Trading Bitcoins has become a popular trend lately with Bitcoin grabbing a spot in news headlines by the day. What is Bitcoin? How can I trade Bitcoin? Is it safe to trade Bitcoin? What’s the process of trading Bitcoin? Is it profitable to trade Bitcoin? Well, these are some of the critical questions that might be crisscrossing the mind of a novice trader in the world of cryptocurrency.
First, let’s understand what the term Bitcoin means. Simply put, Bitcoin is a form of digital currency commonly known as crypto-currency where vendors who primarily use Bitcoins as their means of payments trade goods or services without third-party intervention; that means the absence of a country’s central bank or government.
Before getting started on Bitcoin, you should have some degree of patience to understand the technical details of the operations because financial markets are fragile; something which exposes you to the dangers and risks of making losses.
How Bitcoin Operates
As already mentioned, Bitcoin is a form of digital currency. However, it is a new form of money which distinguishes itself from the traditional money because it lacks the involvement of a third party as an intermediary.
However, that is the key factor for the popularity of Bitcoin because they can be transferred between individuals without the use of banks; which in return lowers the fees and exchange rates. Just like money, Bitcoins also have value and as a result, they are subject to taxation according to a country’s local financial laws.
To get started on Bitcoin trade as a new user, you will be required to install Bitcoin wallet either in your desktop or any smart gadget. After that, the system will automatically generate your first unique address usable only once.
You can then disclose this unique address to your friends or any person you wish to trade Bitcoins with. One significant advantage is that you could have as many different addresses as you want because there is no limit to the number of Bitcoin Addresses.
Another advantage of trading Bitcoins is that you can make transactions anonymously in what is referred to us peer-to-peer network (P2P) that monitors all Bitcoins transfers between users. Each user with a digital wallet has a private key or seed which is known only by the user. With a private key, a user can prove that they are the owner of the wallet, sign transactions, and initiate them at their convenient time. Before the transactions get broadcasted to the network, they are verified and added to the public ledger in a process called Bitcoin mining.
As of this writing, one Bitcoin (BTC) is worth 92,878 South African Rand but the value keeps fluctuating to deal with inflation.
Where to Get Bitcoins
Now that we’ve learned the basics about Bitcoin, you should now understand how you can get Bitcoins. As a trader, you can decide to buy Bitcoins on exchanges or buy them directly from other people in the market. Once you find a trader interested in selling Bitcoins, you can pay for them using your hard cash, credit and debit cards, wire transfers, or even use other cryptocurrencies.
How to get Bitcoins
Step 1: Set up a wallet
You will need to set up a wallet to store your Bitcoin. Your wallet can take the form of a desktop wallet, a mobile wallet or a hardware wallet. Once you have a wallet, the system will automatically generate a private key which acts as your password. As a result, you should be cautious to avoid losing the private key because it will limit your access to the Bitcoins in the wallet.
Step 2: Open an account at an exchange
Depending on your geographical location, open an account at an exchange to allow your Bitcoins to be bought and exchanged on your behalf. Each exchange has a different operational framework which calls for some degree of patience in doing extensive research before you settle on one.
Step 3: Choose a purchase method
Next, choose your preferred method of purchase which could either be an exchange platform or an independent provider.
Ways to obtain Bitcoins
Purchasing Bitcoins at an online exchange
Obtaining Bitcoins from individuals who have them
Accepting Bitcoins as payment
By being a Bitcoin miner where you earn Bitcoins by verifying transactions in the Bitcoin system.
Spending your Bitcoin
There is an increasing number of merchants accepting Bitcoins as a means of payment. You can spend Bitcoins in doing the following: –
You can use Bitcoins to buy presents, notably the gift cards.
You can use Bitcoins to pay for luxurious services such as flights and hotels.
You can use Bitcoins to obtain apps in Microsoft stores.
You can use some Bitcoins to obtain jewelry such as gold.
You can donate some Bitcoins for charity.
Advantages of Using Bitcoin
There are multiple benefits of using Bitcoins as a payment system over traditional banks. Below are some of the advantages that make Bitcoin an incredible digital cash with no likeness: –
- Reduced transaction fees
Bitcoin payments don’t involve a third-party as an intermediary. The entire interaction between buyers and sellers is peer-to-peer. That’s why it remains a favorite go-to destination for small business ventures.
- Quick transactions
When it comes to making Bitcoin transactions, they are generally quick compared to the conventional methods of moving money. For instance, International wire transfers such as PayPal may take you a few days to make transactions compared to Bitcoin transactions which can take only a few hours to initiate.
- Zero Paperwork
It goes without saying that you can only send or receive Bitcoins using a Bitcoin Wallet. With that, you don’t need any paperwork to prove your address or identity; a requirement paramount in conventional banks. You can trade Bitcoins at any location and at any age group provided you have a digital wallet.
- Appreciating Value
The value of Bitcoins keeps appreciating hence proving to be a worthwhile investment.
- Your account cannot be suspended
Irreversible transactions require you to be extra-keen when buying or selling Bitcoins
The absence of escrow services might expose you to fraud
Lack of awareness and understanding because a lot of people might incur challenges to understand the operations of the digital currency.
Bitcoins trade is an emerging trend and as a result, it faces high risks and volatility because there is a limited amount of coins compared to the high demand for them which increases by the day. However, as time goes by, it is expected that more businesses and trading centers will begin accepting Bitcoins. Even though Bitcoins are at an infancy stage, new features are likely to be introduced in the future to make Bitcoins reach its full potential. Bitcoins are worth accepting for traders and it is likely to change the E-Commerce space as it solidifies its foundation globally.
NOTE: Invest only what you can afford to lose because the cryptocurrencies are highly volatile to fluctuations.