Starting with $100 worth of Bitcoin

in #bitcoin7 years ago (edited)

Overview

The purpose of this article is to provide a step-by-step guide to someone that has been looking to join the cryptocurrencies revolution, but has not yet executed the first step of “getting their feet wet”, by actually moving some amount of fiat currency into a cryptocurrency.

Since US Dollar (USD) is the fiat currency most in demand worldwide, and Bitcoin (BTC) is the first and the biggest cryptocurrency (see CoinMarketCap.com), we will use this pair to illustrate the steps that the reader could take to buy BTC with USD.

This article is for those that are eager to start investing in cryptocurrencies, while complying with regulatory requirements that various exchanges are bound by, and at the same time maintain a good level of privacy to protect against non-governmental entities with nefarious intents.

If you are looking for information on how to stay completely anonymous in moving between fiat and cryptocurrencies, this article is not for you. In fact, the level of inconvenience and risk one would have to take to deal with other like minded individuals in cash is not worth the trouble, unless you are paranoid of governmental oversight, or you have some intents that are likely not legal in your jurisdiction. Otherwise, you should have nothing to fear from opening an account in a regulated exchange that offers a good level of privacy from prying eyes, assuming your jurisdiction has not banned cryptocurrencies.

A bit of history

While digital assets existed to a small extent before, Bitcoin was the first digital asset that was built with an innovative cryptographic technology called Blockchain. Satoshi Nakamoto was the alias used by the individual or the group of people that described it in a white paper, along with a reference open source implementation. Bitcoin came to life in 2009, Satoshi Nakamoto disappeared shortly afterwards, and at this time there are tens of millions of Bitcoin and other digital asset users in many countries around the world.

Blockchain technology is what gives cryptocurrencies the ability to exist without any single entity  controlling them, and the key reason for this ability is the built-in consensus mechanism it uses to arrive at the truth of the exact value each participant has in their digital wallet. In traditional fiat currencies, a third party, such as a bank, maintains the consensus and records of each participant's account standing. In contrast, the blockchain for a given cryptocurrency maintains such truth. The blockchain is distributed across many computers around the world owned by people that have decided to connect them into a peer-to-peer network for a given blockchain supporting a given crypto currency.

Blockchain technology is very fascinating, and you should do your own research on how it works, as it would force you to learn a lot more about cryptocurrencies. At a very high level, you could think of it as a chain of blocks containing transactions that have been validated by a computer in the peer-to-peer network, and confirmed by other peer computers, which is what builds the consensus. Validation of the block of transactions is done by a computer through the use of an established algorithm to solve a mathematically difficult problem, which in turn is rewarded with a set amount of cryptocurrency, if that computer is the first one to solve the problem in the network. Since this process incurs a cost (hardware, electricity, time, etc) for the owner of the computer, each such computer has “skin in the game” to ensure that the blockchain is correct, in order to gain rewards in the crypto currency supported by the blockchain.

Given the rise in popularity of Bitcoin and other crypto currencies beyond the relatively small circle of techies, many other users have poured into various exchanges around the globe, including leading venture capital firms such as Google, Goldman Sachs, and Softbank, which have joined others in investing on many startups in this space. Additionally, as cryptocurrencies become even more popular, various governments are starting to introduce regulatory frameworks, either based on existing laws, or creating new laws, in order to provide a level of consumer protection and support for raining in the current “wild west” nature of this new frontier, where scams and fraud are prevalent. It is expected that over time there will be more and more regulation of the cryptocurrencies, which many believe is actually a good thing for this new frontier, so long as it does not hinder technological advancement based on blockchain technology.

Step-By-Step Guide

Exchange Account Registration

Go to Google.com and search for “fiat to Bitcoin”. You will be presented with links to many sites that talk about which exchanges are the best ones to use. Comparisons vary in many respects, such as the the fiat payment methods supported, the deposit and withdrawal fees, trading fees, the level of verification required to open an account, the level of convenience ( opposite of level of verification), and overall user experience.

This guide uses Coinbase because it's the most well known regulated exchange.

Optional privacy enhancing steps

1)  Start your Tor browser to keep your online privacy. 

If you don't have Tor installed on your computer yet, get it here:

https://www.torproject.org/projects/torbrowser.html.en

2) Register a new free ProtonMail.com secure email account. 

If you value your privacy, go to ProtonMail.com and register an account for free. This is a secure email service based in Switzerland, which encrypts email content on your browser, so no one other than you can access your email contents. Do not forget to go back to ProtonMail.com later and make a donation to support it.

The sign up service will ask you for an optional existing email, in case you want to use it as a password recovery email. It will also ask you to verify that you are a human via email, SMS, or a donation.

