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THE MOST COMPLETE GUIDE ON
How to Buy Bitcoins
So you have decided to buy some Bitcoin. Whatever the reasons are, we’re glad you’re here! This guide is designed to help you through the process.
There are many ways to buy Bitcoin. An online search can bring up many questions. You are often expected to have a lot of prior knowledge. The terminology can be confusing. You can find a lot of conflicting information, some of it good, but most is poor, outdated or even deceptive. So how do you navigate through all the noise? When traveling in foreign places it is always handy to use a map, but even better a local guide. Consider this website your local guide on how to buy Bitcoins!
Our guide will walk you through the various methods of buying Bitcoin, both online and offline. You will learn who the industry leaders are and why millions of Bitcoiners trust them when buying, trading, spending or storing their Bitcoin. Once you buy some Bitcoin you will want to know how to secure it. You will learn about Bitcoin Exchanges. You will also learn how to buy Bitcoin with cash, credit or debit cards, direct bank transfer or wires, and even how to use a Bitcoin ATM. We will also suggest industry leading software and hardware you can use to manage and secure your Bitcoin!
Although there is a lot of information in this guide, it is not just a list of products and services in this space. Our goal is that when you use this guide, you will identify which exchanges, wallets and services are best for your individual circumstances and needs. From buying small amounts to speculate on the price to storing large amounts of wealth, the information in this guide is designed to show what tools are best for you!
How can I Buy Bitcoin?
When Bitcoin first came about in 2009, the first users could only trade it among themselves. There were no companies or merchants set up to serve the Bitcoin market, so the first Bitcoiners would trade it among themselves and friends. At some point, early merchants started accepting Bitcoin as payments for products and service, creating a new digital currency.
Fast forward a few years and you now find that there are major players in the Bitcoin industry. You can now buy Bitcoin with PayPal, Western Union, cash, ATMs, credit and debit cards, gift cards, direct bank transfers, bank wires, and many other ways.
In this guide we’ll cover how to buy using:
How to Buy Bitcoin Using a Credit Card or a Debit Card
Tip: If you want to buy Bitcoin right now, we provide a service where you can buy Bitcoin instantly online using your Credit Card or Debit Card – simply skip the rest of this guide and click here, you can then come back to the guide at any time!
Credit Cards and Debit Cards are widely used to make purchases online and most users are familiar with using them. It is no surprise that people expect to be able to use their cards to buy Bitcoin. In the cryptocurrency industry, a more common term for companies that offer the ability to buy Bitcoin directly online is ‘exchanges’. Depending on the laws where the various exchanges operate, they offer users various payment methods for purchasing Bitcoin, including credit and debit cards among others.
Here is a list of exchanges where you can sign-up and buy Bitcoin online using a credit card or debit card.
How to Buy Bitcoin Using Exchanges
Buying Bitcoin from exchanges is just a matter of signing up and using one of the payment methods they provide to send them the amount of funds you want to spend to buy Bitcoin. Here are some of the most widely known and trusted exchanges in the industry.
Using Coinbase to Buy Bitcoin
Coinbase is one of the most long standing and trusted exchanges for buying and selling Bitcoin. They have exchanged over $20 billion in digital currencies to over 8.5million customers. They operate in 32 countries and they provide both a desktop interface and a custom made smartphone app to make buying Bitcoin convenient. Their mobile app is currently available for both iOS and Android. Apart from Bitcoin, you can also use them to buy other popular cryptocurrencies like Ethereum and Litecoin, making them one of the most robust companies in the space.
Signing up is easy, simply go to Coinbase.com and follow their signup procedure. For extra security, you will be provided instructions on how to setup 2-factor authentication (2FA). Coinbase is a regulated financial services company that complies with KYC and AML laws in the jurisdictions where it operates. Be prepared to provide identifying information during the signup process which may include passport, national IDs, and bills showing your address details.
Once you have signed up and your information is verified, you will be provided with various payment methods depending on the country you are located in. You can then buy Bitcoin using credit cards or debit cards, along with direct bank transfers among other payment methods.
Using CoinMama to Buy Bitcoin Instantly
CoinMama boast over 200,000 satisfied users that use their credit cards and debit cards for buying Bitcoin instantly. CoinMama also offers the cash payment method by using Western Union’s services. CoinMama provides you with a Step-by-Step guide to help you through the whole process. It is very easy to use and we highly recommend using them! Click here to visit their website to buy bitcoin.
Once you sign up you can enter the amount of Bitcoin you want to buy. Then choose your payment method and complete your order. You will need to enter the Bitcoin address you want the Bitcoin sent to. If you don’t already have a Bitcoin wallet, here are some options for you.
You will then be sent a confirmation email where you will be asked to confirm the amount of Bitcoin you are buying and that you have entered the correct Bitcoin address for them to send your Bitcoin to. Once you click or press on the confirmation link in the email you will immediately be sent the Bitcoin to your chosen Bitcoin address. You can track the status of your orders under the “My Account” section of the site. You can always start off with smaller amounts to get familiar with the process.
Using VirWoX to Buy Bitcoin
VirWoX was one of the first companies that enabled users to buy Bitcoin online using various payment methods, including credit cards, debit cards and even PayPal. VirWoX was originally set up to enable people to buy Linden dollars, which is the virtual currency that is used in the online virtual world Second Life. In business since 2007, they have been around longer than Bitcoin has, they are now one of the leading independent exchanges for buying and trading virtual currencies with over 100,000 users using their platform. They first incorporated Bitcoin into their platform in 2011.
