Getting Started with Bitcoin and Ethereum

by: Tam Ging Wien

- Getting a Head Start In a Brave New Financial World

Last week I kicked off a post sharing what I understand about Bitcoin and the Blockchain as well as the advantages that it could potentially bring to revolutionise our financial system. Today however, I would like to help you get a quick start to buying your first Bitcoin and its close cousin Ethereum.

Similar to Bitcoin, Ethereum is also an alternative open-source blockchain platform that implements a key feature absent in the Bitcoin blockchain – smart contracts. Having this additional feature allows Ethereum to be used for much wider applications. Ethereum as a platform developed from The DAO project (Decentralised Autonomous Organisation) meant to provide a generic decentralized business model for enterprises. It has its own cyptocurrency known as Ether (ETH).

This article is mean to help beginners quickly getting their hands on small amount of cryptocurrency so that they can appreciate the concepts better through action. It is not meant to be investment advice or sharing of trading strategy, but rather an early starting place to better appreciate the blockchain revolution. I believe that only by getting your hands dirty and using the system can you then truly appreciate how cryptocurrencies work.

In cryptocurrency lingo, there are Bitcoins and then there are Altcoins. The latter being a fusion of the words “Alternative to Bitcoins”. Examples of altcoins include Ether and Litecoin. Collectively, all crypotocurrencies are colloquially referred to as “coins”.

In order to own your first coin, you will need to first be able to transfer your money for the purchase.

Step 1: Setup a Payment Link

As at time of writing, there is no easy way to make payments for cryptocurrency. Traditional internet banking, funds transfer and credit card payments don’t make it easy to pay for cryptocurrency. Therefore to start today, the best way would be to setup a payment link. I personally use Xfers (https://www.xfers.com/sg/payment-link/) which I found simple to setup. Navigate to the site and setup a “Personal Account” and follow the setup instructions.

Xfers limits digital goods (including cryptocurrencies) total transactions to $50 per day anonymously. Therefore, in order to make larger purchases, you will need to verify both your identity and phone number. This can easily be done using their “Account Verification” functions. After the verification is successfully done, you daily transaction limit will be increased to $200. Increasing your daily transaction limit is a matter of simply making more transactions. While $200 isn’t much, it is still sufficient to get started on buying your first Bitcoin and Ethereum.

Next you will need to fund your Xfers account with some money. Xfers support bank transfers from many Singapore based banks including the 3 major local banks. After transferring some money to your Xfers account, you will receive a successfully notification of top up within 15mins. Your top up amount will be reflected in your Xfers balance.


Diagram 1: Screenshot of Xfers Daily Limits

Step 2: Setup a Cryptocurrency Exchange Account

Bitcoins can be obtained through an exchange. The important thing is to ensure that the site you are buying from is secure and reputable. As Bitcoin is still it its early stages of adoption and decentralised, Bitcoin exchanges are not regulated.

The most popular Bitcoin exchange is Coinbase (https://www.coinbase.com/) which has been around since 2012 and boast over 7.3 million users. Coinbase supports 3 major cryptocurrencies namely Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC). If you use this link to sign-up and transaction at least US$100 worth of cryptocurrency, we both will be rewarded with an additional US$10 worth of Bitcoins:-

Make sure you also download the Coinbase mobile app to your smart phone so that you can view your balance and make Bitcoin transactions anywhere.

Other exchanges which I have used include CoinHako (https://www.coinhako.com/), Luno (https://www.luno.com/) and CoinMama (https://www.coinmama.com/). They are both easy to setup and have a simple to understand user interface. However my experience is that I seem to be able to obtain a slightly cheaper price on Coinbase for the same amount of cryptocurrency.

Next you will need to link up your Xfers account as a mode of payment on Coinbase or whichever exchange that you have decided. Upon verification, you are ready to buy your first cryptocurrency.

Step 3: Buy Some Coins

Now that you are done setting up the exchange account and linked it up with the payment link, we are ready to buy some Bitcoins!

The exchanges makes it incredibly simple to make your first cryptocurrency purchase. You simply click on the Buy/Sell function and key in the amount that you want and hit the “Buy” button.


Diagram 2: Screenshot of Coinbase Buy Screen

Be sure to limit your purchase to under the Xfers daily transaction limit or else the transaction will fail.

