Getting Started with Bitcoin

A number of people continue to ask me how to get started with cryptocurrencies.

  • How do I buy Bitcoin?
  • How much should I invest?
  • How much have you bought?
  • Which coins should I invest in?
  • What would you spend $100 on?
  • What’s the blockchain?

I wanted to jot down some fundamentals here that should hopefully answer any questions you may have about cryptocurrencies and beginning to get involved.

Bitcoin, though it has seen explosive growth, is a highly speculative investment. Please do not bet the farm. We’ve seen people taking out mortgages in order to buy Bitcoins – this type of behavior en masse could lead to a global depression. Bet only what you can afford to lose.

How to buy Bitcoin

Currently, the easiest and safest way for a beginner to get some Bitcoin is to create an account on a Cryptocurrency Exchange. Use Coinbase to start and move on to explore other exchanges as you begin your exploration into other coins.

At present, you will need to verify your identity and provide credit card or banking information. Be smart when handing over this information and try your best to hedge against the worst case scenario – like your information being stolen or misused.

This leads us to a very important topic:

How to protect your Bitcoin (and other coins)

If you leave your coins on an exchange, you are asking for pain.

Please, please, please do not underestimate this advice. We have seen time and time again people losing all their money because they did not store their coins in a wallet.

Either download a software wallet to your computer or purchase a physical hardware wallet to store your coins safely off the exchange.

Each cryptocurrency will have its own supported wallets, so do some research online to what is supported. For Bitcoin, I use Electrum software wallet and the Ledger Nano S hardware wallet.

How much you should invest

Imagine you go to a casino. You see the roulette table is getting some great action. Everyone at the table has bet on black and won all night long – doubling, tripling, 200x’ing their money.

How much would you bet on black, knowing full well that it could land on red?

How much I have invested

Somehow, this is a question that comes up within 5 minutes every time. Most likely born of a natural curiosity, this question is deeply personal to me akin to asking how much money I have at all.

Instead of asking someone how much money they have, ask them which price points they managed to buy in at or how their portfolio growth has been. This is a bit more exciting and revealing of a conversation in many regards and will not offend someone who is protective of their assets.

What other coins should you invest in

One of the big problems I see is a lack of understanding of the core problems each cryptocurrency solves. Instead, people focus on the ROI of their investment.

This same mentality led to the .com collapse because we threw money at any website with page hits. We all now know that page hits aren’t gold and that same principle should apply here.

Go and research the different technology behind the coins and justify whether it has legs – otherwise it’s a gamble.

Personally, I believe Ethereum has a solid foundational technology that has tremendous applications. Remember, cryptocurrency is a byproduct of blockchain technology.

The blockchain and how it related to cryptocurrency

Most of the cryptocurrencies you’ve heard of are primarily transactional blockchains – meaning they are built to send money from A to B etc.

But blockchains can be so much more – from renting a car to registering land rights.

Cryptocurrencies are a way of incentivizing computer power to be spent on maintaining a blockchain. If the blockchain is good, the crypto is a good long term bet.

If the blockchain is only solving for cryptocurrency, it better do well otherwise it will be defeated by competition, just like any product or service. There is a lot of competition.

Should you get involved with mining

Probably not.

Mining on your computer is obsolete and setting up your own rigs is a complicated task even for people who’ve built a computer before.

Beware of cloud mining contracts as there’s hardly a way to determine if it’s a Ponzi scheme or not.

This is a buyer beware, wild west market. Be careful and be prepared to lose money.