Bitcoin For Beginners: Getting Started

Step-by-Step Guide to Understanding, Buying, Selling, and Storing Bitcoin

Bitcoin Basics

Bitcoin for Beginners

Introduction

In just 11 years, Bitcoin has evolved from an experimental technology operated by cypherpunks to a resilient, thriving global network on which users exchange an average of $12.8 billion in daily volume.

Despite its meteoric rise, Bitcoin still has a way to go before it becomes entrenched in the mainstream. According to blockchain.com, there are currently around 42 million Bitcoin wallets. If we make a generous assumption that each wallet has a unique owner, that would mean that only 0.6% of the world’s population have engaged with the Bitcoin network.

However, more and more individuals are beginning to realize the unique characteristics of Bitcoin that make it the soundest money ever created.

Evolving Money

As Bitcoin continued its rise to prominence over the first decade of its life, many people found themselves asking this fundamental question in an attempt to understand the real value proposition behind Satoshi Nakamoto’s invention.

In prehistoric times, people relied on barter to conduct their business. A caveman specializing in hunting deer would exchange his deer meat for some fruit collected by the neighboring tribe.

Eventually, the cavemen realized that for commerce to scale, they would need a universal means of representing wealth that would allow them to buy and sell as they wish, without having to rely on direct barter. Shells, beads and other collectibles began serving as the way in which value was transferred.

People began exchanging salt, grains, weapons, cattle, tools, clothes, and practically everything else, based on their perception of the exchanged items’ comparative value. Soon, commodity-based financial systems, such as coffee and wheat, quickly became dependent on harvesting conditions which made it susceptible to severe inflationary cycles.

Evolution of Money

When gold came around in the fourth millennium BC, the shiny metal quickly displaced other forms of money as the preferred store of value, first in raw form and eventually as minted coins. Eventually, bankers began to realize that they could issue notes that represented gold bars locked in a vault, making money easier to transport and exchange.

As a precious metal, it is no surprise that gold served as a peg for these national currencies, including the US Dollar. Gold supply has never increased by more than around 2.5% a year in the modern era and does not corrode or decay easily, ensuring it maintains its scarcity and value.

However, in 1971, US President Richard Nixon decided to unpeg the dollar from gold, creating the world’s first free-floating fiat currency.

The problem with fiat currency is that, absent a tangible commodity that serves as a peg, its supply can be endlessly inflated by reserve bank governors who are prone to political pressures and misjudgments.

Bitcoin represents the next phase in the evolution of money - a fixed, scarce digital asset with a predictable supply schedule that can be sent anywhere in the world without the help of governments and banks.

Evolving Money

Unfortunately, the abstraction of money brought about by Bitcoin is hard to grasp for most. Many people, especially those raised in earlier generations, have trouble understanding how something intangible can have any monetary value. Even though most fiat money exists merely as digital bits on a bank’s ledger, bills and coins give us a physical reference point to which we can ascribe value.

Furthermore, even for those who can conceptually understand Bitcoin, the journey to buying, transferring, and storing (or even trading a futures contract) is unfriendly to beginners. New users exposed to Bitcoin for the first time are overwhelmed by the difficulties of navigating the various wallets, exchanges, and merchants in the space.

In addition to the natural challenges associated with exploring entirely new technology, Bitcoin freshmen must contend with a significant number of disreputable sites and products that seek to exploit their ignorance for illicit financial gain.

With the price of Bitcoin increasing some 200% since yearly lows, it's only a matter of time before the next cohort of users discovers the unique qualities of Bitcoin. As the next cohort of adopters join the existing Bitcoin user base, an information portal that simplifies the complexities of the technology becomes ever-more crucial.

Buying Your First Bitcoin

Buying Bitcoin will be an entirely unique experience for each individual, solely dependent on where you live. Although it might seem overwhelming right now, the process of buying bitcoin has been streamlined over the years, and is much easier than it sounds. Similarly to how the process of buying a website, trading stocks, or forming a business has been streamlined, so has buying your first Bitcoin.

There are many different exchanges that you can find online but not every exchange is one that is to be trusted, used, or even considered.

We have researched all the exchanges based on reputation, security, users, volume, fees, and compliance with different laws and regulations so you don’t have to.

Choosing an exchange is one of the most important steps in your Bitcoin journey. The process, however, can be broken down into 4 easy steps:

  • 1. Open an account on an exchange like Coinbase

  • 2. Verify your account

  • 3. Link your account with your bank account or debit/credit card

  • 4. Open a position on the exchange (Buy, Sell)

Finding An Exchange

To find a reputable exchange in your country you can use the Bitrawr search feature.

