The inner mechanisms of cryptocurrency are complex to the point of being Byzantine (much like its fault tolerance). Buying and using it, on the other hand, has become surprisingly straightforward, and, much like your smartphone or the Internet, you don’t really have to understand how it works to use it. Even though the proportion of the overall population that currently owns cryptocurrency is still quite low, the tools for buying, selling, trading, and managing it have become much more user-friendly and sophisticated than they were even a few years ago.
Step 1: Get a wallet
It sounds like this is a place to store your Bitcoin or other crypto, but it’s really a place to store your public and private keys. These are just strings of letters and numbers that help you access your funds, which are stored not in your wallet but on a decentralized blockchain ledger. Public keys are what you give to other people so they can send you money, while private keys give you control over your account and should be kept secret. This is the hardest part, but don’t get overwhelmed – the good ones all come with easy-to-follow instructions.
You have a few different options here (hardware wallets, online wallets, paper wallets, etc.), but the average user will be fine with a desktop or mobile wallet. Popular desktop wallets include Electrum (also on mobile), Exodus, and Coinomi. For mobile, look into the mobile versions of the aforementioned desktop wallets, as well as the Mycelium and Bread Wallet apps.
Each wallet has a different setup process and set of specifications, so do your research and pick one that meets your needs. Make sure that whatever you do, you have secure backups! Bitcoin is not stored in a bank, and losing your key means losing your money forever.
Step 2: Get on an exchange
Now that you have a place for your keys, it’s time to fill up your accounts! To do that, you’ll need to purchase Bitcoin, which is what exchanges help you do. Technically, you can store your crypto on an exchange as if it was a wallet, but this is not recommended for security reasons. Use them to buy and sell, not hold.
If you’re buying crypto for the first time, you’ll need to find an exchange that supports fiat-to-crypto purchases using your local currency. You should be able to find some good options regardless of which country you live in, but if you’re lucky enough to be in the U.S, you can use Coinbase, which is very user-friendly and has an ever-growing array of cryptocurrencies you can buy and many different payment options available. Other options for both the US and abroad include Gemini (very secure), Bittrex (good interface), CoinMama (lots of payment options), and Bitstamp (primarily serves Europe). Most of the more reliable exchanges will require you to upload some kind of ID for verification purposes, which may take some time to clear.
You can also get a little more old-school and find a local seller who will exchange crypto for cash without going through an exchange using a site like LocalBitcoins. Bitcoin ATMs are also an option in many cities where you can complete a cash-for-Bitcoin transaction at a physical kiosk using cash or card.
Before using any exchange, though, do a little research and check to make sure everything is still on the up-and-up. Things change quickly in crypto-world, and you don’t want your money stuck on an exchange whose founder died (or did he?) and took all the passwords with him, for example.
Once you register on an exchange, the buying process should be fairly straightforward. You can choose which cryptocurrency you want to buy (Bitcoin is standard on all of them), your payment method (many exchanges support bank transfers, cards, and services like PayPal), and how much crypto you want to buy. It’s pretty much like any other online check-out process at this point.
When the transaction is complete, your account on the exchange should be credited with however many coins you purchased, and you now have the freedom to send them wherever you like.
Step 3: Store the coins in your wallet
You’re almost there! Now that you have your coins on an exchange, all you need to do is send them to your wallet for long-term safekeeping or future spending. This should also be fairly straightforward.
When you’re looking at your cryptocurrency balance, your exchange should show you an option to send or receive cryptocurrency. To send it, you’ll need the public key from your wallet, which you should be able to find pretty easily by going to your wallet and copying the string of letters and numbers that correspond with the “receive” option.
Paste this string into the “send” address field on your exchange. Make sure that the address is correct! If you send it to the wrong address or send the currency to an address for another type of cryptocurrency, you can’t undo it.
Press the “send” button. It should tell you that it’s waiting for the transaction to be confirmed on the blockchain. This may take a while since several other computers have to validate your transaction first. If you want to check its progress, you can enter the transaction into a block explorer and see how many confirmations it has.
Once the coins show up in your wallet, you’re done!
What do I do with my newfound riches?
Anything you want! “Hodling,” or just leaving them there and waiting for them to become more valuable, is pretty popular. You can also trade them on exchanges for other cryptocurrencies, use decentralized apps, or even buy and sell things in the real world. Lots of places accept Bitcoin and other cryptocurrencies in return for goods and services these days, and the payment process is often as simple as scanning a QR code. Now that you have your very own digital currency stash, though, the world of blockchain is your oyster!