Once you sign up at VirWoX.com you can fund your account using a credit or debit card among other payment methods. Once your account is funded you can then buy any of the virtual currencies they have to offer, including Bitcoin. You can keep your Bitcoins stored in your VirWoX account and they even provide a convenient eWallet which is a wallet you can access from your web browser. Once you have purchased some Bitcoin and they are stored in your VirWoX account, you can withdraw and send the Bitcoin from your VirWoX account to your private Bitcoin wallet. Learn more about getting a secure Bitcoin wallet here.
VirWoX charges a 0.002 BTC handling fee for Bitcoin withdrawals. They have an extensive support section on their site to guide you through any step of the process. VirWoX operates independently of Second Life and you do not need to have a Second Life account to use their services.
Pros and Cons of Buying Bitcoin From Exchanges
- By using exchanges that offer you the chance to buy Bitcoin instantly using multiple payment methods you are able to bypass the multi step process that is usually involved in buying Bitcoin anonymously using cash.
- Exchanges that comply with anti-money laundering regulations are able to offer more streamlined purchase methods at market competitive rates with much lower premiums than offered by independent cash sellers.
- Just like traditional financial institutions, you will have access to customer support at any stage of the buying process meaning that at no point will you be left unsure about how to proceed with your purchase. Many of them also have training videos or step-by-step instructions on how to use their services.
- Some of these exchanges and companies like Coinbase also offer apps for your PC or mobile device for ease of use and simplification.
- Exchanges that sell Bitcoins are bound by anti money laundering laws. Typically for small amounts of Bitcoin, less identifying details are required. Daily, weekly or monthly limits are usually set for purchases and withdrawals. The more identifying information you can provide to these companies, the higher the limits they can offer you for buying and withdrawing.
- It is important to research that the exchanges you use have wide industry acceptance and are well known. Scam websites do exist that mimic these companies simply to capture your credit or debit card details and run off with your funds. It is very important that you deal only with trusted exchanges that are widely known in the industry. All the companies that we present in this guide are registered real world companies, and are licensed to operate as financial intermediaries in their chosen jurisdictions. If you choose exchanges outside this guide, make sure you research that they are legit. If the price they are offering is too good to be true, it probably is.
- You are subject to typical Visa and Mastercard transaction processing fees on top of any other premium that is charged by the Bitcoin exchange.
- When you use browser based wallets on your personal computer, your security is only as strong as the passwords and encryption you have set up on your computer. If you have poor security set up on your personal computer, then you may be vulnerable to malware or hacking attempts which could involve loss of funds. Once you have purchased Bitcoin online, it is best to store your Bitcoin on an offline wallet, also known as a Hardware Wallet, or simply as a Bitcoin Hard Wallet. If you don’t have a hardware based Bitcoin wallet you can find out how to get one here.
How to Buy Bitcoins With Cash
Using LocalBitcoins to buy Bitcoins with Cash
LocalBitcoins.com is an online marketplace for buying and selling Bitcoins from others using various methods, one of which is using cash. Buying Bitcoin using cash involves meeting with the seller to make the exchange. As with other online marketplaces, sellers develop reputations over time and receive reviews and feedback from buyers that have interacted with them. You can review the reputation of a seller before committing to a purchase. Once you are happy with a seller’s reputation and payment methods, you can make a bid, or accept the price they are asking. If your offer is accepted, you can then arrange to meet in a public place to make the transaction.
To use LocalBitcoins simply sign up for a free account. Cash is not the only method of payment that LocalBitcoins offer. Depending on the seller, you can also pay using a direct bank branch deposit, a direct bank to bank transfer, PayPal, gift cards, credit and debit cards and more methods can also be used. We will look at these methods further into the guide. For now we will concentrate on cash purchases. Once you have signed up, use their search function to find sellers in your area. You can choose the quick buy option. Set your amount and your local currency. You can choose sellers that do not require SMS response or ID verification. Once you have made your selections, you will be shown the sellers in your chosen area. You can then compare these sellers based on seller reputation and the price they set. When you choose the seller you want to buy from, click the ‘Buy’ button next to their offer. You will be taken to a page where the seller describes their terms of payment. This is an example of a sellers terms:
You must cardless cash me. Let me know what bank you will be cardless cashing me so I can head to the ATM to pickup the cash. Provide me with the cardless cash code + pin or whatever is needed to pickup the money. Once picked up I will release the BTC.
Be sure to understand the seller’s terms and make sure you can follow through with your end of the purchase. You will need to provide the seller with your Bitcoin address for them to deposit your Bitcoins. If you meet in public, you can do this with your Bitcoin wallet on your smartphone. More on the best Bitcoin Wallets here.
It is always a good idea to start off making small purchases and get familiar with the whole process. Once you have made small transactions and gained confidence in the process, and have become familiar with certain sellers, you will then feel more confident in buying bigger amounts.
Buying Bitcoin from Other People – Meetups
Using cash is one of the most common ways people buy their first Bitcoin. If you meet someone in your social circle that has Bitcoin, you could ask them if they would like to make a trade for cash. You can agree on a price that you are both comfortable with. If you let them know you are new to Bitcoin, they will most likely guide you through the process. You can also buy Bitcoins directly from other people at Bitcoin Meetups.
