Buying Cryptocurrencies – Where to Begin

Are you tempted by the prospect of buying Bitcoin or other cryptocurrencies?

Would you like to take chance and uncertainty out of the equation?

We can help!

Forget about the reviews that tell you every site, wallet or currency is the next big thing – we’ve done it, so we can show you how. In doing so, we’ll help you avoid spending money you don’t have to, give you advice on how to keep your currency secure – and help you watch your crypto wallet swell in size…

What are cryptocurrencies?

A cryptocurrency is a type of digital money – the most well known of which is Bitcoin, although many others exist. These cryptocurrencies are generally based around what’s known as a ‘decentralised ledger’ – a way of operating that removes power from any individual, government or company who would want to control the currency.

To do this, each transaction is logged, then shared with every other copy of the ledger that exists. Because every transaction can be traced back to the very beginning of the currency, it means every value and transaction can be verified against the information that already exists. Only when a transaction is ‘verified’ is it officially complete – hence, the currency is referred to as a ‘consensus’ currency.

This verification process isn’t simple though – and the network of supercomputers that do it are rewarded with Bitcoins for doing the job (referred to as ‘mining’) – growing the currency in the process.

Why bother?

With financial systems already in place throughout the world, people often want to know why more are needed – so it’s worth understanding why Bitcoin and other currencies have been created and grown in popularity.

In a lot of cases the motivation boils down to trust.

Or, more accurately – a lack of trust in governments and financial organisations. Bitcoin was created almost immediately after the worldwide financial crash in 2008 that damaged the reputation of many household banking names.

As an alternative, most cryptocurrencies require no trust whatsoever – no one has more power or insight than anyone else. The ‘middleman’ is a system, a set of rules that ensures everyone is an equal. Against a backdrop of greed and apparent corruption – this looks like a favourable system.

How do I get involved?

We’ll walk you through the process of buying cryptocurrency – using Bitcoin as an example. Although the values of the currency you look at will vary, generally, most brokers us a very similar process whichever you’re buying.

Step #1 – You need a wallet

For any digital currency to work you’ve got to have a wallet that it can be deposited into. A wallet provides a public address for your money to be sent to. They come in 4 different forms:

  • Paper wallets – a printed version of the code that makes your Bitcoin
  • Hardware wallets –  physical device that holds your Bitcoin code
  • Online wallets – often broker provided online software that holds you Bitcoin code
  • Software wallets – A program that’s downloaded to your computer than holds your Bitcoin code

Generally speaking, for ease of use when you’re getting started, most people opt for an online wallet. This is fine for smaller transactions – but the fact that your currency and the codes that make it are kept online mean it’s somewhat more vulnerable to hackers and malware than an ‘offline’ service.

Both ‘paper’ and ‘hardware’ wallets are offline solutions that offer a great level of security. That said, a hardware wallet is far more costly than an online solution – and paper wallets are often viewed as fairly impractical unless you’re planning on safely storing your printed Bitcoin code keys.

Whichever option you choose, security needs to be at the top of your priority list. For online services, setting up 2-factor authentication is essential.

Step #2 – Decide where to buy your currency from

Until you’ve got a multi-million-pound supercomputer that’s capable of doing the exceptionally complex problem solving that’s required to obtain Bitcoin yourself, you’re going to need a broker to sell it to you!

Brokers don’t create Bitcoin or other cryptocurrencies, they just source it and sell it to you, acting as a transaction middleman of sorts. There are numerous brokers you can use – so we recommend reading an article like this xcoins review – to establish who has a solid reputation in the field.

The registration process can be quite lengthy, you may be required to provide ID and link your bank account to the service. Most cryptocurrencies aren’t anonymous – Bitcoin included – and verifying your ID is an important part of the process.

It’s also worth noting at this stage that many brokers provide an online wallet for you to use as part of their service. Provided you’ve read some reviews to make sure the company is a positive one to work with, this is fine as a starting point, but you might want to take greater control of your currency when you scale your buying or use up.

Step #3 – Buying

When you’re verified with a broker you’ll be able to buy an amount of currency. This is sometimes limited immediately after registration and verification and will be upped to greater limits when you’ve made a series of smaller transactions.

You can expect to enter your credit or debit card details, have money debited from your account – then be left waiting. Don’t panic though, the process of buying Bitcoin can sometimes be held up by the nature of the process – along with the fact that many brokers are making and receiving international card payments.

Step #4 – Cryptocurrency in your account

When the money is credited to your account you’re then the owner of Bitcoin or whichever other currency you opted for. Now you can decide whether to sit on the money and treat it like an investment – or spend it with one of the hundreds of thousands of vendors around the world who accept Bitcoin and other digital currencies.

The choice is yours – but be aware, even though Bitcoin has send exceptional strong performances vs. other financial investments – any cryptocurrency could fluctuate in value quickly and dramatically – and as such, you should avoid tying up money that you cannot afford to lose…

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