How Does This Work
From Exchanges To Safely Storing Your Assets There’s A Lot To Consider When Investing In The New Technology
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Are you ready to start investing in cryptocurrency?
A little more than a decade after the first cryptocurrency, Bitcoin, was launched, the industry that’s developed around the new technology has seen explosive growth. Today, there aren’t just cryptocurrencies available, but a few blockchain-based digital assets, including crypto tokens and NFTs.
There’s several methods for starting your investment journey in crypto. Depending on whether you want help managing your investment or if you want to align with the ethos of the ecosystem and “be your own bank,” there are opportunities for those just starting out.
Keep in mind that investing in cryptocurrency is still risky you could lose the entire value of your investments so make sure you’re in a financially sound position and take the time to asses your risk appetite before putting money towards the asset class.
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The Best Place To Buy Your First Bitcoin Is On An Exchange
Wallets themselves tend not to give you the option to buy and sell bitcoin for fiat. So, youre going to have to find a trustworthy and low-cost exchange, and then send the coins from the exchange to your wallet.
An ideal fiat cryptocurrency exchange for people just getting started is Coinbase. For the following reasons:
- It has the most simple and easy to use user interface
- Its quick to get verified so you can buy bitcoin almost instantly
- There are great mobile apps for Android and iPhone
- Coinbase is a regulated and FDIC insured exchange
Three important factors for choosing which exchange is the right choice for you are reputation, fees and speed:
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Software Wallets: Convenient Buying Selling Storing Trading And Using
- Software wallets take the form of an app which is downloaded for free to your phone or desktop. You simply open up the app and can start making Bitcoin transactions almost immediately.
- Since software wallets connect to the Internet, there’s a small risk of hacking. Therefore, it is generally recommended to not store large amounts of bitcoin in your software wallet. That being said, if you follow password management best practices, it’s safe to store bitcoin in a software wallet.
- While there have been a few isolated cases of software wallets being hacked, by far the greater risk is that you lose your ‘private key,’ which is like the password to your wallet. Therefore, it’s critical to backup your wallet and store the password somewhere safe.
Tip: Make sure the software wallet youre using is fully non-custodial like the Bitcoin.com Wallet, meaning only you can access your cryptoassets not the wallet provider. This protects you from the risk of fraud or bankruptcy by the wallet provider.
How Does A Bitcoin Wallet Work
To send and receive Bitcoin, cryptographic key pairs are used. A key pair is made up of a private key and a public key that corresponds to it. Sending Bitcoin requires the usage of private keys that must be kept secret. Receiving Bitcoin requires public keys that can be shared with anyone. Public keys are created by deriving a private key from them.
A seed is generated when you create your Bitcoin wallet. Mnemonic phrases are used to display seeds in the form of a succession of words. This seed will be used to generate each Bitcoin key that youll need to transmit and receive Bitcoin.
A Hierarchical Deterministic framework, an industry standard for Bitcoin key creation and administration, is the name of this design. When you want to accept Bitcoin, most wallets will automatically generate fresh public keys.
The issue of public key or address reuse is no longer an issue. Anyone might easily follow your whole payment history if you use the same public key every time you receive Bitcoin. Treating keys as one-time-use tokens increases a users privacy significantly. A user can always restore their wallet as long as they know their recovery seed, which is often a 12- or 24-word list initialized with their wallet.
A wallet can cost anywhere from zero dollars to $200 or more. You’ll most likely pay a fixed fee of a few dollars or a percentage of the total transaction value if you use a wallet as part of an exchange.
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Decide How To Store Bitcoin
Bitcoin can be stored in two kinds of digital wallets: a hot wallet or a cold wallet. With a hot wallet, transactions generally are faster, while a cold wallet often incorporates extra security steps that help to keep your assets safe but also make transactions take longer.
With a hot wallet, bitcoin is stored by a trusted exchange or provider in the cloud and accessed through an app or computer browser on the internet. Any trading exchange you join will offer a free bitcoin hot wallet where your purchases will automatically be stored. But many users prefer to transfer and store their bitcoin with a third-party hot wallet provider, also typically free to download and use.
Why choose a wallet from a provider other than an exchange? While advocates say the blockchain technology behind bitcoin is even more secure than traditional electronic money transfers, bitcoin hot wallets are an attractive target for hackers. As Bitcoin.org warns: Many exchanges and online wallets suffered from security breaches in the past and such services generally still do not provide enough insurance and security to be used to store money like a bank.
