Buying your first Bitcoins can feel a bit overwhelming. This short step-by-step process should guide you through it all.
- Setup a Wallet – Just like you need a place to store your Dollars and Euros, cryptocurrencies also need to be stored.
- Go to an exchange – You can exchange dollars and euros to Bitcoin and other cryptocurrencies at exchange services like Litebit.eu or Coindesk.com
- Wait a bit – Your exchange needs to be verified by the blockchain. As soon as this happened, your Bitcoin will appear in your wallet.
How does Bitcoin work? What is a cryptocurrency? And why is it worth that much money?
WHAT IS A CRYPTOCURRENCY?
A cryptocurrency is virtual money, created and held electronically. There’s no government control. They are produced by computers, using software that solves mathematical problems. You can open a wallet, which consist of a long string of letters and numbers. Your coins can be stored there. Transactions between wallets happen without a middlemen, which keeps transaction costs very low. Banking and credit card companies ask a much higher percentage than the computer network does. More small businesses around the world are accepting Bitcoin and other cryptocurrencies every day. Some people just buy the bitcoins as an investment.
WHY DOES IT HAVE VALUE?
That’s a proper question. But why does that piece of paper in your wallet have value? Because we all agree to it. Just like money, or a house, or gold, cryptocurrencies are valued because of trust, adoption and usage. More shops, merchants, investors and start-ups are using cryptocurrencies. Value increases when more people are willing to accept them as payment. That’s how value is created.
Scarcity also plays a part in this… if the amount of Bitcoin was infinite, the value wouldn’t go up that much and everybody would be mining. Or maybe nobody would be mining. If gold was as common as sand, it would have no value. Scarcity and the need to use or own it, makes it valuable. The same can be applied to cryptocurrencies.
Earning Bitcoins, or any other cryptocurrency, can be done in multiple ways. In this article I have listed the most common ones.
Of all the ways to earn Bitcoin, mining is oldest one. Your computer – or your network of computers (a.k.a. mining pool) – does all kinds of calculations to solve mathematical problems. The computer or mining pool that generates the answer to such questions, will ‘win’ the bitcoin. Most cryptocurrencies, including Bitcoin, are setup in such a way that the amount of available bitcoins is finite.
Work & services
You can setup an online business and offer your services in return for payments in Bitcoin or another cryptocurrency. In 2010 a pizza delivery guy sold 2 pizzas for 10.000 Bitcoin, which would now be valued at 99 million dollars.
You can always buy cryptocurrencies at a certain price, and sell them later with a profit. This can be done against traditional currencies (US dollars and Euros), or against other cryptocurrencies (which is by far the most popular way to do it). Many insiders advice to only do this with the Top 50 currencies, which are considered more stable and less likely to be scam. However, the value of a cryptocurrency is highly volatile. Profits are there for the taking, but losses happen just as often.