Bitcoin allows you to exchange money instantly with anybody in the world, without needing to create a merchant account, or use a bank or financial institution. Transferring money does not require names meaning there is little risk of identity theft.
These transactions are then shared publicly into something known as a “block chain”, which states every transaction, and who owns every bitcoin. Bitcoin miners are individuals who own computers that constantly verify the block chain to ensure it is correct and up to date. They are the individuals that confirm transactions, and in exchange for doing so, they are paid in bitcoin, which increases the supply. Since Bitcoin is not overseen by a central authority, mining ensures that the individual transferring the bitcoin has enough, that the agreed upon amount is transferred, and that the balance for each member of the transaction is correct afterwards. [4] X Research source
The Bitcoin network is resistant to government regulation, and it has gained a loyal following among people who engage in illegal activities like drug dealing and gambling due to the fact money can be exchanged anonymously. [5] X Research source However, transactions are still traceable, and the FBI was able to seize numerous bitcoin wallets used by bad actors. Federal law enforcement may eventually conclude that Bitcoin is a money-laundering tool and may look for ways to shut it down. Shutting down Bitcoin completely would be a challenge, but intense federal regulation could push the system underground. This would then diminish the value of Bitcoins as legitimate currency.
Low fees: Unlike using traditional finance systems, whereby the system itself (like PayPal or a bank) is compensated with a fee, Bitcoin bypasses this entire system. The Bitcoin network is maintained by the “miners”, who are compensated with new Bitcoin. Protection from identity theft: Bitcoin usage does not require a name, or any other personal information, simply an ID for your digital wallet (the means used to send and receive Bitcoin). Unlike a credit card, where the merchant has full access to your ID and credit line, Bitcoin users operate totally anonymously. Protection against payment fraud: Because Bitcoin are digital, they cannot be counterfeited, which protects against payment fraud. In addition, transactions cannot be reversed, like what occurs with a credit card chargeback. Immediate transfer and settlement. Traditionally when money is transferred, it involves significant delays, holds, or other hassles. The lack of a third party means that money can be transferred directly between people with ease, and it without complexities, delays, and fees associated with making purchases between parties that are using different currencies and providers.
Keep in mind the Bitcoin network is not immune to hackers, and the average Bitcoin account is not completely secured against hacking or security breaches. [8] X Research source One study found 18 of 40 businesses offering to exchange bitcoins into other currencies have gone out of business, with only six exchanges reimbursing their customers. Price volatility is also a major downside. This means that the price of Bitcoin in dollars fluctuates wildly. For example, in 2013, 1 Bitcoin was worth about US$13. It then quickly moved to over US$1200, and is now approximately US$18597. 99(as of 16/12/2017). This means if you are converting to Bitcoin, it is important to stay in it, as moving back to USD could result in a significant loss of funds. [9] X Research source
In addition, because Bitcoin’s value is determined by supply and demand, should Bitcoin end up being subject to government regulation in any form, it could reduce the amount of people who want to use Bitcoin, which could theoretically make the currency worthless. [10] X Research source
Store the keys to your Bitcoins in an online wallet. The wallet is a computer file that will store your money, similar to a real wallet. You can create a wallet by installing the Bitcoin client[12] X Research source , which is software which powers the currency. However, if your computer is hacked by a virus or hackers or if you misplace the files, you may lose your Bitcoins. Always back up your wallet to an external hard drive to avoid losing your Bitcoins. Store your Bitcoins via a third party. You can also create a wallet by using an online wallet via a third party site like Coinbase or blockchain. info[13] X Research source , which will store your Bitcoins in the cloud. This is easier to set up, but you will be trusting a third party with your Bitcoins. These sites are two of the larger and more reliable third party sites, but there are no guarantees about the security of these sites.
Several online sites offer paper Bitcoin wallet services. They can generate a Bitcoin address for you and create an image containing two QR codes. One is the public address you can use to receive Bitcoins and the other is a private key, which you can use to spend Bitcoins stored at that address. The image is printed on a long piece of paper that you can then fold in half and carry with you.
The Trezor hard-wire wallet is ideal for Bitcoin miners who want to acquire large numbers of Bitcoins, but do not want to rely on third party sites. The compact Ledger Bitcoin wallet acts as USB storage for your Bitcoins and uses smartcard security. It is one of the more affordable hardwire wallets on the market.
Cryptaw: This is a Singapore Based wallet service which allows user to trade Singapore Dollars for Bitcoins. The company currently has only web platform which is also mobile friendly. CoinBase: This popular wallet and exchange service will also trade US dollars and euros for Bitcoins. The company has web and mobile apps for more convenient Bitcoin buying and trading. Circle: This exchange service offers users the ability to store, send, receive, and exchange Bitcoins. Currently, only US citizens are able to link their bank accounts to deposit funds. Xapo: This wallet and Bitcoin debit card provider offers deposits in fiat currency that are then converted to Bitcoin in your account. Some exchange services allow you to also trade Bitcoins. Other exchange services act as wallet services with limited buying and selling capabilities. Most exchanges and wallets will store amounts of digital or fiat currency for you, much like a regular bank account. Exchanges and wallets are a good option if you want to engage in regular trading and don’t need total anonymity. [16] X Research source
Though you are required to provide proof of your identity, exchanges and wallets do not provide the same protection that banks do. You are not protected against hackers, or given reimbursement if the exchange goes out of business.
Some exchanges allow you to make a deposit in person to their bank account. This will be done face to face, rather than through an ATM. If you are required to link to a bank account to use the exchange service, it will likely only admit banks from the country where the exchange service is based. Some exchanges allow you to transfer money to overseas accounts, but the fees will be much higher and there may be a delay changing the Bitcoins back into local currency.
You should also ask the seller if they prefer to be paid in cash or via an online payment service. Some seller may allow you to use a PayPal account to pay, though most seller prefer non-reversible cash as payment. A reputable trader will always negotiate the price with you before you meet up. Many will not wait too long to meet up once the price is finalized, in case Bitcoin’s value takes a dramatic shift.
Many institutions around the world now offer Bitcoin ATMs, from universities to local banks.
Exchange rates at Bitcoin ATMS can vary from 3% to 8% on top of the standard exchange price.