There are many hot wallet providers, offering a range of wallet types. Here are a few:
Although some hot wallet providers offer insurance for large-scale hack attacks, that insurance may not cover one-off cases of unauthorized access to your account.
How To Buy Bitcoin
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Buying bitcoin is often the first step that investors take into the world of cryptocurrency. And it can be an unfamiliar landscape for someone used to traditional financial products.
The value of bitcoin the worlds first and most popular cryptocurrency has risen from $3,237 in December 2018 to briefly acheive new record highs above $65,000 in November 2021 . Like all cryptocurrencies, bitcoin is speculative and subject to much more volatility than many tried-and-true investments, such as stocks, bonds and mutual funds.
One common rule of thumb is to invest no more than 10% of your portfolio in individual stocks or risky assets like bitcoin. If you’re new to investing, find out more about how to invest money. If you do decide to buy bitcoin, there are also some technical and logistical decisions you’ll have to make.
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Types Of Crypto Wallets
Different crypto storage options can serve different purposes, depending on what you plan to do with your crypto. Long-term Bitcoin investors, for example, who plan to hold onto it for a period of time as a store of value may want the security of an offline cold storage wallet. Those more involved in actively transacting with crypto, on the other hand, may want the convenience and speed that an online hot wallet can offer.
Transfering Money To Your Bitcoin Wallet
There are a number of situations in which you will be required to get Bitcoins into your wallet. One of the most common situation is when you go and purchase some Bitcoins, be it from a cryptocurrency exchange or from a Bitcoin ATM.
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In an exchange like Coinbase or Binance, you would ideally be required to create a wallet for yourself within the exchanges website.
From there, you can transfer the Bitcoin to your own wallet which you think is the most secure choice.
For transferring the amount to your wallet, you simply have to choose the Send option for your preferred cryptocurrency and in the dialogue box that appears, input the public key of your wallet, or the address of the wallet. This will ideally be a really long string of alphanumeric characters.
In a Bitcoin ATM, you can either follow a similar pattern and input your wallet address manually or simply scan the QR code of your wallet to have it transferred.
If you are receiving payments from someone via Bitcoins, you can either input the wallet address or scan the QR code, if the latter option is available at all.
In this way, you can transfer money into your Bitcoin wallet.
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Learn How To Securely Send Bitcoin
Sending bitcoin is as easy as choosing the amount to send and deciding where it goes.
The exact procedure for doing so will depend on the type of Bitcoin wallet you’re using, but the main thing you need to know is the ‘address’ of the recipient. A Bitcoin address is an alphanumeric string that looks something like this:
One way to send bitcoin, then, is to simply copy the recipient’s address to your clipboard, then paste it in the send field of the Bitcoin wallet app you’re using.
Bitcoin addresses can also be displayed in QR code format. If you’re sending bitcoin from a mobile wallet like the Bitcoin.com Wallet, you can use your phone’s camera to scan the QR code of the address you want to send to. This will automatically fill in the address.
As for the amount to send, most wallets allow you to toggle between showing the send amount as bitcoin or showing it in your local currency.
IMPORTANT: Bitcoin transactions are irreversible, so if you send to the wrong address, you’ll most likely never see that bitcoin again.
Read more: Learn how to receive bitcoin securely.
How Do I Set The Btc Network Fee In My Bitcoin Wallet
This, again, depends on the wallet. In fact, many web wallets don’t give you any control over the network fee whatsoever. Instead, they have a predetermined fee . In other words, they profit when their customers withdraw bitcoin. This is a common revenue-generation strategy for cryptocurrency exchanges.
Most non-custodial wallets, however, allow you to customize the fee you attach to your Bitcoin transactions. The Bitcoin.comWallet, for example, has three convenient fee settings, as well as the option to set custom fees. The default speed is set to have your transaction confirmed most likely within the next three blocks . If you change it to âFastest,â youâll pay a higher fee and likely have your transaction confirmed in the next two blocks . Changing it to âEcoâ will save you some money, but still result in your transaction most likely getting confirmed within the next six blocks, so generally less than 60 minutes. For advanced users, you also have the option of setting a custom fee. Youâll want to use a tool like Bitcoinfees to ensure youâre choosing an appropriate fee given the current state of network congestion.
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Where To Spend Bitcoin Online
Bitcoin is becoming easier than ever for holders to spend as they wish online, which has helped to pave the way for greater practicality and adoption across the wider world of crypto.
