Blockchain is one of the most disruptive technologies of the 21st Century. A growing number of industries are using blockchain to operate more efficiently or boost security.
However, blockchain is still most important in the realm of cryptocurrencies. Bitcoin has become very popular since its inception in 2008 and that is largely due to the power of blockchain. Blockchain has made investing in bitcoin much more secure than ever.
Are you interested in buying bitcoin? You need to understand the general process and the role that blockchain plays in it.
How Does Blockchain Fit into the Process of Buying Bitcoin?
It may seem a complicated task to invest in bitcoin. However, it can be easier with the proper knowledge and breaking it down into steps. You will need to understand the general process, as well as the role that blockchain plays in it.
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If you want to trade or invest in bitcoin, you need to have a cryptocurrency service account, secure internet connection, method of payment, and personal identification documents. Initially, things may seem confusing to you, but you will surely not regret buying the bitcoin.
You also need a personal wallet outside in addition to your account with a bitcoin exchange if you want to buy bitcoins. The valid payment methods for the process include credit cards, debit cards, and bank accounts. Also, you can buy bitcoin through P2P exchanges and specialized ATMs that connect directly to the blockchain.
Security and privacy are important factors that you need to consider before buying a bitcoin. You need to get private keys to a public address as it will enable you to authorize transactions on the bitcoin blockchain. The blockchain has made trading bitcoin extremely secure, but you still need to protect your digital coins by securing your wallet and account.
Keeping private keys secret is a must as criminals and scammers can attempt to steal them. You have to be careful while using the balance of a public address. Without further ado, let’s explore how you can buy bitcoin over the blockchain.
1. Choose Crypto Trading Service
Initially, you have to choose a crypto trading venue or service. Some of the well-known trading services that you can choose to buy BTC include payment services, brokerages, and cryptocurrency exchanges. You need to make sure that these are legitimate services that actually connect to the blockchain. Out of all these options, you should go for cryptocurrency exchanges as it has a wide range of features that ensures a great level of convenience.
By signing up for a cryptocurrency exchange, you can sell, buy, and hold cryptocurrency. Usually, bitcoin buyers prefer this option because it allows them to withdraw crypto from their personal wallets safely. As long as it is a service that legitimately connects to the blockchain, the transactions themselves will be highly secure. However, it is still important to make sure that the bitcoins stored on the exchanges will be secured as well.
There are different types of cryptocurrency exchanges. Some exchanges allow users to not provide personal information while some need it. The exchanges that enable users to stay anonymous are decentralized and operate autonomously. It means they do not have any central point of control. Such systems can serve the unbanked population of the world. Refugees or people living with no banking structure can use anonymous exchanges that can help them enter the mainstream economy. The blockchain has given them the opportunity to use a much more efficient currency.
2. Connect your Exchange to Payment Method
Once you have chosen the exchange, you need to connect the exchange to the payment option. You need to ensure that you have all the required documents to do that. It includes a driving license picture or social security card that depends on the type of exchange that you choose. You may also have to provide information about your employer and source of income. The exact process depends on your region where you live and the laws that apply there. The procedure is almost the same as setting up a brokerage account.
Once the exchange verifies your identity, you can connect to the payment option and will be ready to start placing transactions over the blockchain. You can directly connect to your bank account, debit, or credit card in most exchanges. Although, it is not a good idea to buy bitcoin through a credit card because price volatility can inflate the overall purchasing coin cost. Bank can also ask you some questions, so you have to be prepared. You should check in advance to ensure that your bank allows deposits at the exchange you have chosen. The deposit fees of banks through debit, bank account, and credit cards can vary.
3. Place the Order
After choosing the exchange and connection payment option, you are all set to buy bitcoin. In the recent past, cryptocurrency exchanges have become mainstream as they have grown massively in terms of features and liquidity. The cryptocurrency exchanges have reached a point where they have the same features as stock brokerage. The blockchain is so efficient at processing these transactions that bitcoins can be purchased nearly instantaneously.
Crypto exchanges offer many order types and methods to invest. Apart from different types of orders, exchanges also allow clients to set up recurring investments. For example, Coinbase enables users to set recurring purchases on a daily, weekly, and monthly basis.
4. Safe Storage
The blockchain has made the process of buying, selling and transferring bitcoins very secure. However, there are security issues that it can’t address, because it only plays a role during the transfer process. Namely, the blockchain can’t protect coins in your wallet. You have to have a secure storage option.
Bitcoin wallets allow you to keep your digital assets secure. If you have cryptocurrency outside of the exchange, then your personal wallet ensures that only you have access to the private key to control your funds. It also enables you to store funds from the exchange and also mitigates the risk of getting your exchange hacked. In this way, it ensures security, so you do not lose your funds.
Most of the exchanges offer wallets for their users, but security is not their major preference. You should not use such type of exchanges wallet that does not guarantee security. Some wallets have more storage features as compared to others, so you should take a look at each of them. You can consider choosing from different types of bitcoin wallets. The hot wallets are known as online wallets, while cold wallets are known as hardware or paper wallets.
You can access hot wallets on internet-connected devices, including phones, tablets, and computers. It can cause vulnerability because these wallets produce the private keys to your coins on devices that you use. Although using a hot wallet is a convenient option that allows you to make transactions efficiently and quickly with your assets.
Also, it allows you to store your private key on internet-connected devices. On the other hand, cold wallets are not connected to the internet, so there is less risk involved in it. You may consider these wallets as hardware or offline wallets. These wallets store your private keys on anything which is not connected to the internet.
According to experts, cold wallets are a more secure option for storing bitcoin or any other cryptocurrencies. You can generate these wallets by using certain websites that provide you with private and public keys.
The Blockchain Plays a Crucial Role in the Process of Buying and Selling Bitcoins
The blockchain has a very important role in the process of buying bitcoin. Trading and buying bitcoin has become one of the major trends that have completely transformed many people’s lives, due to the benefits the blockchain has provided. It provides you with a great opportunity to attain financial freedom and change your lifestyle. But you need to have complete awareness before buying the bitcoin to avoid any risks of losing the funds.
Getting professional assistance from bitcoin or crypto experts can make the bitcoin buying process easier for you. It will also help you know about the different aspects that can be beneficial for you in the long term.