As cryptocurrencies require miners to chain the blocks together and verify the transaction, clearing could take time. It could be as fast as 5mins but sometimes as long as 2 hours. Check back about 15 to 20mins later to see if your coins have arrived. If they have still not arrived, don’t be alarmed, check back again 1 hour later.

The cryptocurrencies that you have successfully purchased would automatically be deposited into your corresponding wallet. It is stored there until your transfer or sell them.

Selling the coins are as simple and buying them. Explore these functions and get familiar with them.


Diagram 3: Screenshot of Coinbase Wallet

Navigate to your dashboard to check the price trends of the various coins. The amount of coins that you have in your wallet is shown together with the corresponding exchange rate to the currency of your choice.


Diagram 4: Screenshot of Coinbase Dashboard

Congratulations, you now own a small amount of cyrptocurrency. You have just dipped your toes into this brave new world!

Step 4: Get a Bitcoin Wallet

You are probably wondering why this is even a necessary step. After all, these exchanges already have built in wallet functions. You could simply just use it as it is right?

We technically yes, you could continue using the wallets provided by these exchanges. However do note that cryptocurrencies can only be accessed when the private key is available. In order for the exchanges to access your coin portfolio and balanced, they would definitely have to store a copy of your private key on your behalf. In the unlikely event that these exchanges are attacked, an attacker could potentially take control of a vast number of private keys and make coin transfers out of the exchange. In cryptocurrency speak, this is known as putting your coins in “cold storage”.

If this is your first foray into owning some coins and your quantity is low, you can afford to take the risk and leave your coins on the exchange for convenience. However, as your progress on this journey, its best that you consider storing your private keys offline from the exchanges and keep it in a secure location. Be sure to have multiple backups as once your private keys are lost, nobody is able to retrieve your coins for you!

There are various types of offline wallets available including physical wallets, desktop wallets, mobile wallets and even paper wallets. A wallet is simply a cryptocurrency address coupled with the private key and a means of securing them.

Ledger Nano (https://www.ledgerwallet.com/) and TREZOR (https://trezor.io/) are among the most common Bitcoin physical wallets. As for other types of wallets, there is Exodus (https://www.exodus.io/), MultiBit (https://multibit.org/), Armory (https://www.bitcoinarmory.com/) and Mycelium (https://wallet.mycelium.com/). For paper wallets, consider using MyEtherWallet (https://www.myetherwallet.com/) for Ether.

Step 5: Explore, Explore, Explore

Now that you have finally own some coins and have prepared a safe place to secure them offline, its time to explore, explore, explore!

Try sending coins from your exchange to your offline wallet and transferring back again. Get a hang of how works and familisarise yourself with the long cryptic string of cryptocurrency addresses. Alternatively, try using the QR Code to perform the transfer. Be careful though, if you send them to a wrong address, there is no way to reverse the transaction! Also there is a small fee associated with each transactions.

Register for a Bitcoin debit card! This allows you to transfer your Bitcoins to the debit card wallet and utilise your Bitcoins for payments at merchant that accepts Visa or MasterCard. The popular choices of Bitcoin debt cards include BitPay (https://bitpay.com/card/), Xapo (https://xapo.com/card/), BitPlastic (https://bitplastic.com/), SpectroCoin (https://spectrocoin.com/en/bitcoin-debit-card.html) and Bitwala (http://www.bitwala.io/). At point of writing, Bitwala (http://www.bitwala.io/) appears to provide the lowest cost for owning a Bitcoin debit card.’

How about shopping with Bitcoin? Considering using Purse (https://app.purse.io/) account where you could save up to 25% on your Amazon purchases. How about a 20% discount at your local Starbucks store with Folderapp (https://coffee.foldapp.com/)? As Bitcoin becomes more widely accepted, your potential for such service and savings increase!

Be sure to follow up on the prices and market capitalisations of all available cryptocurrencies at Coin Market Cap (http://www.coinmarketcap.com/).

And for those who love a trill, try signing up for a cryptocurrency trading account at Poloniex (https://poloniex.com/). It an entire trading platform for cryptocurrencies!

There is really no end to this brave new world of cryptocurrencies. Aren’t you glad you got started?

At ProButterflyTM, we encourage all our readers and subscribers to dabble a little into the cryptocurrency space as we believe that asset class has a long term potential and the wave has only just started. We encourage you to read our introduction to blockchains and cryptocurrencies as the following links:-

 

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