A quick smattering of leading online retailers that allow users to add money to their accounts using Bitcoin and/or other cryptocurrency:
- Whole Foods
More companies are joining the fray of late. Earlier this year, Landry’s the parent company of Del Frisco’s, Morton’s, Chart House and Bubba Gump Shrimp, among other restaurants said it would be accepting Bitcoin across most of its locations. McDonald’s and Burger King are experimenting with accepting cryptocurrency in some international locations.
If you’re interested in knowing which stores around you accept cryptocurrency payments, it’s worth consulting Coinmap, which shows both merchants and ATMs. Bitcoin.com has a map detailing where Bitcoin is accepted.
Select The Crypto That You Want To Copy The Address From
After youve tapped on Deposit, youll land on the Deposit Crypto page.
On the page, youll see a list of cryptocurrencies.
Now, you need to select the cryptocurrency that you want to copy the address from.
You can tap on the search icon and search for the cryptocurrency.
For example, if youre looking to find and copy your Bitcoin wallet address, search for Bitcoin.
Then, tap on Bitcoin to open your Bitcoin wallet.
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How To Cash Out Bitcoin Using Localbitcoins
1. First, you will need to open an account at Local Bitcoins. You can do this by .
2. Choose a username and a strong password. You also need to enter and confirm your email address.
3. Once you are logged in, click on Sell Bitcoins at the top of the page.
4. Then you need to choose the country where your ideal buyers are located. I recommend using your own country , however, this is up to you. In this example, I have selected the UK. You also need to enter the amount of Bitcoin you wish to sell.
5. As you will see below, there are many different ways to cash out your Bitcoin.
6. In this example, I will show you how to cash out Bitcoin using PayPal. As you can see, the buyer has a 100% feedback rating, and has completed more than 1000 trades! This is a sign of a serious, legitimate buyer.
7. Confirm the amount of Bitcoin you want to sell and enter your PayPal email address. Then click on Send Trade Request.
8. Your buyer will then receive a notification to say that you would like to sell your Bitcoins to them. Once they accept, you will then send your Bitcoins to the LocalBitcoins escrow . So, the buyer will not receive your Bitcoins until they have paid you, and you confirm they have done so.
9. The buyer should contact you to let you know that the funds have been sent. Check that the funds have arrived in your PayPal, then click on Payment Received, and you’re finished.
Congratulations! You now know how to cash out Bitcoin using a P2P exchange.
Energy Consumption And Carbon Footprint
Bitcoin has been criticized for the amount of electricity consumed by mining.
As of 2015, estimated combined electricity consumption attributed to mining was 166.7 megawatts and by 2017, was estimated to be between one and four gigawatts of electricity. In 2018, bitcoin was estimated to use 2.55 to 3.572 GW, or around 6% of the total power consumed by the global banking sector. In July 2019 BBC reported bitcoin consumes about 7 gigawatts, 0.2% of the global total, or equivalent to that of Switzerland. A 2021 estimate from the University of Cambridge suggests bitcoin consumes more than 178 annually, ranking it in the top 30 energy consumers if it were a country.
Bitcoin is mined in places like Iceland where geothermal energy is cheap and cooling Arctic air is free. Bitcoin miners are known to use hydroelectric power in Tibet, Quebec, Washington , and Austria to reduce electricity costs. Miners are attracted to suppliers such as Hydro Quebec that have energy surpluses.
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How Does Bitcoin Work
Bitcoin is built on a distributed digital record called a blockchain. As the name implies, blockchain is a linked body of data, made up of units called blocks that contain information about each and every transaction, including date and time, total value, buyer and seller, and a unique identifying code for each exchange. Entries are strung together in chronological order, creating a digital chain of blocks.
Once a block is added to the blockchain, it becomes accessible to anyone who wishes to view it, acting as a public ledger of cryptocurrency transactions, says Stacey Harris, consultant for Pelicoin, a network of cryptocurrency ATMs.
Blockchain is decentralized, which means its not controlled by any one organization. Its like a Google Doc that anyone can work on, says Buchi Okoro, CEO and co-founder of African cryptocurrency exchange Quidax. Nobody owns it, but anyone who has a link can contribute to it. And as different people update it, your copy also gets updated.
While the idea that anyone can edit the blockchain might sound risky, its actually what makes Bitcoin trustworthy and secure. In order for a transaction block to be added to the Bitcoin blockchain, it must be verified by the majority of all Bitcoin holders, and the unique codes used to recognize users wallets and transactions must conform to the right encryption pattern.