Bitcoin for Everyone
Lesson 7 – How to Obtain Bitcoin
Transcript of video lesson
Welcome back to Bitcoin for Everyone, an original Coin Academy course. This is our introduction to the world’s most popular alternative currency, Bitcoin. Divided into 8 lessons, we’re now on Lesson number 7 where we turn our attention to how you can actually obtain Bitcoin. There are really 6 different ways that you can obtain Bitcoin. We’re going to touch on all six.
First, and really the simplest, is to buy Bitcoin from an individual. Using your friends and acquaintances are one of the safest ways to get started with Bitcoin and it avoids exchange fees. Even though exchange fees are quite small, it’s really just simpler to do this with someone you know. Give them cash or exchange for value whatever the case maybe. All you need to do is pass your friend your public address and they can transfer the Bitcoin directly into your digital wallet. That’s my public address on the screen, by the way, if you feel the need to pass someone some Bitcoin, you can do that for me anytime you like.
Another option is to accept Bitcoin for goods or services. We’re seeing this more and more in the marketplace because it’s actually quite easy to do. You can either set up a merchant account or you can take payment directly by posting your QR code or your public address. Really, QR codes are the easiest to go. Public addresses, those long strings of numbers and letters are often clunky. The QR code is your safer route.
Another alternative is to buy on an exchange. Remember, exchanges deal specifically with buy, sell and redeeming Bitcoin. We’re going to repeat here the cautions we give you earlier. Basically, do your due diligence on the exchange of your choice. Don’t commit to an exchange lightly. Make sure that they offer Two-Factor Authentication. Check and see whether they audit their reserves. And check what percentage of reserve do they maintain? Ideally, you want a 100% reserve to guarantee liquidity. And finally, do they have a good reputation? Do a little bit of research, Google them. Find out what people are saying. Find out if they’ve been a victim of hack attacks in the past. Now, the nice part about exchange is the convenience factor. Some of them do offer direct connections to your bank account. It allows you to move in and out of fiat currency relatively easily. And the expense is very, very low. It’s not like a traditional stock exchange or stock trading account for example. Fees on exchange is generally range from 0.1% to 0.35%, extremely attractive numbers.
Another option is to buy digital currency on eBay. Yes, believe it or not, there’s now a “virtual currency” category inside coins and paper money on eBay. Now, this is still relatively new on eBay and you’ll see that most of the buyer ratings are actually quite low. And what I mean by that is they don’t have very many buyer ratings. They are all relatively new to this marketplace. I think eBay is still investigating this as well because at this time, they seem to only be accepting classified ads for digital currency. In other words, you can’t buy digital currency at auction and/or on a buy it now, make an offer basis.
You’ve got to do your due diligence here, and the big issue is prices. The prices tend to be quite a bit higher than your exchange prices. You also want to check the delivery terms. Many of the people want to deliver face to face which is, again, a way for you to protect your data, and awkward but more secure in many ways. Also, make sure you read your Seller reviews and ratings. Again, do due diligence on these people, don’t just take it at face value and please be aware that ebay purchase protection is lacking in this category. At this point in time, there is no eBay money back guarantee that we see in a lot of other areas on eBay which gives a lot of other people peace of mind.
Next, you can purchase Bitcoin directly from an ATM or Bitcoin vending machine such as shown in the exhibit here. In this case, you’re buying directly with fiat currency , you’re transferring to your bank account. The issues here are the same as they are with any ATM. One, potential privacy issues, be careful with your private data. Don’t be pulling out your mobile device where people can see your private key while you’re fumbling around looking for your public key. Also, be aware of ATM fraud. We have seen some incidents of ATM fraud, and it’s just like within the other ATM, the risk there is the nature of the device.
The last option, the sixth choice for obtaining Bitcoin is to obtain via mining. I guess if you will, this is the traditional route. The mining route however is increasingly difficult. Years ago, when this all started out. It was a good way to go. Today, it’s very, very hard to recommend mining to someone who’s new to it. Your options here, number one, you can fly solo. That is buy the hardware, obtain the software, set it up and go and wait. Realize you’re playing against some very big players right now including the mining pool, some of which are incredibly large and have a tremendous amount of hardware and computing power. Competing against them is a very difficult, time consuming task. Don’t think it’s free. Don’t forget you’re paying for your electricity and you’ve got to recover the value of your hardware and your time, and hardware does wear out. We’re also in a bit of an arms race in the Bitcoin mining world, as people buy increasingly complex, fast, dedicated mining rigs.
This leaves you with another option which is to join a mining pool, that is a bunch of individual miners pooled together and they share in the reward. You’ve got to do your due diligence here. First question, you want to ask is, “Do you want to join a single currency pool?” For example, a pool that only mines Bitcoin. Or a multi-currency pool which would be a pool that assesses the relative difficulty and rewards available and switches between currencies to optimize the returns for the members. You also need to check the fees. There are percentage fees on almost all mining pools. And you want to see how those are taken out and how those are calculated. And you need to check the payout method. There’s over a dozen payout methods employed by mining pools today. You’ve got to read in to this deeply, and finally, Google them for reputation. The mining pool world tends to be a little contentious.
The last point and the other option for mining is you can buy a mining contract, and this is basically renting time on someone else’s mining rig. Be really careful here. You can buy these mining contracts on eBay as well. But it’s really difficult to make sure that you’re getting the value of what you’re paying for.
Okay, so there you have it. Six different ways to obtain Bitcoin. One of them is bound to be right for you. You just need to find out what you’re comfortable with. For many people, it begins by obtaining Bitcoin from a friend or a colleague, and from there, they move on to moving into the Exchanges or accepting it for goods and services.
That’s the end of this lesson. Our final lesson is coming up next, in which we tackle the topic of How to Get your Money out of Bitcoin? Thanks for joining us.