Mining is one way to acquire Bitcoins, but not practical for getting them immediately. There are a few sites we can use for setting up our Bitcoin money system.
There Are 3 Basic Needs When Starting Out:
1. A Bitcoin Wallet
We can hold our Bitcoins or Bitcoin codes on our computer, USB drive, SIM card, or our iPhone or Android phone. If we lose the computer or device somehow, those coins are gone also. Not desirable.
We can secure our Bitcoins by signing up for a Bitcoin wallet that resides in the Internet cloud. We then back-up the information to our phone and/or computer with encryption, and then distribute that encrypted information. Only we will hold the key, or those we trust, for unlocking our Bitcoin wallet information. This will all become clear when we get through the simple, almost instant process.
A Bitcoin wallet gives us a Bitcoin address. When we buy or sell Bitcoins, we use this address. Here is a Bitcoin wallet address set-up with Coinbase.com, one of several Bitcoin exchanges and wallet providers:
We will probably end up having many wallets and many bitcoin addresses. Recommended practice is to have one wallet address for buying Bitcoins and one for selling them.
Here is a view into the account of this new Bitcoin wallet with no Bitcoins. This is a new Bitcoin wallet without any bank account attached to it, or fully operating. We could receive Bitcoins with this address, but we will need to link a bank account to transfer money in for buying Bitcoins.
Here is just a partial list of Bitcoin wallet providers that store our Bitcoins in the cloud with back-up options:
There is another alternative way of getting a Bitcoin wallet - though it is much more than that. One can sign up with OkPay.com, which offers more of a banking-like service level and direct transfers of funds to a debit card. The risk with OkPay.com is that it has more financial liabilities than the other Bitcoin wallets mentioned.
Setting up an account with OkPay.com is good for getting funds out of Bitcoins more easily. It is not the most secure place for getting a Bitcoin wallet because of the financial liabilities inherent with their wide transfer offerings.
There are several Bitcoin wallets that we can set-up on our computers without access through the Internet:
- Electrum
- The Satoshi Client
- Armory
- Multibit
These local computer based Bitcoin wallets are more complicated to use and keep secure. For most users, a Bitcoin wallet with Blockchain.info (Internet/Cloud Hosted Wallet) will be their best choice.
2. A linked account for funding Bitcoin purchasing
This is usually a bank account. We have to go through verification steps that can include tracking small deposits that the Bitcoin wallet provider may make to guarantee we own this account. Paypal uses this method. Plan on a 24-72 hour wait for this process.
3. Our first Bitcoins or bitcents
We can buy from the same place where we signed up for our Bitcoin wallet. We can also get Bitcoins locally. LocalBitcoins.com is a marketplace for buying and selling bitcoins locally with cash and other payment methods of your choice. You can find a local bitcoin trader near you or can even start your own bitcoin exchange to sell your coins. This is one of the most interesting aspects of this system. Unlike the current, formally appointed exchanges, anyone can become a Bitcoin exchanger and offer there own rates of exchange.
More commonly, people go to the largest of the exchanges, Mtgox.com, and sign up for an account there. We can then use our Bitcoin wallet address for buying Bitcoins on the Mtgox.com exchange.
Once we have funded the Bitcoin wallet provider from our bank account (Coinbase for this example) we can then buy Bitcoins - possibly.
Coinbase has reached their daily limit of buying Bitcoins for their clients, us. This happens frequently in the Bitcoin world. With only a small number of Bitcoins in circulation - far less than the 11 million already produced - there is more demand than supply. This lack of supply results in people not being able to get any Bitcoins at times. Eventually the price per Bitcoin rises for the buying/selling pressure to equalize.
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