The days of striking gold with Bitcoin are probably long past, but that doesn’t mean that there’s no reason at all to get into Bitcoin. There’s a growing Bitcoin infrastructure, including regulated and audited exchanges, Bitcoin ATMs and so on; some retailers such as Overstock even take advantage of Bitcoin’s lower fees to offer discounts for Bitcoin purchases. Plus, Bitcoin seems to have weathered the storm triggered by Mt. Gox, showing a surprising maturity that might not have been present in years past. All these things hint that there may indeed be a future where Bitcoin is more than just a speculative plaything.
If you’re excited, or even the very least intrigued, by Bitcoin, you’ve probably thought once or twice about getting your feet wet and delving into the world of Bitcoin. There are a lot of things to be aware of before you take the plunge, but the first and most obvious question is, of course, getting your hands on the Bitcoins themselves.
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There are four ways to get your Bitcoins, and we’re starting with buying them.
1. Buying Bitcoins
The most common way to buy and sell Bitcoins is on Bitcoin exchanges. This is probably the way most of you will want to get your Bitcoins, since there aren’t any extra costs and, barring a major crash, you’ll probably be able to make your money back if you choose to sell. Also, it’s worth pointing out that you can buy fractions of Bitcoins, so you don’t have to commit $650 or so to buy one Bitcoin.
(Image Source: Bitcoin Rumors)
Buying Bitcoins from exchanges is a straightforward process: make sure you have a Bitcoin wallet and then just create an account on any of the exchanges. Some may also ask for copies of personal documents and even utility bills in order to verify your identity.
There are two types of exchanges, fixed rate and real time exchanges:
1. Fixed rate exchanges: exchange sets the value, and all sales and purchases are conducted according to this fixed value. e.g. Coinbase
2. Real time exchanges: facilitates buying and selling by letting buyers and sellers set the maximum price they want to pay and the minimum price at which they want to sell. e.g. Kraken and Bitstamp
There are a lot of options out there, so here are a few tips on selecting an exchange:
- It’s best to choose an exchange that supports your preferred currency, so as to avoid having to convert your money twice over.
- If you’re patient and diligent, real time exchanges can get you much better deals when buying and selling Bitcoin.
- If speed is an issue then fixed rate exchanges might be preferable.
Bitcoin ATMs And LocalBitcoins
You can also buy and sell Bitcoins at the Bitcoin ATMs that are starting to gain traction in North America. Robocoin, for instance, has a few ATMs scattered across North America, and is expanding into countries such as Singapore, Australia and Italy this month. Lamassu also has a Bitcoin ATM in the works, although it has yet to be deployed.
(Image Source: Vancouver Sun)
If you don’t want to risk having your Bitcoins in an online exchange and there aren’t any Bitcoin ATMs near you, you could try looking on LocalBitcoins to see if there are any individual buyers or sellers based in the same city or country.
2. Mining Bitcoins
An alternative to buying Bitcoins directly to mine Bitcoins yourself. It’s an incredibly competitive endeavour, so you should only consider this path if you’re in it for the long term and are willing to keep upgrading your hardware.
(Image Source: Fotolia)
Mining will also eventually be made redundant by the fact that there will only ever be a maximum of 21 million Bitcoins in existence. This limit won’t be reached for a while yet, but it is something to bear in mind.
Mining Machines
Bitcoin mining is all about dedicated â€" and expensive â€" ASIC-based mining machines. There’s a large range of power available for potential purchase, from a relatively-entry level 5 gigahash per second (GH/s) machine such as the Bi•Fury to 2 terahash per second (TH/s) monsters like Cointerra’s TerraMiner IV. The TerraMiner IV, for instance, will mine about 1.8 Bitcoins a week at the current difficulty.
That may seem like a good deal, but be warned, Bitcoin mining difficulty is constantly increasing, and machines will mine less and less Bitcoins as time goes on.
Mining Costs
When mining Bitcoins, extra costs such as electricity have to be taken into account. The TerraMiner IV consumes roughly 2,100 Watts of power. Add that to the initial $5,999 cost of the TerraMiner IV and that 1.8 Bitcoins a week doesn’t seem like that much anymore, does it?
The biggest danger, though, is simply the risk of machines not getting delivered at all. The Bitcoin mining hardware marketplace is rife with scams and undelivered promises; if you’re adamant on buying mining hardware then you will definitely have to research all the available choices thoroughly before making a decision.
Here’s a quick introduction to mining, if you want to go down this particular path.
Cloud Mining
There’s another way to mine Bitcoins that doesn’t involve buying and running expensive Bitcoin mining hardware: cloud mining. As of now, the only site offering this service is CEX.IO. Basically, CEX.IO is a market that lets you buy and sell processing power in the form of GH/s.
The GH/s you buy mines for you, and all you need to do is to pay for the upkeep. It’s an interesting solution, and probably worth looking into if you want to avoid exchanges but don’t wan’t to buy your own mining hardware.
3. Exchanging Altcoins For Bitcoins
Option 3: Instead of buying or mining Bitcoins outright, you have the option of mining or buying Scrypt-based altcoins (such as Litecoin) and then trading those altcoins for Bitcoin on an exchange like Cryptsy or Bter. This method does mean you’ll have to keep track of the exchange rates quite dilligently, and act fast when the exchange rates are favorable.
Scrypt-based coins are comparatively much easier to mine than Bitcoin, and can even be mined using off-the-shelf AMD GPUs. They’re also relatively cheaper at the moment.
The current AMD flagship GPU, the R9 290X, costs upwards of $599, and you’re definitely going to need more than one as 1 R9 290X will only mine about 1 Litecoin a week, which at the time of writing, is only worth about a fraction of a Bitcoin (0.028 Bitcoin).
You’ll definitely need more than one card, and an increase in the number of cards comes with an increase in power consumption and heat.
(Image Source: LitecoinTalk)
There’s nothing that says you have to mine Litecoin, although it would probably be optimal to choose one particular altcoin and stick with it if you want to go down this path. At the time of writing, Dogecoin seems to be the altcoin to go for, but as with everything in the cryptocurrency landscape, this can change in the blink of an eye.
If you’re interested, here’s a comprehensive guide on how to mine Litecoin, including building the actual mining rig itself.
4. Free Bitcoins
If you just want to mess about and see what the fuss is about, ideally without having to spend a single cent, then some of the Bitcoin faucets might be of interest. These faucets give away a small number of Satoshis on a set schedule, maybe once a day or once every few hours. Some also encourage you to play games in order to win free Bitcoins. Examples of these Bitcoin faucets include Daily Free Bits, Bitcoiner and FreeBitco.in.
Don’t get overly excited, though; Satoshis are the smallest fraction of a Bitcoin, equivalent to 0.00000001 BTC. Daily Free Bits, for instance, gives out a maximum of 1200 Satoshis on a six-hour schedule. These faucets probably won’t help you buy that cool TV you’ve been eyeing on Overstock, but they’re a good way to get some Bitcoins to play around with, just to see what the fuss is about.
Conclusion
The method you choose will almost entirely depend on how much money you’re willing to spend, and how ready you are to commit to the cryptocurrency. Mining for Bitcoin is strictly the reserve of the dedicated, but Bitcoin exchanges and faucets provide a way for almost anyone to get in on the action. It’s not such a bad idea, really; when someone like Google’s Jared Cohen throws his weight behind the idea of Bitcoin and cryptocurrencies, you know that there’s probably something to all the madness.
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