Where to start?
Before you can rush out and start buying or working for Bitcoin, you will need somewhere to put these Bitcoin when you have them i.e. somewhere for people to send payments.
You mean a bank account?
Kind of, as Bitcoin is a Peer-to-Peer, decentralised payment system, there is no bank that manages the transactions or "accounts" (known as Bitcoin Addresses). I won't bore you by explaining in too much detail but if you do happen to want to know there are a number of very informative websites. Here, here and here for example. Although Bitcoin does not have a central bank or corporation that manages the accounts, there are many services available that will host your Bitcoin Wallet for you. This can be very convenient. You can access your account easier (from another PC or your phone) and you will not have to download the entire blockchain (or transaction record) which is currently approaching 40GB in size.
40GB!?
Yes 40GB and that's only 6 Years of Bitcoins and transactions. So that brings us to Bitcoin Wallet providers.
Now there are hundreds (maybe even thousands) of Bitcoin Wallet providers, so I will only be outlining a few of the most popular ones.
First Wallet
Coinbase is a Bitcoin Wallet provider that is probably the most popular (or very close). Just by using this link to sign up you will get USD$1 worth of Bitcoin for free (thats enough to start playing with). But enough of the social marketing and onto the main benefits/pros of this Wallet provider.
Pros:
- Blockchain is hosted for you - no need to download 40GB worth of Bitcoin network.
- Security - You will not have to worry about protecting your Bitcoin wallet, Coinbase takes the security of its service seriously (because they depend on their service for income) Read more here.
- Convenient - Being an online app, means that you can log into your Coinbase wallet from any device to check your balance and make/receive payments. It even has an Android App.
- Vault - Added security if you want to hold Bitcoin for extended periods. The Vault has extra security and a 48 hour (cancel anytime) withdraw time. Meaning even if someone gets into your account you have plenty of time to get in and fix any problems.
- Developer API - probably not a big thing for most people, but this means it is easy to accept Bitcoin payments directly to your Coinbase Wallet. Just find a plugin for your website that accepts Coinbase and off you go.
- Bitcoin exchange - this is only available to USA and as I am Australian I have not had the pleasure of using this feature. I will however talk about Exchanges as an investment opportunity in a later post.
Second Wallet
Xapo is another wallet that is gaining popularity rather fast. Mainly for the reason that it is developing the worlds first Bitcoin Debit Card as it is in Beta there are not very many details about it i.e. Countries it will work in, places that will accept it etc. Feel free to contact Xapo support if you have questions.
Pros:
- Blockchain hosted for you - no need to download that 40GB again.
- Security - once again, because Xapo are storing your precious Bitcoins (and making money from it) they take it as a priority to make it as secure as possible.
- Convenient - An online App you can access from anywhere. They also have a nifty Android App that can double as your two-factor authentication.
- Vault - Xapo also has a vault to store your precious Bitcoins away from prying eyes.
- Buy Bitcoin - Xapo allows you to buy Bitcoin by simply using bank transfer straight into their account. A real quick and easy way to get Bitcoin.
What if I have 40GB of space just laying around?
Well in that case, you will probably want to host your own Bitcoin Wallet. This is great in a few ways:
- You have complete access to your wallet - create as many addresses as you like
- You can be a node for the Bitcoin network - help confirm transactions
- Can be used with Tor proxy - hide your payment from prying eyes
A few cons:
- Requires increasing storage - the record is continually growing
- Requires a lot of bandwidth - you will have to download a 40GB file and keep it up to date
- Can be less secure - unlike hosted wallets, you are the one that has to make sure you don't get malware or even someone physically transferring your funds.
- Slightly technical - it is not too complex to host your own wallet, but it does help to have a bit of tech knowledge.
- BACKUPS!! - make sure you backup your wallet data regularly.
Well how do I host my own Bitcoin Wallet?
Simply download the software called Bitcoin Core from the Bitcoin Site.
Conclusion
So in conclusion, there are many choices for Bitcoin wallets out there, the main thing you will need to worry about it being educated. Just do your research, take what I have told you and make an educated decision. Or, try your options, if you find you don't like hosting your own wallet then try a hosted one and find the one that suits your needs.
Next Time
In my next post I will explain a few different ways to obtain your first Bitcoin.
Breifly:
- Bitcoin Exchanges - Buy your first Bitcoin
- Freelance Work - Work for your first Bitcoin
- Selling Products - Offer Bitcoin payment on your website
- Faucets - Get Spammed for Bitcoin.
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