All over the world, in most major cities and towns, people get together and hold Bitcoin Meetups where enthusiasts gather to discuss issues the Bitcoin community may be facing. Meetups are a great place for people to experience Bitcoin first-hand. At these meetups, Bitcoin enthusiasts are often happy to welcome new people to the community and help them buy their first Bitcoin. People with more experience using Bitcoin often happily take on the task of guiding beginners through the process of buying Bitcoin and how to install a wallet on their smartphone. Bitcoin meetups are also a great place to bring up and discuss the technology behind Bitcoin, any concerns you have about using, trading or storing Bitcoin, and a great place to meet like minded people. Simply sign up on Meetup.com and search for the nearest Bitcoin Meetup near you.
Buying Bitcoin Using A Bitcoin ATM
Bitcoin ATMs offer a convenient way for people to buy Bitcoin. You can find the nearest ATM near you by doing a Google Search or by using sites like the CoinATMRadar.com. Although these machines have instructions, you may want to do some research beforehand on the steps involved to make a purchase. Depending on the ATM operator you will have different instructions. You will have to have a Bitcoin wallet installed on your smartphone to use an ATM, we discuss the various kinds of Bitcoin wallets later in this guide. Alternatively you can use a hardware wallet to store your Bitcoin, which we also discuss later in the guide.
Do you need a Bitcoin wallet? Check out our guide on the best Bitcoin wallets!
Although the procedure may vary slightly from machine to machine, buying Bitcoin from an ATM usually involves the following steps.
- You may be required to provide the ATM machine with your phone number or email – this is usually to issue you with a receipt.
- You will be asked how much cash you want to use to buy Bitcoin.
- Once you enter this amount, the ATM will show you the amount of Bitcoin it can provide you. Conversion charges or fees may or may not be clearly shown, so it is a good idea to have an idea of the market rate near the time of purchase.
- Once you have deposited the cash into the ATM, it will ask you which Bitcoin address you would like the Bitcoin sent to. This is usually done by presenting the ATM with a QR code that is generated by your Bitcoin wallet. You can present the QR code to the scanner of the machine. The ATM will ask you to verify that the address it has scanned matches the address your wallet generated. Once verified, the machine will send the Bitcoin to your wallet using the Bitcoin network.
Pros and Cons of Buying Bitcoin with Cash
Although a great anonymous way to buy your first Bitcoin, buying with cash can sometimes come with associated risks.
- When you are buying Bitcoin using cash from another person, there is no need to sign up anywhere or provide any third party any identifying information.
- Even if you use a Bitcoin ATM or LocalBitcoins.com you only need to provide a minimum of information.
- Once you come across a reliable seller of Bitcoin, you can then trade directly, bypassing any need to use a third party service.
- As cash transactions can be relatively anonymous, and can be done without providing information of the transaction to third parties like banks and governments with tax implications. Cash-based Bitcoin sellers expect to sell at a premium price over the going market price, and the premium can vary wildly depending on the seller.
- Depending on the amount you want to buy, you may end up carrying large amounts of cash around — making you vulnerable to theft or unexpected loss.
- Bitcoin ATMs can be tricky to use and you need some prior knowledge of how to use and store Bitcoins before visiting them as you will need to provide the ATM or seller with a Bitcoin address to deposit the Bitcoin into – typically this is done using a wallet app on your smartphone.
- You need to be familiar with the current market rate of Bitcoin and decide on what premium you are prepared to pay. This also exposes you to Bitcoin’s price volatility.
How to Buy Bitcoin Using PayPal
PayPal has widely established itself as the money used on the internet. It is widely used and it has a very user-friendly interface. People first started offering PayPal as an option for buying Bitcoin on the popular LocalBitcoins exchange. Instead of meeting someone in person, you could send money to their PayPal account and they would send you Bitcoin to your chosen Bitcoin Wallet. There are now other exchanges that offer PayPal as one of the payment methods including:
Pros and Cons of Using PayPal to Buy Bitcoin
- PayPal is a known and trusted brand with wide acceptance for making online purchases and transaction.
- PayPal is great for sending money to individuals and companies overseas.
- PayPal offers extensive guidance and support for users on all their services.
- PayPal is a regulated financial services company that is required to operate under the financial services laws in the jurisdictions that it operates in. Certain transactions can be subject to anti money laundering or anti-terrorist laws. This means PayPal may need to seize, suspend, or confiscate funds it deems as suspicious and it may do so with no prior warning.
- PayPal adds their own charges on top of any other charges that are added to a transaction by an exchange.
How to Buy Bitcoin Using a Bank Account
There are various ways to use your bank account to buy Bitcoin and a lot of it comes down to where you are located.
Direct Bank Transfer Or Wire
If you use local exchanges like LocalBitcoins, many of the sellers will offer you a payment method that involves directly depositing money into their bank accounts. Although this can be done by depositing cash directly into someone’s bank account through an ATM or even a bank teller, most of the time this can be achieved as a direct bank transfer from your bank account to the seller’s bank account, or using a bank wire service. A direct bank transfer is more convenient if the transaction is performed in the same country and particularly easy if the seller is using the same bank. Bank wires can be sent to different banks and can also be sent to overseas banks.
Using Your Bank Account With an Exchange
Most Bitcoin exchanges offer bank transfers, bank deposits and bank wires as payment methods in the countries and jurisdictions they operate in. Once they receive your deposit they credit the money into your account in the denominated national currency. Once the money has been credited to your account, you can ‘trade’ it for Bitcoin – in effect you are selling your ‘fiat’ currency to buy Bitcoin. Once the purchase is complete you will have the Bitcoin available in your exchange account. If you want to avoid these steps, Coinbase will automatically convert it for you, making it a very quick and smooth exchange.
