Bitcoin is a form of digital money. You can use Bitcoin for transactions. You can use it as a store of value. And you can use it for investing and trading for profit.
Bitcoin has been in existence now for over 10 years and the number of users is increasing.
The price development of Bitcoin has been spectacular over the years, but there have been many periods when the currency has been falling in value. It’s been a roller coaster ride with some severe falls. But long-term, Bitcoin has risen substantially in value.
Past performance is of course no guarantee, but many people believe that Bitcoin will continue to increase in value in the long run. This makes Bitcoin an ideal investment for many people.
In addition to Bitcoin there are now literally thousands of so-called “altcoins” – or “alternative coins”. The term altcoin is used to refer to all other cryptocurrencies which are not Bitcoin.
There are many different types of altcoin. Some are simple copies of Bitcoin. Others offer features and benefits that Bitcoin does not have. Some have different purposes and uses to Bitcoin, for example acting as tokens to provide and manage services.
Most of these cryptocurrencies can be traded on exchanges throughout the world, although most of the large exchanges only list a selection of the more popular and higher volume ones.
Bitcoin is often used as an exchange entry point into and out of these altcoins.
Another advantage of Bitcoin is that it’s relatively easy for people to trade directly from home. I say relatively, because there are still some technical and other hurdles to negotiate.
Set Up A Bitcoin Wallet
The first thing you should do if you’re going to be able to use Bitcoin for any purpose is to set up a digital wallet for your Bitcoin.
A Bitcoin wallet is basically a piece of software that enables you to receive, send and store Bitcoins.
The advantage of these online wallets is that they are free to set up and run and no software needs to be installed on your computer. They are accessed via a normal standard web browser.
When you set up a wallet, such as one of the online ones just mentioned, the wallet will provide you with a unique Bitcoin address.
A Bitcoin address is a rather long string of characters – letters and digits which looks like this: 1GdeZTrwKnc34dkgKDlqw64lutzr7KBWpC.
You can think of this as rather like an account number. Except that with Bitcoin, you can actually have an unlimited number of Bitcoin addresses or “account numbers”. They don’t cost anything (although the Bitcoin network levies a charge for each transaction).
If you want you can use different Bitcoin addresses for different purposes. For example different types of spending or holding or for different business clients. Some people even use a new Bitcoin address for each and every transaction, but you don’t have to do this.
Open A Bitcoin Exchange Account
Once you’ve set up your Bitcoin wallet, the next step is to buy some Bitcoin.
To do this you need to open an account with a Bitcoin exchange.
The best exchange for you will partly depend on where you live in the world and which fiat currency you use in your daily life – Dollars, Euro, Pounds or whatever.
Some exchanges do not allow citizens of the US to register and this can be a drawback.
Other exchanges have minimum deposit or transaction requirements. I recommend opening an account with exchanges that do not impose these restrictions.
Some possible exchanges to consider:
Bear in mind that some exchanges, such as Poloniex do not handle fiat transactions, they only deal in Bitcoin to altcoin transactions.
To open an account at these exchanges you will normally be required to comply with AML/KYC regulations. This means identifying yourself by means of a passport, or driving license or similar, as well as providing proof of your current address, such as a utility bill or residence registration certificate.
You will also need to provide details of a bank account that you wish to link to your exchange account in order to transfer fiat currency to and from the exchange.
You will also need to provide your Bitcoin wallet address so that you can transfer Bitcoin between the exchange and your wallet.
You can leave your Bitcoin or altcoin holdings on the exchange, but this isn’t advisable long-term for security reasons. Unless you are trading in small amounts and making short term trades, it’s generally safest to move your Bitcoin off the exchange and into your own wallet.
But note that Bitcoin and many altcoins impose a transaction charge for each transfer. The exchange will usually also levy its own withdrawal fees, in addition to trading fees.
Once your Bitcoin exchange account has been set up and verified you will be all set to authorize your first fiat transfer to the exchange and make your first Bitcoin trading transaction.
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