Hello guys and gals,
I'm Nate from 99Bitcoins, and welcome to Bitcoin Whiteboard Tuesday! Every few weeks we’re going to send you
a cool new video, just like this one, explaining some Bitcoin basics. You can use them to learn
more about Bitcoin yourself or you forward them to friends
or family members who have questions. Today’s topic is
how to buy your first Bitcoin. If you’ve followed our previous lessons, then you’re probably somewhat of
a Bitcoin expert by now. However, nothing will teach you
more about Bitcoin and how it works than having a firsthand experience
with a live Bitcoin transaction. By buying even a small amount of Bitcoins, you’ll probably learn more
than by watching this whole video series. So let’s get started! Before you can buy Bitcoins,
you’re going to need a wallet to hold them. If you’ve watched
our previous episode about wallets, then you’re all set. However, if you’re completely new to Bitcoin, or if you can’t quite recall
what we talked about in the video, here’s a short refresher: Bitcoin wallets are programs that
help you send and receive Bitcoin. They generate your Bitcoin address, which serves as your personal address
for receiving Bitcoins. If you’re buying small amounts of Bitcoin,
you can use any trusted software wallet. It could be a mobile wallet
or a desktop wallet, it doesn’t really matter. For large amounts of Bitcoin though, you’ll want to use
only Hardware or Paper wallets. These wallets aren’t
connected to the Internet, and so they eliminate the possibility of
someone stealing your funds unless they’re actually
holding your physical wallet. To make it easier on you,
we’ve listed some recommended wallets, depending on your device
and operating system, at the bottom of this video. Once you choose your wallet,
open it and copy your Bitcoin address. You’ll need it later on. Got your address? Good, you now need to ask yourself
a very important question: How much money do you intend to
invest in Bitcoin? Bitcoin is a VERY risky asset. This means you should never buy
any amount you can’t afford to lose. It’s important to think this through. If this is the first time
you’re buying Bitcoins, choose an amount that
won’t affect you financially if Bitcoin were to drop to zero. In general, we tend to be
overly optimistic when we invest, and we forget about
the very real possibility of a downside. Our personal rule of thumb is to never invest
more than 5% of your disposable income or total wealth. Keep in mind that
you can always buy less than 1 Bitcoin. One bitcoin can be divided up to
8 decimal points. This means that you can buy half a bitcoin,
a quarter of a bitcoin, or even one-hundredth of a bitcoin. Of course, the amount you’re
going to spend on Bitcoins will lead you to your next step:
choosing an exchange. Choosing an exchange is hard work. Each exchange has different rules,
accepted payment methods, and fees, along with other factors to take into account. If you want to avoid the hassle,
you can use our “Buy Bitcoin” page, which matches you up with
the best exchange based on your location. There’s a link to that page
at the bottom of this video as well. This, of course, is a very rough match, but it will give you
the best result 95% of the time. If you want to do your own due diligence,
however, here’s what you need to look out for. The first thing you’ll want to check is that
the exchange accepts users from your country. Not all exchanges accept customers
from all around the world. The second thing you’ll want to check is what payment methods are accepted
by the exchange. Some exchanges accept
a wide variety of payment methods, and some accept only wire transfers. Payment methods that allow the buyer
to request his money back, like credit cards or Paypal,
will usually be accompanied by higher fees. This is because the seller is taking the risk that you’ll cancel the payment
after you get your coins. On the other hand,
payment methods that can’t be reversed, such as wire transfers, are usually cheaper. The third thing you’ll want to check is how much you’ll need to pay in fees
for your transactions. There are three kinds of fees: deposit fees, transaction fees,
and withdrawal fees. Each one is different and can affect the total amount of money
you’ll receive in the end. The fourth thing you’ll
want to be aware of is the exchange rate. Some exchanges have low fees, but their exchange rates are higher
relative to the competition. This means that the fees are
“hiding” in the exchange rate. Fifth, you’ll want to know your buying limit. Your buying limit will
depend on your payment method and your identity verification level. If you’re looking to buy
a large amount of Bitcoins, some exchanges won’t allow it
due to their low limits. Finally, you’ll want to check out
the exchange’s reputation. Is it well known in the community? How well is the support in the event
you get lost in the process? Have there been a large number of
complaints against the exchange? Keep in mind that no exchange is
free of negative reviews, but it’s important to consider the volume
and the content of those reviews. One important distinction to make is the difference between