Pros and Cons of Using a Bank Account to Buy Bitcoin
- It is one of the most convenient ways of sending money to the Bitcoin seller or company and can be done from the comfort of your own home using internet banking.
- You receive a bank confirmation when the money has been delivered to the desired recipients account. If all details have been entered correctly, the money can be fully traced from the originating bank account right through to the recipient. If there are any errors, the money usually returns to your account and the transaction is reported as failed.
- Bank transfers and wire services can take days, particularly when the seller is using a different bank than yours or the bank you are sending to is overseas. Banks are also closed on weekends and public holidays so this can add further delays.
- The price of Bitcoin can often be volatile. This means, the longer it takes for the money to be transferred, the more fluctuations in price you will be exposed to.
- Banks may deem purchases of Bitcoin as a suspicious behavior. They may ask you to provide more details about a certain transaction. They may refuse to process a transaction if they know the money is being used to buy Bitcoin. Banks have also been known to close off the bank accounts of individuals and businesses that operate in Bitcoin related services – oftentimes with little or no prior warning. As licensed financial services companies, banks operate under the regulations of the countries and jurisdictions they operate in and are therefore required to report any transactions they deem as suspicious under anti-money laundering laws and anti-terrorist laws. Bitcoin exchanges also operate under these laws and establish limits with regards to bank deposits which are designed to keep their customers safe from loss or seizure.
Securing Your Bitcoins With a Wallet
What is a Bitcoin Wallet?
The Bitcoin blockchain can be thought of as a public accounting ledger. It stores information about every Bitcoin transaction in a transparent way. You can think of this as similar to the database of transactions your bank keeps. Your bank is happy to provide you access to information about your account and it uses your signature, pin number and other identifications to establish that you are the account holder.
You can then think of a Bitcoin wallet as you would think of a bank account. Your wallet contains information about all the transactions that have passed through it – just as your bank account would. You can secure a Bitcoin wallet in such a way that only you have access to it, and access to the Bitcoins in it.
The Bitcoin wallet is what you use when you want to send or receive Bitcoin. This is done through public and private key cryptography. Your Bitcoin wallet will manage both the public and private keys. The public key, also known as a Bitcoin address can be thought of like a credit card number, and the private key can be thought of like your credit card’s private PIN number. When you want to receive a Bitcoin payment into your Bitcoin wallet, you will need to provide a public Bitcoin address that is generated by your Bitcoin wallet software. Anyone sending you Bitcoin will need to know this address and it is usually represented as a QR code or a string of numbers and letters like this. [graphic of QR code and Bitcoin address].
Why do I need a Bitcoin Wallet?
Whoever controls your Bitcoin private keys controls your Bitcoin. Bitcoin enables you to be your own bank, and this is only true when you have exclusive access to your Bitcoin which is stored in your Bitcoin wallet.
In the initial stages of buying Bitcoin, you will most likely use an exchange to do so and you may store your Bitcoin on that exchange. You can log in to your exchange account and see your Bitcoin balance. You can even withdraw the Bitcoin, or convert it back into your local currency, or use it to buy another cryptocurrency and trade (click here for a full list of everything you can do with Bitcoin). You just have to keep in mind that you are using a third party to store your Bitcoins and this means they are managing and securing your private keys on their servers. Most modern exchanges are very sophisticated in terms of security, however things can and do sometimes go wrong – such as:
- Your account login security may be compromised
- The exchanges servers are vulnerable to hacking attacks
- The exchanges hardware and software may fail
- Even well secured servers are vulnerable to human errors, even honest authorized employees can make errors
Having small amounts of Bitcoin on an exchange is not that big a deal. But if you start accumulating amounts of Bitcoin you would be uncomfortable losing, you are best securing the Bitcoins yourself using a Bitcoin wallet where you control the private keys, here are the best ones for this!
What are the Different Types of Bitcoin Wallets?
The two most commonly used types of wallets are hardware and software wallets. Then there are also web wallets, desktop wallets and paper wallets.
Hardware wallets, also known as hard wallets or cold wallets, are typically used to store Bitcoin offline, also known as cold storage. These devices typically connect and communicate with your personal computer or smartphone using USB or BlueTooth (not WiFi). Once connected, your Bitcoins can be transferred to the hardware wallet. Hardware wallets use various authentication methods for log-in and operation.
As these devices never expose your private keys online, they are known as the most secure way of storing cryptocurrencies. We highly recommend everyone to own at least one to safely store their Bitcoins. Click here to see a table comparing the best Bitcoin hardware wallets.
During the initial setup stage you will be presented with a mnemonic key, also known as a seed, which is a series of random words. These are to be written down and kept in a safe and hidden place. We recommend having more than one hardware wallet. By restoring your wallet on new devices, you create clones. Having backup clone hardware wallets adds an extra layers of security to your funds.
The Leading Hardware Wallets
An unsuspecting device that can comfortably fit on a key ring that can achieve a ‘hidden in plain sight’ effect. Don’t be deceived by its minimalist design, this device packs an awesome amount of security features in such a small package.
Connectivity to your computer or mobile is achieved with a microUSB cable (supplied) and it supports connectivity to PC, Mac OS, Linux, and Android (needs to support USB). Your private keys are handled within a custom isolated environment which you access through a PIN code. It has support for Bitcoin, Ethereum, Litecoin and other cryptocurrencies meaning you can control all your private keys in the one device. It also includes companion apps for Bitcoin, Litecoin, Ethereum and Ethereum Classic and popular software wallets like Electrum and Mycelium wallets among others, allowing you to manage your keys in user friendly interfaces.
