Getting started with Bitcoin

Getting started with Bitcoin is a huge pain in the ass. There's so much information out there it's hard to know what's trustworthy and what's a scam. And there are lots of scams.

But I was determined to figure this thing out, so I rolled up my sleeves and spent the last 2 weeks researching Bitcoin, mostly on reddit.com/r/bitcoin and bitcointalk.org.

So here's some information on getting and using Bitcoin. By the way, it goes without saying, but please proceed carefully. I can't guarantee my techniques are 100% foolproof (although they've been working fine for me), so I don't want to be blamed if you lose money. Ok, now that I've covered my ass let's proceed.

Buying Bitcoins

In terms of purchasing Bitcoins with US dollars, Coinbase is the best option. At first I felt a little uncomfortable hooking up my bank account info, but the more I read about Coinbase and its staff the better I felt. There's a lot of venture capital invested in this company and they intend to grow exponentially, so they're doing everything right.

The only downside to Coinbase is it takes about a week for your purchased Bitcoins to show up in your account. (From what I understand, this is because they follow banking regulations and only keep enough cash and Bitcoins on hand to cover all their customers – in other words, to guarantee they can never be insolvent.)

Then there's LocalBitcoins.com, where you can get Bitcoins right away. Honestly, this website scares the crap out of me. The idea of meeting total strangers and exchanging envelopes full of cash sounds absolutely horrifying. Luckily, I found a way to use the site that I'm comfortable with, and is decidedly less sketchy.

First, find a seller with a perfect rating (ie, 100+ transactions and 100% positive feedback. Just like eBay.) Then make sure the payment method is "Cash deposit" in a major bank with a location close to you. When you initiate a transaction with the seller, the seller places your bitcoins in escrow and provides you with a bank account number. Then you head to the bank and make a cash deposit into that account with a teller. You'll get a receipt, which you then photograph and upload to LocalBitcoins as proof you deposited the money. Then the seller releases the Bitcoins from escrow, and the funds show up in your account. Nice.

Securing Your Bitcoins

You've probably heard of the concept of a "Bitcoin Wallet." A wallet is just a collection of bitcoin addresses and the secret keys that enable you to send from those addresses. Sites like Coinbase and Localbitcoins automatically create wallets for you when you sign up, and they're pretty easy to use since everything happens behind the scenes.

But if you're paranoid about security (or to put it another way, smart), you shouldn't keep large amounts of money in those online wallets because you're not in control of them. If those sites have a security breach or shut down, you're shit out of luck (like the people who had money at Mt Gox).

So to secure your Bitcoins you need to take matters into your own hands and download some wallet software for your computer.

To learn more about using and transferring money into a Bitcoin wallet on your computer, check out my next article, Using the Electrum Bitcoin wallet.

Comments (One Comment)

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    Really interesting article thank you for the informations ! http://czbitcoin.com/

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