We’ve received a lot of feedback from our last few write-ups on the bitcoin and cryptocurrency market.
And because a many readers have said they are going to roll up their sleeves and enter the market themselves, we thought we’d offer three simple pieces of advice to bitcoin beginners.
Speaking from personal experience, I highly recommend that folks looking to buy some bitcoin start with an extremely small amount… no more than a bitcoins worth, which today is the equivalent of a couple thousand U.S. dollars. (You can use less money and buy a fraction of a bitcoin also if you prefer).The process of buying, moving and storing bitcoin is not like traditional online banking or investing. If you send bitcoin to the wrong location, for example, you can’t just call up your bank and cancel your transaction. So it’s critical to familiarise yourself with the mechanics of buying and moving bitcoin around first with a relatively small sum, before moving on to larger dollar amounts.
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The process of buying, moving and storing bitcoin is not like traditional online banking or investing. If you send bitcoin to the wrong location, for example, you can’t just call up your bank and cancel your transaction. So it’s critical to familiarise yourself with the mechanics of buying and moving bitcoin around first with a relatively small sum, before moving on to larger dollar amounts.
Write everything down
It’s ironic that whilst bitcoin is a highly modern technology, you must make sure you keep ‘offline’ records of all your bitcoin information. That means a pen and paper, or at least using a Microsoft word document and printing it out as a back up.
Storing and sending/receiving bitcoin involves setting up a digital wallet. This is a where you ‘keep’ your bitcoin.
Your wallet has a public key (which might look a bit like this: 1GwV7fPX97hmavc6iNrUZUogmjpLPrPFoE) which is where the bitcoin gets sent to. This is like an account name.
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Your wallet also has a private key. This will either be an alpha-numeric sequence that looks like the public key above, or a long sequence of random words generated by the wallet. This is the ‘password’ you use to access your wallet.
Either way, secure wallets do not have an ‘I forgot my password’ option.
If you lose or forget your private key, you lose access to your wallet. And you lose your investment. Period.
I write everything down, and I print out screen grabs (that is, printouts of what is shown on the screen).
Don’t leave money at the exchange
In order to convert your cash into bitcoin, you need to open an account with an exchange.
This process will typically take a few days as the exchange will need to conduct KYC (know your customer) diligence on you. This means they’ll do a standard identity verification so the exchange knows who you are, and that you’re not a wanted criminal.
Once you’ve opened the account, you’ll be able to fund it with a bank transfer – or by credit card in some cases – before you buy bitcoin.
If the exchange where you bought bitcoin (and left it there) gets hacked ,then you can lose your money. This has happened in a couple of high-profile cases.
For example, in 2014 bitcoin exchange Mt. Gox, which at the tie was handling up to 70 percent of all bitcoin volume, filed for bankruptcy, saying that 750,000 of customer bitcoin was missing. That’s US$1.5 billion-worth at today’s prices.
The safest place to store your bitcoin is in a wallet. There’s a good selection to choose from here.