You can check and confirm transactions on the device’s own built-in digital display, and you can access all the devices features using the built-in device buttons. It is easy to backup your device and should it somehow be destroyed, you can recover your backup on other devices or wallets that are compatible with openly developed Bitcoin backup and recovery standards. All initialization and restoration features are performed in a secure offline environment meaning that your security credentials are never exposed to the outside world.
It is among the cheapest hardware wallets on the market, and is a great entry level device. Reserve your device here.
Released in August 2014, the TREZOR hardware wallet was one of the earliest Bitcoin cold storage devices to gain wide adoption among the Bitcoin community — and it has definitely stood up to it’s reputation as being a robust hardware wallet — even Bitcoin related businesses use it to store large amounts of Bitcoin offline. It does not come with its own companion apps for smartphones, yet by being the forerunner in the industry and setting the standard, third party software and apps adapted to the TREZOR and became compatible with it. You can download the TREZOR wallet software on Windows, Mac OS X, or Linux and access it using a custom TREZOR Chrome extension to manage your coins and initiate transactions. The connection to your computer is made with a USB cable.
When it is offline, the device can be operated solely by using its two in built buttons and following the prompts on the display to initiate, confirm and sign transactions.
TREZOR ships with support for Ethereum, Litecoin, DASH, and Zcash out of the box. The company behind TREZOR have been leading the way creating and implementing cryptographic security standards for the Bitcoin economy and have been endorsed by industry leaders. TREZOR devices are usually on backorder because of the high demand for them – check availability here.
A distinguishing feature of the KeepKey device is its large OLED display for viewing transactions, instructions and confirmations. Its aluminum casing gives the device a robust and sturdy feel. Security is achieved by isolating your private keys which never touch the internet and are never displayed on the devices display, meaning they always stay in ‘cold storage’.
Initializing the device is achieved through installing a custom Chrome extension in your browser, which allows you to initialize the security set up on your device and then to manage transactions. You then connect the KeepKey to your computer using a USB cable. You can set a name and pin for the device. You will use this pin when you want to make transactions. During the initial setup, and after you have set up the pin, the device will give the one time mnemonic key (recovery sentence) which you jot down and use for backing up and restoring your device. Although transactions are managed by your custom KeepKey Chrome extension, the actual private keys never leave the device, and the transaction is authorized and signed on the device itself, keeping the keys isolated from the internet.
The KeepKey also comes with inbuilt support for Ethereum, Litecoin, Dogecoin, Dash and Namecoin and it can run on Windows, Mac iOS, Linux and Android devices that support USB connectivity. Check it out here.
Arguably the sleekest hardware wallet on the market, the CoolWallet can fit neatly into your actual wallet or purse as it’s the size of a credit card. Tired of having your devices inspected at every airport? The waterproof CoolWallet is unsuspecting as it sits among other cards. This credit card sized hardware wallet comes packed with solid security, a companion app for both Android and iOS, and can connect to your mobile through Bluetooth and NFC technologies. It’s sleek look is also complimented by the CoolLink battery charger which connects through a USB to your laptop for convenience, and the CoolWallet fully charges in 4 hours by simply placing it over the charger device.
Operation is easy. After installing the CoolWallet mobile app for Android or Apple phones, simply pair the card with your mobile device. When the wallet is on and the NFC or Bluetooth connection is achieved, your CoolWallet serial number will appear in the app, indicating that the devices are now ready to be ‘paired’. Enter the One Time Pairing password that will appear on your CoolWallet’s screen into your phone and the devices will ‘pair’ – you can repeat this on up to 3 of your devices.
The CoolWallet is a Hierarchical Deterministic (HD) wallet, meaning that you can use a ‘seed key’ to restore the device from a backup. You can use your mobile companion app to send and receive Bitcoin into your wallet device – and Bitcoin is the only cryptocurrency that this device supports.
Overall this ‘one trick pony’ is easy to use, has solid security features, is not recognizable as a device and it looks so very cool. Get yours here!
With a 3.5 inch touchscreen full color interface the Ledger Blue is both Bluetooth and USB enabled, making it easy to connect with any computer or smartphone. The Blue has its own operating system that enables the installation and removal of custom apps using the Ledger Manager Software.
As the cryptocurrency space evolves with more blockchains, smart contracts and new ICO tokens, the Ledger Blue software can be freely upgraded to support more blockchain applications. It is built on the Blockchain Open Ledger (BOLOS) platform, so the device has its own operating system environment for running other blockchain apps, including sophisticated smart contracts. This makes the Ledger Blue unique among hardware wallets that can only support a handful of cryptocurrencies. The level of sophistication that comes with the Ledger Blue makes this device the most future-proof among the hardware wallets.
The initial installation and PIN security setup can all be performed exclusively on the device itself without the assistance or need to connect to any other device. The Ledger Blue supports the Bitcoin blockchain and all Bitcoin clones like Litecoin, Dogecoin, Zcash and more. Out of the box it also supports Ethereum and Ethereum Classic tokens and smart contracts along with Ripple. Ledger is also developing support for Monero, Tendermint, Hyperledger and Liquid side-chains and will keep up with more developments in the wider blockchain industry as it evolves.
You can purchase your Ledger Blue here!
Designed to not be distinguishable from an ordinary USB flash-drive, the Bitbox is a tough device made from an epoxy material used in bulletproof glass. It ships with native software that is custom built to communicate with the device meaning you can avoid using online internet browsers. Private keys are stored on a military grade high security chip.
