How does Bitcoin work

How Does Bitcoin Investment Work?

posted on: March 14, 2018 category:

A lot of people made a great deal of money on bitcoin and other cryptocurrencies in 2017. With values skyrocketing throughout the year, those who might have invested years ago (or even early in 2017 for that matter) had the opportunity to cash out and make large or even massive gains. Now, there is such a thing as a “bitcoin millionaire” or “cryptocurrency investor,” and some of them are starting to give advice about how much ought to be invested in bitcoin moving forward.

It’s a good idea generally to read some of that advice before making a decision to invest. Remember that bitcoin is a brand new commodity and there’s really no such thing as an expert at this point. It’s a difficult asset to predict, and even those who have traded successfully can’t be sure of what’s next – which is to say no one voice is fully trustworthy. But as with any other investment it’s vital to educate yourself on the different possibilities and the key factors involved.

Strategy aside however it’s also important to learn how to invest in bitcoin, since it isn’t exactly an ordinary asset or commodity. Buying bitcoin isn’t like buying a stock, or even trading in gold or oil. The buying and storing processes work differently, and require a little bit of education.

There are actually different ways to buy bitcoin, and one of the most comprehensive overviews actually comes from a gaming site (because bitcoin has become a preferred method for a lot of online gamers to pay for play). This overview is worth a read, but points out that there are several ways of acquiring bitcoin, including purchasing from friends or family, using a direct bank transfer, or perhaps most commonly, by registering with an exchange. You can also mine for your own bitcoin, meaning you’re acquiring it as soon as it goes into circulation, but this is a complex process that demands expensive, high-end computing equipment. The easiest way to buy bitcoin if you want to so it right away is to register with a popular exchange like Coinbase, which allows you to use bank transfers, credit cards, or deposited cash to purchase cryptocurrency directly.

As to how you actually store bitcoins, you’ll need to familiarize yourself with the idea of crypto wallets, because they’re really the only way to do it. It’s important to recognize as you get into the process that bitcoin isn’t a tangible asset, and you never actually possess it in the traditional sense. It exists online, and what you buy is access to it, in the form of digital codes. Wallets store these codes in different ways. Bitcoin wallets can either live on your computer and/or mobile device, on a physical gadget, or on a piece of paper. Put more simply, there are software wallets (computer and/or mobile device), hardware wallets (gadgets like USB sticks) and paper wallets (literal pieces of paper that contain your digital keys). There are pros and cons to each option concerning security and ease of use. Some might argue that hardware storage is best for long-term investment because it store
s bitcoin offline and free of hacking concerns – but this opinion is subjective.

That explains the basics, regardless of actual strategy for whether or not it’s wise to buy in. It’s a different sort of investing practice, but one that’s actually reasonably easy to get the hang of once you understand the core concepts.

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