Everything You Need to Know before Buying Bitcoin

It seems like everyone has jumped onto the bitcoin bandwagon this past year. For those who have been following it for a while now, you may be very interested in purchasing some.

Following bitcoin is a great place to start, but now you want to get in the game.

Before you jump out and start investing, there are a few things you need to understand. Bitcoin is vastly different from any other payment system you’ve encountered. So, you need to go into investing with a solid understanding.

In today’s post, you’ll learn 6 essentials before buying your first stake in bitcoin.

Disclaimer: This should not be taken as official advice. Consult a investment specialist for a professional opinion before making any investment decision.

1. Bitcoin is Turbulent

This technology is still in its infancy. A variety of complicated market factors generate consistent fluctuation. As with any market, it lives and dies on supply-and-demand.

More people buy bitcoin, the more its value increases.

When more people sell, the price dips.

If you look at the history of bitcoin cost, you’ll notice it has a wide range of fluctuation over time. You shouldn’t consider it as a money-making scheme because it is -- in reality -- an incredibly unpredictable and risky investment.

2. Learn About Security Before Buying Bitcoin

This seems obvious, I know. But it’s always astounding how many people choose to ignore this advice. You MUST learn about proper security before investing in any cryptocurrency -- including bitcoin.

The reason is simple: lose the wallet, all your bitcoin is gone. Forever. There’s no accountable -- or concerned -- third-party. And there’s no way to get it back.

Sanjay Beri, CEO of Netskope, quickly explains the basics of security:

Keep your cryptocurrency off the internet, in a "cold wallet."

"Cold wallet" is not a brand, it's a concept of storing bitcoins offline (not connected to internet) so that it reduces the opportunities for hackers to steal via online techniques.

"Hot wallet" is connected to the internet, for daily transactions. Think about "hot wallet" as a checking account and "cold wallet" as the savings account.

Here is how to create a cheap "cold wallet" on a dedicated computer:

First, download a cold wallet application to a new, secure usb drive.

Then, take a computer, reset it to factory setting, disconnect it from the internet and keep it offline.

Last, load the cold wallet application onto the computer, keep your cryptocurrencies on that clean and offline computer. You can make transactions offline, using the cold wallet application.

3. Bitcoin Transactions Cannot be Cancelled

Once you’ve started a transaction, you can’t cancel it. That’s not how the network works. Once you release the bitcoins from your wallet, they’re gone forever.

So, it’s important to keep a security-driven mindset, even after you secure your wallet.

A couple of tips to remember:

• Always double-check to ensure you’re making the right transaction.

• Make sure you’re sending over the right amount, too.

If you ever send money to the wrong person, the best thing you can do is try to get in contact with the receive. But in such an anonymous industry, that’s easier said than done.

4. Research Where Bitcoin is Accepted

You can call bitcoin a currency all day long. However, if no one is willing to exchange it as payment for goods or services, is it really money after all?

Many large companies accept it as a form of paying, including: Microsoft, WordPress, Dell, PayPal, and many others. But it’s a bit more difficult to find local merchants.

Enter: CoinMap. Here you’ll find a crowd-sourced list of local sellers around the world who accept bitcoin. And always keep an eye out for a “bitcoin accepted” sign at local businesses. It might just be that you need to contribute to CoinMap too.

5. Bitcoin is NOT Anonymous

People believe that “crypto” is synonymous with anonymous. But it’s not. In fact, the process of exchanging bitcoin happens on a very public address that can be seen by anyone. Every transaction you make is visible on the blockchain.

This transparency is what makes the network so secure. A little counterintuitive, I know. But that’s how it works.

Even though your transactions are public, personal information isn’t available. Really, it’s just a strings of numbers. And those numbers are tied to your wallet. We’re all just morphing into data distributed across the ledger.

6. Verify if Bitcoin is Legal in Your Country

One of the most important things to know before purchase bitcoin? That it’s actually legal in your country. You don’t want to unknowingly get yourself in a precarious situation with the law.

First, you might be wondering… Why would the government make it illegal?

Well, governments like governing, and they can’t do that with bitcoin because there’s no central authority. This challenges the status quo and makes many powerful people feel threatened.

Think of it this way… The more people use bitcoin, (presumably) the less they will use traditional fiat currency.

This means banks -- and all the people they employ -- become useless. In a significant way, governments will lose control and power will lie in the hands of the people. So, many fear this possibility and want to prevent it by destroying bitcoin.

Now, for most it’s still legal.

But even where you can purchase it, many countries are facing controversy over the subject.

Ecuador, Bolivia and Russia are all known for showing hostility toward the cryptocurrency.

Other countries don’t have specific laws, but there have been many raids reported in places like Kazakhstan, China and India. Because it’s so controversial, you should understand and accept the risks before trading.

BitLegal is a good resource for anyone curious about its status around the world.

Ready to Buy a Bitcoin?

As a society, we’ve just started understanding what’s possible through the blockchain and bitcoin. There are many undiscovered use cases for the technology.

Now that you’re equipped with the basis, you can start seriously considering an investment.

Remember to always stay safe, both in personal security and legalities. And enjoy the learning experience, so that one day you can tell your grandchildren about that time you invested in this revolutionary technology.