A secondary password can be used to access a ‘hidden wallet’ feature, which adds a plausible deniability feature that is handy in case the device falls into the wrong hands. If anyone else tries to enter an incorrect password they would be presented with a new wallet as if the device was new, while you retain access to the hidden wallet with the right password.
Backups can be easily achieved using a microSD card offline, ensuring your private keys never touch the internet. The device is FIDO universal compatible meaning any FIDO compatible apps can be used to manage the device without needing any additional set up. You can connect it to PC, Mac OS, Linux or Androids devices through USB and it is TOR friendly for extra privacy. Ethereum is also supported and you can check your balances with its custom mobile app.
Though less sophisticated than other hardware wallets that support multiple blockchains, when used for storing Bitcoin and Ethereum the Digital Bitbox will do the job well. Secure your Digital Bitbox order here.
Common Hardware Wallet Features
Private Keys Stay Offline – the key common feature of hardware wallets is that they are able to generate private keys, receive, send and sign transactions while remaining in an isolated ‘offline’ environment – also known as cold storage. By keeping the private keys offline, they are not exposed to the usual internet related security vulnerabilities such as malware, phishing and hacking attacks.
Mnemonic Keys – A keyword phrase generated by the wallet during initiation which is used for wallet backup and restoration. Jot it down, keep it safe and do not lose your mnemonic key. This mnemonic key is effectively your wallet backup. If your hardware wallet is lost, stolen or malfunctions in any way, you can use the mnemonic key backup words to restore your wallet on a new device.
Backup and Restoration – You can restore a hardware wallet from backup using the mnemonic key you used during initialization. Simply enter the seed key or backup phrase/words into the new device. Your wallet information will be recreated and restored on your new device. Not only that, you could also have 2 or more devices with the same backup key or seed, effectively acting as identical clones of your main hardware wallet. Having a backup clone is great in case one of the devices is lost or damaged. Every time you add Bitcoin to one wallet, the other wallets are automatically updated with the new information when they next interact with the blockchain.
Universal 2nd Factor – Also known as U2F, this is a protocol standard that is supported by industry leaders such as Google, DropBox, GitHub, Facebook and others which is aimed at making the Two Factor Authentication (2FA) process more open and simple to use. By using U2F, users are less reliant on multiple passwords and usernames for strong authentication. Here is help on setting up 2FA.
USB, Bluetooth and NFC connectivity – These connectivity methods allow hardware devices to keep the private keys isolated from online activity. Any communication that happens between your hardware wallet and it’s companion app, or other compatible apps, is done with non-internet connected protocols which keeps you wallet offline.
As the name implies, software wallets, also known as soft wallets or hot wallets, is software that you can install on Windows, Mac iOS, Linux and Android devices, such as computers and smartphones. They are known as ‘hot’ wallets because they are primarily used for daily transactions. They are great for this because they can use your device’s camera and screen to scan and send QR codes to other devices for Bitcoin transactions.
Typically they are only used to manage a small float of cryptocurrency. Good software wallets give you the confidence to manage similar amounts of Bitcoin as you would carry cash around. Being connected to the internet, software wallets are not designed for storing and managing large amounts of Bitcoin or other cryptocurrencies.
The most common form of software wallets are smartphone or mobile wallets that offer the convenience of being able to scan QR codes for transactions on the go. They are great for their convenience, but they are best used as ‘hot’ wallets for daily transactions and holding small amounts of Bitcoin. A mobile wallet is only as secure as the security settings on your mobile phone. If your phone is lost, stolen or damaged, a loss of funds can occur. A good rule of thumb would be to use a mobile wallet for similar amounts of Bitcoin as you would for cash that you would normally carry around with you at any time.
Here are some popular mobile wallets for Android, iOS and Windows:
Many Bitcoin companies or exchanges offer web wallets which are a convenient way to manage your Bitcoin online. You create an account with the provider online to purchase, store and manage your Bitcoin and make transactions.
Web wallets are primarily used for convenience as they can be accessed anywhere you can get an internet connection, but this also makes them vulnerable to common internet security vulnerabilities like malware, key-loggers, phishing attempts, hacking and even insider theft from within the companies.
Web wallets are able to offer convenience because they manage the private keys of your Bitcoins on their servers. However these are also vulnerable to hacking attempts, loss of server data due to breaches in server security. Web wallets are typically used for transacting and managing small amounts of Bitcoin.
Designed to run on Mac iOS or Windows machines, desktop wallets are custom made software that interact directly with the blockchain for managing Bitcoin transactions and private keys. These are primarily run by those that are confident in the security setup of their hardware and for the technically minded. Although they can be set up in ways that allow for the wallet to work on an offline computer, doing so requires advanced technical knowledge in computer security.
Similar to any wallet that is operated on an internet connected device, desktop wallets are mainly used for transacting and storing small amounts of cryptocurrency. Although there are some desktop wallets that support altcoins, typically you would install a custom desktop wallet for each altcoin that you hold and transact. This means that it is quite inconvenient and time consuming if you hold multiple cryptocurrencies.
If you want to try a desktop wallet, we recommend Exodus.
Paper wallets offer a Bitcoin storage solution to people that are used to securing their assets in strong physical safes or bank deposit boxes. You can use software that generates QR codes for your Public and Private keys, and then print them on a piece of paper. You can make ‘backup’ copies of paper wallets to store in multiple locations. Paper wallets can also be printed in denominations of Bitcoin and be used similar to cash. If you give someone a paper wallet, they have full access to the private key.
