This has proven to be the most challenging for me personally – because I live in rural Missouri and still have a RR (rural route) home address. Most online purchasing options flatly refuse to accept that my address is in fact “physical” and all options to use credit or debit cards fail and throw the “post office box addresses are not permitted” error. For this reason, I have to use bank wire transfer method to purchase bitcoin, and it takes 5 business days to receive the bitcoin.
I selected Coinbase.com as my preferred wallet for purchasing and transferring bitcoin, because it seems to be the most reliable and it is easy to use. However, I also setup a Blockchain.info account to use for holding bitcoin for a variety of reasons.
Sign up for an online service – such as Coinbase to create a secure place to store your bitcoin, as well as easy payment methods to convert your local currency into or out of bitcoin.
Connect your funding source – after signing up, connected either your bank account, PayPal account, or credit card to use as a funding source for buying bitcoin.
Buy and sell bitcoin – Create a purchase of the amount of Bitcoin desired, and Coinbase will complete your buy and deliver your bitcoin. Sale of Bitcoin works the same, but in reverse. The price of bitcoin changes over time, so you’ll be shown the current exchange rate before you buy.
Before you start using Bitcoin, here are a few things you need to know in order to use it securely and avoid common mistakes and pitfalls.
Bitcoins are impossible to counterfeit or inflate.
You can use them to send or receive any amount of money – the smallest fraction of a bitcoin, with anyone, anywhere in the world, at very low cost.
Bitcoin payments are impossible to block, and bitcoin wallets can’t be frozen.
With Bitcoin you can directly control the money yourself without going through a third party like a bank or Paypal.
Bitcoin transactions cannot be reversed or refunded. You should only deal with businesses or people you trust.
To be valid, a Bitcoin transaction must be confirmed at least once but preferrably 6+ times before it has happened and becomes irreversible.
Bitcoin is not anonymous but there is tumbling. Bitcoin tumbling, also referred to as Bitcoin mixing or Bitcoin laundering, is the process of using a third party service to break the connection between a Bitcoin address sending coins and the address(s) they are sent to. All Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address.
You can get bitcoins by accepting them as a payment for goods and services; or by buying them from a friend or someone you know. You can also buy them directly from an exchange with your bank account.
There is a growing number of services and merchants accepting Bitcoin worldwide – recently, you can even pay your Dish Network monthly bill with bitcoin. You can use Bitcoin to pay those that accept it, and rate your experience to help honest businesses to gain more visibility.
The Bitcoin industry is always changing and there are a ton of Bitcoin news services to help you stay up to date on the latests trends, prices, etc.
Without a Bitcoin wallet, you can’t send or receive Bitcoin payments. So before you get bitcoins, you’ll need to buy, download, or create a bitcoin wallet.
The different types of wallets are:
Online bitcoin wallets. Wallets that can be accessed on the web from any internet connected device.
Bitcoin hardware wallets. Physical devices designed to secure bitcoins.
Software wallets. Wallet applications downloaded to your phone, computer or tablet.
Paper wallets. Bitcoin private keys printed from an offline computer.
I setup a bitcoin online wallet at Coinbase – I also setup a bitcoin wallet at Blockchain. Why two wallets? Because I learned that with Coinbase and other similar services, you rely on that service to give you the funds, because you don’t hold the private keys from the address. With Blockchain, you hold the private keys, so the bitcoins can be controlled only by you. Since there is a need for services offered by Coinbase – I setup a free account using both. When I buy bitcoin through Coinbase, which I do because the rates are more reasonable and it is reputable, I immediately transfer them to my Blockchain wallet if not elsewhere. Buy on Coinbase – store on Blockchain and get the best of both services.
Blockchain.info sets up a wallet client-side and you control the private keys directly. Whereas Coinbase stores the bitcoins for you, and most are stored in cold wallets – meaning the only amount kept on the server is the amount needed to cover anticipated withdrawals.
With blockchain.info, you are required to make sure you have an absolutely secure password and you can maintain a secondary password also. If you use gmail or another webmail service, you can enable 2-factor authorization for your electronic mail, so wallet backups could be sent to your email.
With Coinbase, you’re trusting that Coinbase has provided significant security for you rather than managing the security yourself. So, you definitely want to enable 2-factor authorization.
The major concern is that if Coinbase got hacked, you do not have control of the funds. If Blockchain.info got hacked, your bitcoin is as safe as you’ve configured your wallet account to be using the tools they provide.
Whoever has the private key for a bitcoin address owns the coin balance associated with that address. Coinbase works just like a bank – they own the bitcoins, they worry about security, and your account balance represents a promise from them that they owe you that many bitcoins. You take on counter-party risk when you give your bitcoins to Coinbase, because if something goes wrong, or they get hacked, Coinbase could disappear with your coins.
If you control your own wallet application, either in the cloud (like Blockchain.info) or on your own computer, only you have access to your private key, and you own the bitcoins and you are responsible for key security. I liked this because there is no counter-party risk.
A potential downside of being responsible for your own security is concern that permit access to your private key, in which case your bitcoins will be immediately stolen. So it is important to understand and safeguard your private keys.
Coinbase offers the opportunity to buy and sell bitcoins – Blockchain.info does not.
It is a good practice to purchase bitcoin with Coinbase, and immediate transfer bitcoin to Blockchain, for better security.
Some use paper wallets, and print out their private keys, safeguarding the paper and deleting all digital copies. You do this, and your bitcoins cannot be hacked or stolen.
Secure wallets like paper wallets or hardware wallets can be used as “savings” wallets, while mobile, web, and desktop wallets should be treated like your spending wallet.
Create multiple backups of your wallets or private keys and access codes or recovery codes. Backups should be kept in separate physical locations in the case of fire or water damage. Paper wallets can be laminated or written in metal for extra protection.
By Pamela|2017-05-20T13:11:19-05:00March 13th, 2017|