Over the last two days, I have had a few friends ask me about how to buy Bitcoin or ask for more information on how it works. I decided to throw together a quick guide for beginners on the basics of cryptocurrencies and some information on how to safely make an investment.
Disclaimer: Follow this guide at your own risk, and please be careful. Also, I have a strong preference towards Ethereum over Bitcoin and other cryptocurrencies so keep that in mind if you follow my advice.
Before you rush off to the exchanges to buy some Bitcoin or Ethereum try to learn a little bit about cryptocurrencies first. Here are some good articles to get started learning about the top three cryptocurrencies by market cap (price of coin X number of coins).
There are also some nice illustrated guides here.
A Deeper Dive
If you want to learn even more about cryptocurrencies here some more resources that will help you:
- Read Digital Gold - This is in my opinion, the best book about cryptocurrencies. Even though it is pretty dated at this point, it is written like a novel and is not very technical at all. It is perfect for beginners and very entertaining.
- Understand transaction volume and fees - as cryptocurrencies become more mainstream, the biggest differentiator is going to be how fast the development teams can scale the network to support increased demand. Notice from these charts that Ethereum processes far more transactions that Bitcoin, yet has significantly lower fees. This is why I don't own Bitcoin anymore and instead own Ethereum and Bitcoin Cash.
- Read some in-depth guides this link is to a site called Blockgeeks which has some really great information on how Blockchain and Cryptocurrency technology works.
How to Buy Bitcoin and Ethereum
Now that you have a better understanding of cryptocurrencies, if you want to go and buy some Bitcoin or Ethereum this is how to do it:
Create an account on Coinbase and go through their verification process. Coinbase has a pretty rigorous verification process because they are heavily regulated. It will probably take a few days as well before you can start buying Bitcoin or Ether.
Buy a Trezor to store your cryptocurrencies. This is important. Hardware wallets are expensive, but if you are investing more than the price of the wallet in cryptocurrencies it is well worth it. People lose money all the time by storing Bitcoin and Ether in less secure ways. Be sure to follow the instructions that come with the Trezor and create a secure backup of your keys so that you can restore your wallet if you lose it.
Expect the price to swing wildly - Sometimes the price of Bitcoin drops 80% of its value then takes over a year to recover. Take Warren Buffett's advice "Be fearful when others are greedy. Be greedy when others are fearful". Or better yet hodl.
Hope this helps demystify cryptocurrencies a bit. Good luck and remember to Hodl.
If you enjoyed this post, please check out the new decentralized social network that I am building at fragmented.world.