When a weekly call from your sibling or a coffee conversation with your colleague turns into a bitcoin purchase talk, you know that the interest in bitcoins is increasing. As bitcoin prices skyrocket, it seems like everyone around wants to join the bandwagon, irrespective of the lack of understanding of the instrument and the risks involved. If you are interested in getting hold of cryptocurrencies, here’s a look at how to go about it.
How to get there?
According to coinmarketcap.com, there are over 1,000 cryptocurrencies, the most popular of which is bitcoin. “There are four main ways to acquire cryptocurrencies—mining, receiving cryptocurrency as a gift, accepting it in exchange for goods or services you provide and buying from a brokerage platform or an exchange,” said Benson Samuel, chief technology officer and co-founder, Coinsecure.
The bitcoin system runs on a peer-to-peer network and transactions happen directly between users without an intermediary. “Transactions are recorded in the public ledger called blockchain and verified by network nodes, which could be any individuals using a computer system with bitcoin software installed. Once users have made a transfer, the transaction will be broadcast between users and confirmed by the network. Upon verification, it will be recorded in the blockchain, and then the transfer is completed. This record-keeping process is referred to as ‘mining’ and people offering the computing power to do so are called ‘miners’,” wrote David Lee Kuo Chuen, economics professor of fintech, Singapore University of Social Sciences, in his paper Cryptocurrency: A New Investment Opportunity?.
Since bitcoins are created as an incentive for solving the cryptography puzzle, miners are rewarded with the newly created bitcoins, apart from transaction fees. So, bitcoins are created as an incentive.
Bitcoin as gift and payment:
If you get bitcoins as a gift, you can sell them at any cryptocurrency platform. But sometimes, you can encash only at a particular exchange. To get bitcoin payment, you have to provide a bitcoin address. You will have to open an account and give bitcoin address from where you can then cash out.
Buying bitcoins from exchange platforms:
Another way is to buy it on exchange platforms. Bitcoin exchange platforms are like stock exchanges. Some exchanges allow you to buy other cryptocurrencies as well such as ethereal. In India, exchanges such as Coinsecure and Unocoin allow you to buy bitcoins.
How do you buy?
To purchase bitcoins you have to first register yourself. Usually, most exchanges have apps which you can download. Once registered, you have to provide your bank details and go through the know-your-customer (KYC) process. Hence, you have to provide details such as PAN and Aadhaar. You will also be asked to give your photograph and provide your signature. Once this process is complete, you can start buying and selling bitcoins. Buying bitcoin is like an e-wallet where you can load money. The difference is that you can convert the currency into cryptocurrencies and for doing it you have to load money through fund transfer channels. For the service that the exchange provides, there is a fee, and also commissions.
Fees and other charges
There is a cost involved in getting bitcoins, whether you mine them or buy from an exchange platform. “Every bitcoin transaction has a mining fee associated with it. To have a faster bitcoin transaction, individuals can add in a larger mining fee to expedite the validation process. In terms of fees to buy and sell bitcoin, each exchange and brokerage has a different fee structure. Our fees range from 0.4% to 0.6%. Some brokerages charge up to 2% in fees for buying and selling bitcoin,” said Samuel.
What you should know
While the sharp rise in bitcoin prices may look attractive, you need to careful while deciding to invest in them. To start with, do a thorough check while choosing the company from where you want to buy. No one wants to put money in something where she may get cheated. In the last couple of years, there have been multiple incidences of fake cryptocurrencies.
Don’t expose yourself too much to cryptocurrencies if you don’t know much about it. If you are getting bitcoins or any other cryptocurrency in the form of payment, check if the company has a history of making payments in this manner and if your country has an outlet to convert this into fiat currency if required.
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