This can be a fun way to share small amounts of Bitcoins out to friends, relatives or at Bitcoin Meetups. However any serious amounts should be for ‘your eyes only’ as the security of your funds is only as physically safe as you can make it. If a paper wallet falls into the wrong hands, you can consider it lost, similar to losing cash.
If however you have a robust physical security setup, you can use paper wallets for ‘cold storage’ as any transactions you send to them are completely offline.
Converting Your Bitcoin Back Into Your Local Currency
There are three main ways of converting Bitcoin back into your local currency:
- You can trade Bitcoin for cash directly.
- You can withdraw Bitcoin to your local bank account using a Bitcoin exchange that operates in your country.
- You can also use Bitcoin Debit cards to convert Bitcoins into your local currency and withdraw at regular bank ATM machines.
Selling Your Bitcoins for Cash
You can sell your Bitcoins for cash. You can find buyers that are wiling to make a trade on websites like LocalBitcoins, at local Bitcoin Meetups, or even to friends that you know that are interested in buying some. You will need to establish a selling price. You will also need to use a Bitcoin wallet or exchange to send the Bitcoins to the buyer. Once you have sent the Bitcoin, the buyer may also ask you for the transaction to clear on the Bitcoin blockchain before they hand over the cash – you can check the transaction confirmation status on blockchain.info
From Exchanges to Your Bank Account
If you have an account with an exchange that operates in your country, and if you have fulfilled the exchange’s KYC & AML requirements. You can convert your Bitcoin into your local currency on the exchange, and then withdraw the funds into your local bank account. Each exchange provides daily withdrawal limits and varying fees for bank account withdrawals. We highly recommend using Coinbase as their platform makes it quick, safe and simple to convert back to your bank account.
Bitcoin Debit Cards
Some Bitcoin companies and exchanges offer debit cards that allow you to convert Bitcoin into your local currency and then use the debit card at regular bank ATMs to withdraw funds in the local currency. This means you can access your funds on any ATM in the world that is connected to the Visa Or MasterCard network. Also known as Bitcoin Debit Cards, some of these exchanges also allow you to convert other cryptocurrencies into USD, GBP, EURO and other local currencies to then be withdrawn from ATMs. If you are interested in getting a Bitcoin Debit Card, check out CryptoPay, SatoshiTango, and Coinizy for the best cards on the market!
How To Avoid Bitcoin Scams
Just like every corner of the internet, and every corner of the world where money is used, there will be scammers. Avoiding Bitcoin scams is similar to avoiding scams in general. In this guide, we have made every effort to vet the companies we include in it. Our criteria is based on choosing registered companies, that operate openly in the market, and that are widely known in the industry. When it comes to overt scams, the general rule of thumb still applies — “If it is too good to be true, it probably is!” Here is a look at the most common scams and how to avoid them.
You may receive an email from what looks like a company that deals in Bitcoin. They may offer you a limited time offer or some kind of discount if you ‘act now’. They may even offer you free Bitcoin software, like a wallet. Make sure you never take any offer from a company or individual you do not have further information on. Many of these scammers even have elaborate setups including websites that look legitimate. So how do you tell if they are legitimate or not?
The first obvious sign is that registered Bitcoin companies are registered in the countries that they operate. This includes a registered address, a company number, a telephone number and other identifying details, like an office location. If they are missing any further identifying details, you are likely dealing with a scammer. Do your research. Go online and see if there are reviews on this company, see if other people have interacted with them. Always remember that it is not usual for a Bitcoin company to make unsolicited approaches for business.
Bitcoin Company Impersonators
Some scammers create websites that are clones of legitimate companies and sometimes even advertise on other websites or through chain emails. They may pose as an exchange for instance, with the intent on getting you to sign up and send them funds or Bitcoin. It is difficult to spot if a website is legitimate, but one of the telltale signs of being directed to a website like this is that you will be provided with a link. The links can be made to look like they are from the registered company.
The only way to make sure you are dealing with the correct company is to not follow the link, but instead to do a regular internet search for the company. Also remember that like banks, it is not usual for a legitimate Bitcoin company to contact you and to get you to enter or provide login details. This is a clear giveaway sign that something could be wrong. If you have an account with an internet company, always manually enter their address into your browser and never follow a link from advertising or from an email. Lastly, if you believe you have received a legitimate offer from a Bitcoin company, you can independently find their contact details, contact them and ask if they ever made you such an offer. A legitimate Bitcoin company should be able to provide you with these details.
Bitcoin Flipping and Pyramid Scams
A flipping scam is usually an offer for you to instantly make money by giving the scammers money. You may be asked to participate in a scheme that pays out periodic returns or that doubles your money overnight. Bitcoin pyramid scams are similar, but they are slightly more elaborate. They will initially ask you for a set-up fee. Then they will promise you a payout each time you get someone you know to invest with them. In other words, they are trying to get you to recruit more people into their scam. The offers are usually solicited through social media. As with company impersonators, do some research about whoever is making these offers. Usually you will find that there is no information about them, or there may be a trail of bad reviews online from people that have been scammed. Avoid tempting offers if you cannot establish who you are dealing with and that they are a legitimate company.
Malware is software that infects your computer. Successful malware usually goes undetected. Malware often hides in other software, usually free software like a game, a screensaver or other software that seems innocent. Certain malware can detect your keystrokes when you enter passwords, other types can send any saved browser passwords to a remote server. Some malware is specific to Bitcoin and is designed to extract private key information and send it over the internet to a remote server. All of the above methods can be used to access and steal your funds.
