are your keys. Your public key can be shown to other people – it’s like a phone number or address to which people can send currency – but your private key is just that; private. Never show your private keys to anyone, even your Mom. Once you have purchased the Bitcoin, you have access to those keys.
Here’s the problem. If you store your Bitcoin on Coinbase, Coinbase has your private keys. What if Coinbase goes boom? Your private keys go boom, as well. You’re going to want to move your private keys to a place you can call home.
You have many choices for wallets. I really like a few of them. Copay and Coinomi are super user-friendly and secure. Let’s say for now we pick the simplest wallet app in my experience, Copay. You download the app for your smartphone or iPhone. You will have a backup phrase that consists of 12 words. Weird. This is a REALLY SUPER DUPER important phrase that you must write down carefully. Write it down on a piece of paper, make sure it is exactly right, and store it somewhere secure. This is your “password” to your private keys. If you lose this mnemonic phrase, you lose your wallet. It’s that important.
So your Bitcoin keys are sitting in your Coinbase wallet right now. Time to send them. Choose “receive” from your Copay wallet. Copy the big long address that shows up for your wallet. Next, open your Coinbase app and choose “send”. Choose to send the “max” amount of Bitcoin and paste in your Copay wallet address. Then, hit send. There will be a fee for sending your Bitcoin to your wallet. This fee can vary, although it’s much better than it was during Bitcoin’s peak back in December, when the market was super-volatile and the network was congested with the surge in popularity. Check that the fee is a reasonable amount before confirming your send order.
Now you’ve sent your Bitcoin. hurray! It’s in your wallet, right? No? NO? Your Bitcoin is GONE?!?
Remain calm. Bitcoin is sent through a network called the Blockchain. What happens is that your transaction is being checked by a network of “miners” on an open ledger that proves your transaction is real and for the right amount. The miners receive a small reward of Bitcoin for providing this service. This takes time, especially when the network surges in popularity. Don’t be alarmed if your Bitcoin doesn’t show up immediately. It will take a few minutes.
To be clear, there are more secure ways to store your Bitcoin than wallets like Copay. You can store your Bitcoin on a hardware wallet, a paper wallet, or even in your memory! This is something to look at in the future. Anyway, get out there and try making that first purchase. Be prepared for the possibility of becoming a little obsessed with the daily goings-on of digital currency. You’ve been warned!