Cryptocurrency is a digital or virtual currency that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.
There are many different types of cryptocurrencies, including Bitcoin, Ethereum, and Litecoin. Cryptocurrencies can be bought and sold on a variety of exchanges, or they can be mined.
To buy cryptocurrency, you will need a cryptocurrency wallet and some Bitcoin or another cryptocurrency. You can buy Bitcoin and other cryptocurrencies with fiat currencies like US dollars on exchanges like Coinbase.
Here are the steps on how to do so:
Step 1: Choose a Crypto Service or Venue
The first step in buying bitcoin consists of choosing a crypto trading service or venue. Popular trading services and venues for purchasing cryptocurrencies include cryptocurrency exchanges, payment services, and brokerages. Out of these, cryptocurrency exchanges are the most convenient option because they offer a breadth of features and more cryptocurrencies for trading.
Signing up for a cryptocurrency exchange will enable you to buy, sell, and hold cryptocurrency. It is generally best practice to use an exchange that allows its users to withdraw crypto to their own personal online wallet for safekeeping. For those looking to trade Bitcoin or other cryptocurrencies, this feature may not matter.
There are many types of cryptocurrency exchanges. Because the Bitcoin ethos is about decentralization and individual sovereignty, some exchanges allow users to remain anonymous and do not require users to enter personal information. Such exchanges operate autonomously and are typically decentralized, which means they do not have a central point of control.
Step 2: Connect your exchange to a payment option
After you have chosen an exchange, you will need to gather your personal documents. Depending on the exchange, these may include pictures of a driver’s license or Social Security card, as well as information about your employer and source of funds. The information you may need can depend on the region you live in and the laws within it. The process is largely the same as setting up a typical brokerage account.
After the exchange has verified your identity, you will be asked to connect a payment option. At most exchanges, you can connect your bank account directly or you can connect a debit or credit card. Although you can use a credit card to purchase cryptocurrency, it is not a good idea because cryptocurrency price volatility could inflate the overall cost of purchasing a coin.
Step 3: Place an Order
You can buy bitcoin (or other cryptocurrencies) after choosing an exchange and connecting a payment option. In recent years, cryptocurrency exchanges have slowly become more mainstream. They have grown significantly in terms of liquidity and their breadth of features. The operational changes at cryptocurrency exchanges parallel the change in the perception of cryptocurrencies. An industry that was once thought of as a scam or one with questionable practices is slowly morphing into a legitimate one that has drawn interest from all the big players in the financial services industry.
Once you have Bitcoin or another cryptocurrency in your wallet, you can use it to purchase other cryptocurrencies on exchanges like Binance. Or, you can use it to buy goods and services with merchants who accept cryptocurrency.
Mining cryptocurrencies is a process of verifying transactions and adding them to the blockchain. Miners are rewarded with cryptocurrency for their work. Ethereum, Bitcoin, and Litecoin can all be mined.
To mine Ethereum, Bitcoin, or Litecoin, you will need a mining rig. This is a special computer built for mining cryptocurrencies. You can also join a mining pool to increase your chances of earning rewards.
Cryptocurrencies are still relatively new and volatile, so be sure to do your research before buying any!