Unless you are a computer security expert, it is very hard to completely secure an internet connected machine. Many IT security experts consider any machine that is connected to the internet as potentially infected or at least insecure. You may not be able to completely secure your computing devices, but there are steps you can take to minimize the chances of losing your funds. Always make sure you run anti-virus software on your machine and make sure it is up to date. Never install apps or software on a device unless you are absolutely sure that the app or software is from a legitimate company. This is particularly true for any device you use to store any amounts of Bitcoin, or any device you use to access Bitcoin wallets and exchanges. As you can never be completely secure on an internet connected device, we recommend you never store large amounts of Bitcoin on one. If you have large amounts of Bitcoin that you need secured, keep them offline and store them in hardware wallet. See our section on hardware wallets here.
Licensed financial institutions are required to abide by KYC and AML requirements. KYC stands for ‘Know Your Customer’ and AML stands for ‘Anti Money Laundering’ measures. For an institution to remain compliant, they require their account holders to provide various forms of ID when transacting in amounts of money that are deemed as significant. The more ID is provided, the more you can deposit and withdraw. Most Bitcoin exchanges are licensed to handle financial transactions and are required to abide by KYC and AML regulation.
Bitcoin transactions are relatively fast when compared to systems already in place with transferring funds around the world. Transactions can take about 10 minutes to go through the network in order to receive 1 confirmation. Most exchanges like to wait until they receive multiple confirmations in order to release your Bitcoins. Ultimately it depends on the payment method you use that will determine the speed of receiving your bitcoins. For example. cash transactions in person with a friend is faster than buying through an exchange.
Physical Bitcoins work in very much the same way as paper wallets do. Some people like physical Bitcoins, such as gold coins because they can feel, touch and store them just as they would a regular coin. Some physical Bitcoins can also have a collectors value depending on their rarity and appearance. Physical Bitcoins are also convenient gifts. Denarium is a company selling physical bitcoins you can buy to keep or give away!
Similar to cash, they are also a good way to exchange value with someone else anonymously as they do not carry any identifying details of their users. Just like any physical object, physical Bitcoins can be lost, stolen or damaged. If you choose to buy physical Bitcoins, it is a good idea to backup the private key, so even if you lose it, you still have access to the represented amount of Bitcoins on the blockchain.
Yes. Bitcoin is divisible down to eight decimal places. This means that 0.00000001 BTC is the smallest Bitcoin of unit you can buy – which is also known as a Satoshi. However, it is not practical to spend that amount of Bitcoin because a Bitcoin transaction incurs a fee – typically a Bitcoin fee is upwards of 2000 Satoshis. So you would only want to deal in amounts of Bitcoins that are larger than the fees.
There are many reasons some people want to buy Bitcoins. One of them is their scarcity value, as there will only ever be 21 million Bitcoins. Some people see this as a hedge against currency inflation that people typically see in national currencies. In countries where inflation is high, it can be seen as a good store of value. Other people like the level of anonymity Bitcoin gives them and its censorship resistance. It can be used in ways and in markets where the traditional payment methods fail, like big person to person money transfers across borders, or donating to organizations like Wikileaks or directly to overseas charities and eliminating rent seeking middlemen. Bitcoin is also a possible way for people to store value and transact cross-border in countries where they have no access to regular banking services. As Bitcoin evolves, people continue to find use cases for it. Here is a list of many different ways you can use your Bitcoin!
The legality of Bitcoin use depends on which country you are in. Each country has its own regulations regarding Bitcoin’s use. If you are unsure, you should check the laws and regulations of the country you reside in. This guide is regularly updated.
Depending on the country you live, and the way you use Bitcoin, you may be subject to capital gains, income tax or even other taxes such as sales tax. Different laws also apply if you use or store Bitcoins for business purposes. Here’s what the US says about its virtual currency policy. You can also find more general information here, We suggest that you consult with a local accountant that is familiar with taxation laws in your tax jurisdiction.
Yes! You can use as many exchanges as you like. You can shop around on fees, user friendliness, trustworthiness, different payment options, and pros and cons of each. We have done all this research and made it easy for you top of this page.
Some people even send Bitcoin from one exchange to another to take advantage on any price differences between the exchanges. This is known as Bitcoin arbitrage which is a particular form of trading.
Bitcoin is known as being pseudonymous, which means that you do not need to reveal your identity to transact in Bitcoin. However, Bitcoin transactions can be tracked on the blockchain which is an open public ledger. There are also data mining companies that work closely with law enforcement that are able to trace Bitcoin transaction with high degree of accuracy. The more information you provide when transacting with Bitcoin, like providing ID to sign up at a Bitcoin exchange, the less anonymous your Bitcoin transactions are. Even so, there are ways to use Bitcoin to increase your anonymity, including using Bitcoin mixing services and transacting Bitcoin through TOR and VPN services. Visit our Everything Bitcoin page to see a list of each of these categories!
You can offer goods or services in Bitcoin. You can sell products, art or even your labor hours for Bitcoin. You can look for freelance digital jobs on sites like XBTFreelancer. You can try your luck at an online Bitcoin casino, such as BitStarz or BetCoin. Trade or copy traders with your Bitcoins on an exchange, like 1Broker.You can also join a Bitcoin cloud mining service. If you provide a voluntary service, like this website, you can provide visitors with a Bitcoin address 1JhmV6b9cSTwVLPeMMN8UQJ8ft2khqpKr4 🙂 to accept donations!
As you see there are many ways to earn Bitcoin. Visit our Everything Bitcoin page to get a full list!