How to buy bitcoin and where to keep them

How do I buy bitcoin and where do I keep it?

We already know what bitcoin is, which is real, because it exists. We know that it is safe and in addition to having known its legal nature, we have seen that despite not being fully regulated, it has an incipient legal framework. Up to this point, everything is fine. We already have the theoretical data necessary to be informed and "know what it is about".

But bitcoin is more than "a subject for specialists". Bitcoin is already part of the economic and daily life of countries , cryptocurrencies have been installed in the media, people talk about them. But nevertheless, this is where the most important brake arises, perhaps the most important filter when making the leap towards a really massive adoption: how do I buy bitcoin? Where are cryptocurrencies bought and sold? Do I have to go to a physical place, like a Money Exchange? Or is everything done online? Is the sale of crypto assets regulated by law? It seems complicated, but it is not . But let's go by parts and see how the Law protects us.

First of all, we must remember that bitcoin and cryptocurrencies are 100% digital. Unlike fiat currencies (traditional money), which can be represented both in physical banknotes and in a number in a bank account, cryptocurrencies are not in a physical format , therefore, to hoard, hold and accumulate bitcoin, for example, We need a space on the Internet, to put it simply. A safe place to keep them, where to have them protected. And for this, digital wallets or purses were created .

Purses or wallets are applications that allow not only to save and accumulate bitcoin, but also to make transactions (buy and sell) with them. These apps or wallets have two keys, one public and the other private . The public key would function as a CBU in the sense that it serves to make bitcoin deposits in that wallet: anyone who has the public key of that wallet will be able to send (deposit) bitcoins in that wallet. Instead, the private key is used to access the wallet and enables transactions with the bitcoins accumulated in it. It would be the PIN of that wallet. In other words, whoever has access to that private key will be able to dispose of the crypto assets that are treasured there.

"A wallet has several addresses where to receive bitcoins (public key), all of them valid forever. However, it is usual that they show us a single address, which changes automatically when receiving funds, thus preventing them from being reused addresses, in order to improve privacy, " explains Franco Amati, co-founder of the NGO Bitcoin Argentina.

There are different types of wallets , some more complicated to use, but very safe, and others simpler, also safe but with less security measures. The wallets are divided into Hot wallets and Cold Wallets . The former are applications connected to the Internet, easy to use and fast to perform many operations. They are ideal to start trading with bitcoin and make purchases and payments with cryptocurrencies. The latter are offline wallets, more secure, and ideal for hoarding and transacting large amounts of bitcoin. These wallets come in different hardware options, such as flash memory or hard drives.

Entities that trade bitcoins are known as exchanges. Exchanges are very important because they can be the entry and exit nodes, that is, of purchase and payment.

In order to know who has or does not have bitcoins, the operation is transparent and traceable, but who owns the wallet? Alice would wonder in the country of the Blockchain. Precisely, for the purposes of law enforcement, an exchange can allow to know the identity of those who exchange Bitcoins. That is, verify who bought and who sold. That is why many exchanges adopt similar rules to banking, in terms of anti-money laundering, standards know your client and others.

Exchanges are the equivalent of exchange houses, but they operate with bitcoin. As we saw in the second article in this series , since cryptocurrencies are not considered as currencies, exchanges do not need to be regulated and / or enabled as an ordinary exchange office. 

A simple option to enter the crypto ecosystem is to “get closer” to an Exchange . These special exchange houses simplify the entire process by allowing users to create an account, load money into it through traditional payment systems (transfers, or payment networks, for example) and, when the money is credited, through of their platforms operate (buy / sell) in a very simple way.

In these cases, the exchanges offer the possibility of choosing which wallet to operate with or directly act as a wallet and the private keys, for a security matter, are in their possession. The user, who signs a contract with the exchange when activating the account, from which he can carry out, as we said, his operations safely.

Among the most common doubts that those who want to enter the bitcoin world have, in addition to the security of wallets and exchanges, how much is the minimum I can buy, how much can a bitcoin be divided, are the most popular. The value of a bitcoin is at September 26, 2019 at around 8,500 US dollars (about 536,000 Argentine pesos). But a bitcoin (BTC) can be broken into 100,000,000. That is, the minimum unit of bitcoin, a satoshi, is one millionth of a BTC. A dollar, then, is equivalent to about 11,800 satoshis (as of the date of this note). 

On the other hand, exchanges have a minimum to open an account that varies around 10-15 dollars (depends on each Exchange), which is not a large sum and is ideal to start trading and familiarize yourself with the system.

As for security, something very important must be taken into account: a movement or transaction in bitcoin is irreversible (something that does not happen with bank transfers, which can be canceled). Transferring bitcoin is like transferring a material thing to another person: there is no going back, unless that person decides to return it. That is why we must take extreme security measures.

The main recommendation of the experts is to treasure bitcoin in cold wallets and keep 20% of the total in hot wallets, for transactions and small payments, to be safe from hackers or hacks to exchanges. On the other hand, there are also simple scams with pyramid schemes that offer tempting and quick profits in bitcoin. These scams, similar to Ponzi schemes, promise to recoup the investment by inviting other people to the system. Something like the loom of the abundance of cryptocurrencies.

"These scams generally target low-income people," says Amati, co-founder of the NGO Bitcoin Argentina. "Many people still don't know what bitcoin is and what usually happens is that they are led to believe that bitcoin is that pyramid scheme where you have to bring people, so that they bring more people, and thus earn a commission. That is not bitcoin, but they use their image ”

In turn, Rodolfo Andragnes , president of Bitcoin Argentina, clarifies that: 

"There are thousands of masked cryptocurrency alternatives that have nothing to do with the technology that makes Bitcoin trustworthy. They are mostly simple scams, mostly involved in cunning multi-level recruitment strategies, future promises, or expensive marketing strategies . ”

It is not superfluous to explain that none of these scams operates under the law so that the user is completely unprotected and their investment in the fate of that fraudulent scheme.

You just have to be aware of these deceptions. The only way to operate safely and be protected by law is through exchanges, their platforms and / or with reputable digital wallets.