We get it, buying Bitcoin for the very time can feel daunting — super daunting, in fact. After all, the digital currency is still in its infancy and its inner workings aren’t as cookie cutter as say a physical dollar.
However, we’re here to dispel that purchasing-Bitcoin-is-hard perception. Believe it or not, how to acquire Bitcoin online is actually pretty bare bones. When the process is boiled down, it’s a three-step approach. Let us walk you through each step in as simple terms as possible:
Step 1: Set Up A Bitcoin Wallet
Obviously, Bitcoins don’t exist in a physical form like paper money. Therefore, to “store” them, you’ll need a Bitcoin or digital wallet (both terms are used interchangeably with one another).
These wallets fall into one of two classes — software and hardware. As the name suggests, software wallets run on your desktop, mobile device, or both through a downloadable application. That differs from hardware wallets that are physical devices that connect to your computer.
Generally speaking, hardware wallets are the much more secure of the two. That makes it ideal for storing large sums of Bitcoin. However, that’ll also come at a steeper price. Software wallets are cheap (or sometimes free altogether), but lack the same level of security as hardware ones. Going the software route is better for newbies exchanging less amounts of Bitcoin.
There’s no shortage of Bitcoin wallets available to use. Comparing and contrasting different wallets is an article in itself, however, a few that are particularly well-recommended include Exodus, Ledger Nano S, Mycelium, among many others.
Step 2: Find Your Bitcoin Address
Upon setting up a Bitcoin wallet, you’ll need to identify the unique address associated with it. Think of this like the checking account number on a bank account or a serial number on a physical bill of money.
For Bitcoin, the identifier will be a string of characters between 26 and 35 — containing both numerals and letters (in small and upper case; case sensitivity does indeed matter). The character code will alway, and we mean always, start with either a 1, 3, or bc1.
By and large, most addresses are single-use tokens. Meaning, it can be used only once before your Bitcoin wallet generates another unique address to be associated with. This is an extra security measure to safeguard your transactions — a far cry from re-using the same credit or debit card number over and over that’s just asking for trouble.
Step 3: Buy Bitcoins
So you have a wallet and address, now what? Welp, here comes the fun part — buying the actual Bitcoins themselves.
This part can become very convoluted with various purchasing options, but let’s simplify things, shall we? Our suggestion is to buy Bitcoin through an online exchange. You can bucket exchanges into either traditional brokers or trading platforms.
Brokers allow you to purchase Bitcoin directly on its platform similar to how you’d buy a stock or option. This simplistic approach is great for first-time buyers. However, beware of fees, which can be high depending on what broker you use. Robinhood and SoFi are two popular brokers that support Bitcoin purchasing.
On the other hand, trading platforms connect Bitcoin buyers and sellers directly, with no middleman (e.g. a brokerage) in between. Fees are typically smaller on such platforms, but it’ll vary from exchange to exchange. Using a platform is better suited for more experienced Bitcoin users. Some of the most-popular platforms include Coinbase and Gemini.
Once you’ve purchased Bitcoin (in either fractional or whole form) from an exchange, you can send them to your own digital wallet using that Bitcoin address we covered before. Doing so gives you ultimate control over the newly-bought Bitcoin, instead of relying on an exchange to house it.
So there you have it, a crash course in how to buy Bitcoin. It’s not that hard, after all, huh?
Knowing this process will come in handy as Bitcoin becomes more and more mainstream across the entire world. For now, you can make Bitcoin-based transactions on a slew of goods and services — event tickets, online gambling, virtual private networks, and the list goes on and on.