trading platforms and brokers. Trading platforms are sites that
automatically connect buyers and sellers. This means that you buy from people
who’ve placed sell orders on the site without ever communicating with them directly. The platform usually takes
a small fee for the service. Conducting transactions on
trading platforms like Bitstamp or Kraken is usually the cheapest way to get bitcoins,
but often it’s not very user friendly. Trading platforms have options like
limit orders and stop loss that can confuse inexperienced users. Also, when you place an order,
it may not be fulfilled immediately due to a lack of sellers
at the price at which you want to buy. In order to avoid the hassle,
you can use a broker. Brokers are sites that simplify the process
by allowing you to buy coins through them at a predetermined price. When you buy from broker sites,
the process is usually much simpler, but it’s also more expensive. In the end, it doesn’t really matter
if you’re buying your coins from a trading platform or a broker. What matters is that the company is reliable and that you’re happy with
the price you’re paying. Sometimes it’s worth it to spend
a bit more money in order to finish the process hassle free. As a side note, if you’re looking to buy
large amounts of Bitcoin, let’s say over $10,000 worth, there are specific exchanges and brokers
that deal in these sort of transactions. If this is the case for you, take a look at the resources section
at the bottom of this video. Now that you know how much you want to spend
and you’ve chosen your exchange, it’s time to make the trade. Sign up for the site you’ve chosen
and complete the registration process. Most exchanges today will have
a Know Your Customer process, also known as KYC,
that you’ll have to go through. This means you’ll need to supply the exchange with some additional information
like your ID, a proof of residence, and in some cases even a proof of income. As Bitcoin has become
more and more mainstream, exchanges have become subject to
stricter regulations by governments, and in many cases, they’re unwillingly forced to
request this information from you. Once you finish the registration
and your identity is verified, you can finally buy your bitcoins. I hate to break it to you,
but the process doesn’t end there. After the transaction is complete, it’s highly advised that
you move your bitcoins from the exchange
into your own personal wallet. If Bitcoin’s history has taught us anything, it’s that if you keep your money
on an exchange, you don’t actually own that money,
the exchange does. If the exchange becomes insolvent
or it gets hacked, you risk losing that money for good. This happened in the past with MT.Gox, and it’s happened more recently with
exchanges like BTC-e and Bitfinex. Once the coins are in your account,
make sure to withdraw them to the Bitcoin address
you’ve copied from your wallet. After the coins arrive safely in your wallet, then you can proudly say that
you’ve bought your first Bitcoin. Other options to buy Bitcoins
include Bitcoin ATMs. Bitcoin ATMs are machines that accept cash,
also known as fiat money, and send you Bitcoins in return. Some ATMs allow you to only buy Bitcoins and some will allow you to
sell your Bitcoins as well by giving you cash in return. Many people love to use ATMs because of the relative anonymity
throughout the purchasing process. You don’t have to wait for long
identity verification processes to finish. Just enter your money
and get your coins instantly. Bitcoin ATMs are run by companies that usually charge
a specific fee for their service, so make sure you’re aware of the fees
before making the transaction. If you want to find a Bitcoin ATM nearby
use the link in our resource section below. Before we end this lesson,
I want to touch upon one other subject. Some people will prefer to buy bitcoins
from an individual and not in an exchange. In this case, there are a few things
to watch out for: First, try to see if you can
verify the seller’s identity. Some people will want to remain anonymous,
and that’s fine, but verifying someone’s identity will dramatically reduce
your risk of being scammed. Second, try to use some sort of escrow service that will hold your money
until the seller sends you the coins. If that’s not possible stick to cash
and meet with the person face to face. In any case never use irreversible
payment methods like wire transfers before receiving your coins. Finally, you’ll want to wait for
the Bitcoin transaction to have at least 2–3 confirmations
before considering the deal complete. Of course, this depends on
the amount of money you’re exchanging. Smaller amounts can do with
only one confirmation. Keep in mind that buying from an individual
usually involves a lot of uncertainty, and sometimes it’s just not worth
the few bucks you’ll save in the process. That’s it for today’s video. All that’s left for you to do now is
go and get your first Bitcoin. Remember, if you ever get stuck, use the resource section
at the bottom of this video, or just shoot us an email. Good luck, and I’ll see you… in a bit.
