The first thing to know about buying bitcoin is that you will need two things:
- A place to buy it ? an exchange
- A place to store it ? a wallet
So imagine you want to convert your CAD into Mexican Pesos. You take your cash to a foreign exchange counter (the exchange). You give them CAD, they take a cut and give you the rest in pesos. You then put the pesos in your wallet (the wallet). Buying bitcoin is similar to that, but the transactions are digital.
The wallet I recommend for complete beginners is called Coinbase. You can download it as an app on your phone. But get started by clicking this link.
Coinbase is the worst wallet you can choose from a security standpoint, but the reason I recommend it for beginners is that is it both a wallet and an exchange in one, so it makes your first experience buying bitcoin much smoother.
The purpose behind bitcoin is that you own your money and no one can take it from you. The only way this is true is if you own something called your ?private key? ? like the password to your money. Unlike most wallets, Coinbase stores your private key for you. For a lot of people that?s handy, because if you lose your private key, your money is as good as gone. Like if you have an impenetrable safe that you lost the combination to. You know where the money is, but you have no way to access it. The danger of having Coinbase store your private key is that if they get hacked, you lose your money. If they go bankrupt or disappear, you lose your money. If the US government decides coinbase can?t operate anymore ? you lose your money. All of these are highly possible. Long story short, Coinbase is good for learning and getting started. But if you want to put material amounts of money into crypto, this is not the place to do it.
Step 2: Sign up for an account
Remember the first time you got a bank account? It may have seemed easy at the time, but in retrospect, the process was pretty intensive. You had to show up at a physical bank branch. You also had to show up during banker?s hours during the middle of a work day. You had to present government issued photo ID ? to a manager ? and if the manager wasn?t there, you had to come back another day. You had to fill out form after form ? all on paper ? and sign them so they could store them in a filing cabinet. All to have a place to store your money. Getting set up to purchase crypto is not all that different, it?s just done online. Remember that when you get frustrated at any point in the process.
To get started, fill in the boxes and verify your email like you would with any other app. Then click the big green get started button! (Other countries may ask significantly more questions as a part of their regulatory compliance).
Coinbase is required to verify your identity ? just like a bank would be. Take a photo of your ID and they will verify you are human. This verification process could take minutes or hours or days or weeks. And you won?t know which one it?s going to be, so you?re best to set up your account before you?re in a hurry to buy.
Step 3: Connect a Money Source
In order to buy crypto, you need a way to pay for it. You will need to add a payment method to your account the same way you would add your credit card to your uber account. Enter in either a debit or credit card. Note that there will be a much lower threshold for purchases on a credit card for risk reasons.
Don?t be surprised if your bank blocks the transaction. Scotiabank is particularly notorious for blocking people from spending their legally earned money on bitcoin ? a legal monetary instrument. If this is the first time you?ve experienced being told you can?t buy what you want with your money, you?re starting to scratch the surface of why bitcoin is important.
Step 4: Buy the crypto!
Click on ?Accounts? at the bottom of the app. You?ll see an awesome list of a whole bunch of different cryptocurrencies. These are all the cryptocurrencies Coinbase offers on their exchange. If you don?t see the token you want to buy here, you will have to sign up for a different exchange.
Because of some changes in the bitcoin and ethereum tech and communities it looks like there are two versions of each. If you want to buy bitcoin and ether but don?t know which one to get, then the ones you want are BTC and ETH.
The most important rule of buying crypto is only invest what you are willing to lose completely. Those of us who have been around for a while are used to watching half our investment disappear overnight. Most people aren?t ? and it?s not a good feeling, and it WILL HAPPEN TO YOU BECAUSE IT HAPPENS TO EVERYONE. That?s the downside of a volatile market. If you can?t handle that or will need your money to maintain its value in case you need it in the short term, then investing more than a few bucks in crypto is not for you.
The other thing to remember about it crypto is that?s it?s still taxable as income or capital gains. Start tracking your purchases and sales right from the get-go or you?ll find yourself in a right mess at tax time.
Step 5: The Fun Part
Congratulations! You are now the proud owner of cryptocurrency. You have joined some of the world?s brightest minds in a technology that is transforming the financial sector and disrupting some of the oldest societal systems we know. Enjoy the ride as you watch the price rise and fall, plummet and go to the moon.
Your job now is to spread the word. Share this post with a friend and send them some bitcoin. For most of us, it?s a neat way to participate in a new economy. But for many around the world, bitcoin is a lifeline to access rights and freedoms we take for granted. Start learning more about the impact cryptocurrency and more importantly, blockchains, are going to have on society to understand why this technology really matters.
Anne Connelly is passionate about harnessing blockchain and decentralized technology to transform the lives of people in developing countries. Anne is Faculty at Singularity University and has been an active part of the global blockchain community since 2012. She previously worked with Doctors Without Borders Canada in Central Africa and currently serves on their board of directors. Anne was honoured as one of CBC?s 12 Young Leaders Changing Canada and one of the Fifty Most Inspirational Women in Technology in Canada. You can find her at www.anneconnelly.ca.
Want to learn more about blockchain and cryptocurrencies? Check out the resources on my blog: New Kids on the Block: Resources to get up to speed on blockchain technology
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