Buying and selling bitcoin (BTC) is not as complex or difficult as you might think. If you look at it in the same way you use your bank account to transfer and receive money it makes it a lot easier to understand.
Before we go into some detail basically the idea is that you are either transferring an asset, in this case bitcoin, from your bitcoin account, called a wallet, to someone else’s bitcoin account, also called a wallet or vice versa someone is transferring some bitcoin from their wallet to your wallet. Regardless of the ownership of the wallets it is a transfer of a specific amount of bitcoin from one wallet to another. If you are in a room with john and you both get out your wallets and you take 5 dollars out of your wallet and give it to john who puts it in his that is what is happening. Same deal if John takes out 5 dollars from his wallet, gives it to you and you put it into your wallet.
But how do you do that? A wallet for bitcoin is simply a database or record of your ownership of BTC It comes in many different formats or styles but all essentially work the same way. You have two keys composed of very long strings of characters such as ‘y4bylblvryqliry43i3yrbabi7tr’ for example. One is a public key and one is a private key. No two keys are the same. There are untold trillions to the power of billions of these keys so the likelihood of having the same key as someone it is safe to say is impossible.
To receive BTC you give people your public key and they simply send the BTC to that key over the internet. You can buy BTC and have it sent the same way to your wallet (Some people will have more than one wallet). Often when you join an exchange you will have a wallet there and can simply accept BTC from others by giving them your public key or or you can simply buy BTC with a credit card. Other exchanges operate in a simpler manner. By the same token you can ‘spend’ bitcoin to others by sending to their Public Key and they will be credited with the ownership of that BTC in their wallet. Some of the most popular methods to buy bitcoin are:
- Buy Bitcoins from CoinBase
- Buy Bitcoins with credit card from Coinmama
- Buy Bitcoins from LocalBitcoins
All crypto currency exchanges will charge you a fee to buy and sell bitcoin. The fee will vary with each exchange and may or may not depend on the quantity of the transaction. This fee, or part of it, goes to the creators of BTC as part of the mining process. One should be careful to select an exchange that is highly secure and not prone to hacking. One usually has to open an account in order to buy/sell or trade bitcoin and this invariably means supplying identification in much the same way as the banks when you open a new bank account. Currently all trades or transactions are confidential but note that the US Taxation Office (IRS) is working to have any transactions by US citizens over a certain amount reported to them by the exchange. Check the news items for more details of progress on this.
There are now thousands of retail traders, restaurants and service providers that accept bitcoin and this is increasing on a daily basis. It is very likely that bitcoin will become the international currency of the future. It is fast, efficient, cheap to transact and highly secure, more so than fiat or digital currency in fact.
It is vitally important that you do not give out your private key to anyone. That is the key to your bitcoin. It is the only way you can access and control your bitcoin. When you log on to your account with a trader to access your wallet they will ask for additional security measures such as a verification number sent to your phone which you will need to enter into a website (if your wallet is on a website), or a series of numbers to access a hardware wallet. These keys are recorded to you and you alone in the blockchain and no one else can use them. This principle is not new. In 1991 A Phil Zimmermann created a secure system called Pretty Good Privacy, a system in which data such as emails, texts etc, could be encrypted and sent to another person or persons using a private and a public key. Using special software a message would be encrypted and sent to another person’s public key. That individual, using their private key could unlock the encryption and read the message. As far as we know this system is still around and used. This principle has simply been incorporated into crypto currency transactions in order to improve the security and safety of a person’s asset. Remember, the security of your bitcoin is your responsibility alone so it will pay you to be careful with your keys and wallets.