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Saturday, December 30, 2017

How to Obtain Bitcoin and Other Cryptocurrencies

How to Buy, Accept, or Mine Bitcoin and Other Cryptocurrencies - Quick Intro

Buy Bitcoin on an Exchange

One easy way to get started with owning bitcoin is to buy some on an exchange, such as Coinbase.

I offer this link because I think it is helpful, not just because I could get $10.  Sometimes you can't tell why people recommend things.  I figure, if you plan to sign up anyway, why not save a little money?

With this referral link, we each get $10 in bitcoin after the new account is opened, and a trade of $100 or more is completed:

Note that it is not necessary to buy a full coin, but there are commissions for buying and selling, and  mining fees for transfers.   To minimize commissions, try entering different amounts to see how much makes sense, before completing the transaction.  For example, buying $100 of bitcoin may cost as much in commissions as buying $200 worth, or around $3.00.  In 2017, commissions have been around 1.5%.

Other ways to get bitcoin and related assets

Buy stocks related to bitcoin, blockchain, or cryptocurrency

For a while, to buy a stock that invests directly in bitcoin, pretty much all that was available was GBTC.  Late in 2017, the list started to grow quickly, especially after bitcoin became available on the commodities markets.  We may expect to see an ETF at some time.  A search on some of those keywords will turn up some new companies, and there are also companies that create hardware for mining.

Accept bitcoin as payments, tips, or gifts

This requires a crypto currency wallet, or account on an exchange that manages the wallet.  Probably the quicket way to start receiving bitcoin is to install a local wallet such as Jaxx on a smartphone.  If using an exchange such as Coinbase, there is also an app that can be used to receive bitcoin.

Speaking of tips, some websites may offer a link where they would gladly except tips.  Here is ours for, of you are so inclined:

BTC:  1Wqg1EeNuuURFA39cYAQnmgijBQANW7yB
ETC:  0xbf5c22ef84eeb0c84bf0e70be5beb28379d0e278
LTC:  LasBvJfk7ypwic1HjKaUtGqZ9MwisXMMG9
BCH:  1HqnEB8xy7Nmfm6GuY7iXeA1eEvf69HthT

Mine Bitcoin

Cryptocurrency Mining continues to require faster and more specialized hardware, and the difficulty continues to increase, but as prices increase the investment could pay off sooner than expected.  This could be an entire series of articles, but for now, just understand that this is a way to obtain bitcoin.

Cloud Mining

A sub topic of mining is cloud mining, which is a good way to learn how the process works, but profitiability is questionable.

Where to Store Bitcoin 

Crypto currency is actually stored on the blockchain, and is publicly visible to all.  The way to control transactions is with the use of public and private keys.  Funds are received by sharing the public key with the sender.  The way to send funds, is with the public, and private keys, and possibly with a password, or PIN.  The way to recover a wallet, is ususally with a 12 word passphrase.  The public key, password, and passphrase should never be shared with anyone, other than someone who should have full access to all the funds, such as  a spouse, or the recepient of an inheritance.

Caution must be taken to never lose the keys and passphrase.  If a wallet or device is lost or damaged,  the wallet can be recovered using the secrets, but if they are lost, the funds are gone forever.  That means you need to have multiple backups that you can use to recover, but not allow the secret information to be used by anyone else, since they could steal all your funds.

Exchange - OK for small amounts, and short periods of time. Most of the big exchanges are relatively safe, but they control your keys, so there is always a risk they could be hacked.  Also, make sure to remember the username and password.  Again, this is probably the easiest way to get started but consider other wallets for larger amounts.

Software Wallet, or Hot wallet - A software app, where keys are usually stored locally on the device, e.g. a computer, phone, or tablet. More control of the keys, but still a risk that the device could be hacked. Usually recommended for small amounts of spending or trading money.

Hardware wallet, or cold storage wallet - A physical device which is safest as far as privacy and control of your keys, since the wallet is disconnected from the network. The biggest risk is losing the keys and passphrase.  If the device is lost, or damaged, the wallet can still be recovered from the pass phrase that was written down somewhere.

Some popular choices are:
 Ledger Nano S
 Trezor Wallet

Notes:  Other sites have recommendations, and reviews for each of the items mentioned.  This article is meant to be a quick introduction.  In the future this information will probably be well known, and obvious, such as how to open a bank account, or how to use a debit card, checkbook, or an ATM.  All those banking activities are now common knowledge, but in 2018, how to deal with cryptocurrencies is still not widely known.

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