Start by finding your country in the drop-down list.

Bitrawr Screenshot

Once you find your country, you'll find a list of exchanges that operate within your country.

Scroll and choose the right exchange for you based on your needs. Make sure to review the exchanges' description, fees, security, etc

Bitrawr Screenshot For Exchange

Signing Up

For this example, let's go with Coinbase. Coinbase is one of the largest Bitcoin exchanges in the world and operates in around 32 countries. Their easy and user-friendly platform also makes the buying and selling Bitcoin process seamless.

Coinbase Guide Sign Up

Fill out your personal information to complete your account sign up. Be sure to use your real name as shown on your passport or driver's license as using an alias could delay the confirmation of your identity later on.

Coinbase Guide Fill in Information

You'll be prompted to verify your email account.

Once verified, you will be prompted to set up 2-factor authentication using your phone number.

Coinbase Guide Two-step Verification

Verifying Your Account

Coinbase has to abide by KYC/AML laws because they are based in the USA. The Know Your Customer (KYC) and Anti Money Laundering (AML) laws ensure that businesses verify the ID of their clients or customers. These laws help to prevent money laundering and other criminal activities.

If you were not asked to verify your ID after entering the SMS code, go to the “Trade” tab, then click on the “Submit ID + Photo Verification” button.

Coinbase Guide Trade

You have the option of uploading either your Passport or Drivers License using your webcam, mobile camera, or file-upload.

Coinbase Guide ID Type

Once your account is verified, you can continue onto the next step.

Great, now you will need to connect your payment method before you can buy or sell Bitcoin.

Coinbase offers 4 payment method options.

  • Debit card

  • PayPal

  • Bank account

  • Wire transfer

Head over to the "Settings" tab and then onto "Linked Accounts".

Coinbase Guide Linked Accounts

Press the "Link a New Account" button to be prompted with the payment method options

Coinbase Guide Connect Bank Account

Follow the process of adding your payment method to move onto the next step.

Setting Up a Trade

You're now ready to place your first buy order for Bitcoin. Press the "Prices" button.

Coinbase Guide Prices

Next, click on the "Trade" button next to Bitcoin. A popup will appear prompting you to input your buy or sell amount and payment method type.

Coinbase Guide Input Amount

Once inputting your order, press "Preview Buy".

Coinbase Guide Preview Buy

You'll see the details of your order now. Review the payment type, fees, and expected arrival date of your purchase and confirm. Bitcoin will be deposited into your Coinbase wallet.

Coinbase provides its users with a wallet for sending and receiving cryptocurrencies. You will be able to store, buy, and sell your Bitcoin all in one place.

As convenient as this is, it is not recommended to store your Bitcoin on a custodial change. This would be a good time to think about getting a hardware wallet like a Ledger. You can follow our guide on wallets for more information.

Selling Your Bitcoin

Selling is as easy as buying. The "Sell" button can be found under the "Trade" popout.

Coinbase Guide

Choose where you want your funds to be deposited and press "Sell Bitcoin". The funds usually arrive within 1-2 business days and the delivery date will be shown on the trade confirmation page before your order is submitted.

Congratulations, you've completed your first Bitcoin trade!

Guide to Storing Bitcoin

What Is a Wallet?

A Bitcoin wallet is a device, physical medium, program or service which stores the public and/or private keys and can be used to track ownership, receive or spend cryptocurrencies.

Wallets are available in many forms including hardware devices, mobile applications and web-based.

To store your Bitcoins, you need to choose a wallet that is compatible with your needs.

Types of Wallets

What Is a Private Key?

A Bitcoin private key is a secret number that allows your coins to be spent. You can think of it as like a password.

Every Bitcoin address has a matching private key. The private key is mathematically related to the address, and is designed so that the Bitcoin address can be calculated from the private key, but importantly, the same cannot be done in reverse.

When you hold your Bitcoin on a custodial exchange like Coinbase, Binance, or Kraken, the exchanges hold your private key for you. While this can seem like a good idea, there has been many cases where large exchanges have been hacked and user funds have been stolen.

Personal hardware or software wallet are undoubtedly the safest option for storing Bitcoin.

Learn More

Want to learn more about bitcoin wallets? Check out our full page on wallets.

Thanks for reading our Beginners Guide article on Bitcoin! Check out this similar guide that also includes tax treatments and regulations. If you have any more questions please reach out to us on Twitter.