3) Log in to your newly create ProtonMail.com email account


You may choose not to use ProtonMail.com, or any other secure email service that offers encryption. However, in the increasingly security challenged Internet world, you should take steps to protect your information.

Coinbase Account Registration

1) Sign up with Coinbase as an Individual.

Navigate to Coinbase.com, and choose to sign up as an Individual. You can also choose to sign up as a Business, if you indeed want to use your business entity for cryptocurrency transactions. However, note that Coinbase will send you to their other site designed for Business entities.

2) Login to Coinbase after you've successfully signed up. 

If you are using 2 factor authentication, you'll need to download Google Authenticator, add Coinbase key to it, and use it during sign in. 

NOTE: Accessing Coinbase via Tor browser does not work. Therefore, you'll have to give up some of the privacy you gain via Tor browser by using Google Chrome browser. There is no use in figuring out how to make Tor work with Coinbase because you're required to identify yourself anyway when you sign up with Coinbase.

Buying $100 worth of Bitcoin with your Visa Credit / Debit card

This guide will show you how to go about buying $100 worth of Bitcoins using your Visa Credit / Debit card in Coinbase.com. Similar steps are supported by various other exchanges, using the same payment method, ot other payment methods. However, the idea is the same in moving some f your fiat money into a cryptocurrency.

1) Add a payment method.

After logging into Coinbase, navigate to Settings > Linked Accounts, click on “Link New Account”, choose to add a new Visa Credit / Debit card, and verify the two small amounts Coinbase charged your credit card with:

 


2) Buy $100 worth of Bitcoin using the linked payment method.

After successfully adding a Visa credit card payment method, navigate to Buy/Sell, choose to buy $100 worth of Bitcoin with your Visa credit card, and click “Buy Bitcoin Instantly - $100” button:

3) Review the completed transaction.

After you confirm to buy $100 worth of Bitcoin, you will see immediately that your BTC Wallet would have about $96 worth of Bitcoin, which is the result of Coinbase taking about $4 as transaction fee:

Congratulations! You have successfully bought $100 worth of Bitcoin.

Moving your Bitcoin to a hardware wallet

It is always advisable to not leave your crypto currency with an exchange, unless you plan of trading it using that exchange. This is to avoid the risk of the exchange being hacked and your Bitcoin being stolen. The reason why this is a likely scenario is because you are not in control of the private key of the address containing your cryptocurrency in an exchange. It's the exchange systems that maintain the private key to that address. If hackers were to gain access to the exchange systems, they could download whatever private keys they can get their hand on, and steal the Bitcoins associated with those private keys.

Therefore, spend a bit of money and get yourself a Ledger Nano S, which is likely the best hardware wallet in the market as of the time of this article.

Once you have your Ledger Nano S, go through the process of setting it up (there are many youtube.com videos on how to do this), and then go back to Coinbase to send your Bitcoin to your Ledger Nano S.

1) Send Bitcoins to your BTC Address from your Ledger Nano S.

Navigate to “Accounts”, click on “Send” button under your BTC Account, and choose to “Send Max” when you move the cursor inside the $ value field:


As you can see, the Bitcoin network fees are high, primarily due to the high amount of transactions that the network is supporting. If you choose to pay over 20% of the amount in network fees, go ahead an click Continue to complete the transaction. Otherwise, go back to your Coinbase, sell your Bitcoin to your Coinbase USD Wallet, buy LTC, and then send LTC you your hardware wallet as the network fees are much more reasonable.

2) (Optional) Convert Bitcoin to Litecoin, and then send to Ledger Nano S
Navigate to "Sell", choose Bitcoin, enter the amnout to sell into your USD Wallet, then navigate to "Buy", choose Litecoin, enter the amount to buy using your USD Wallet as the payment method, and eventually follow similar steps as with BItcoin to send Litecoin to your Ledger Nano S LTC Address:

 


  
Exchanging Bitcoin for Litecoin, and then moving Litecoin to your Ledger Nano S saves you a nice size of the cryptocurrency you would otherwise send to Bitcoin miners as a network fee.

Once you have your Litecoin in your Ledger Nano S, you could use it to exchange with many other cryptocurrencies in other exchanges that support various cryptocurrency trading pairs.

For example, you could sign up with Kucoin, which an exchange that allows you to trade may cryptocurrency pairs, and also rewards you with a portion of transaction fees if you keep a balance of their coins in your account.

Enjoy your cryptocurrency journey!

Affiliate Links:

>>> Ledger Nano S

>>> Kucoin

Donations Are Welcome:

BTC Address:

3MuNB5X9QfQ9DF8y1MJpKmf8GgGEcWXzo7 

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