For general questions, please read our F.A.Q.
Disclaimer: Cryptomover is not a licensed financial advisor. The information presented in this piece is an opinion, and is not purported to be fact. Cryptocurrency is a volatile virtual commodity and can move quickly in any direction. Cryptomover is not responsible for any loss incurred by following this advice.


77. How to buy and store Bitcoin? (Published: 20th Nov, 2017)
As the price of Bitcoin grew exponentially this year, it is getting increasing attentions and interests from investors. More and more people want to buy Bitcoin to learn more about this unique asset class, to hedge against traditional investment, or just speculating for fun. However, Bitcoin is by no means similar to any of the traditional assets and all of us have to know what it means by “buying Bitcoin”.

The blockchain
Before we start, it is vital to know what the blockchain is. Bitcoin is the first application of the blockchain technology. The blockchain is essentially a public database in which each block stores the transactions. For example, in a typical block you can observe that address A has sent X amount of Bitcoin to address B. Since the blocks cannot be deleted, edited, and are validated throughout the global via a consensus algorithm, we can then know the balance of all of the Bitcoin addresses on the blockchain. Therefore, Bitcoin is actually not a visible coin, but balances held by these addresses.

Buying Bitcoin
There are several ways to acquire Bitcoin but the most common way is to buy on an exchange. There are many exchanges worldwide, you can either choose a local exchange that accepts your local fiat currency, or pick an international exchange which supports major fiat currencies (beware of the transfer fees, though). Next, similar to a stock market, you deposit fiat currency in it and place orders to buy Bitcoin from other sellers in the market. Once the trade is done, you should have certain amount of Bitcoin in your account, but they are not actually controlled by you.

Counterparty risk
As we mentioned, Bitcoin are just balances held by different addresses on the blockchain. An exchange is the owner of some addresses that are holding some balances of Bitcoin. When you trade on an exchange, it is just like moving the numbers within their own ledger and the total balances of those addresses do not change. In other words, the exchange controls the coins with the private keys and you are trusting them that they will follow your instruction whenever you want to send out your coins. Meanwhile, in case of any hard forks, it is also subject to them to credit you the new coins or not (See our previous post as an example).

Getting back your control
The private key of an address allow you to send the Bitcoin on that address. So again, if you store the Bitcoin on an exchange, you are giving up control to them and are exposed to counterparty risk (e.g. the exchange can be hacked, or cracked down by regulators, etc.). What you should do is to have your own wallet so that you have the private keys to control your Bitcoin. To do so, you need to know what is a Bitcoin wallet.

Bitcoin wallet
A Bitcoin wallet is a controller for addresses. You can create as many  addresses as you want with it and it will generate the corresponding private keys at the same time. Simply send your Bitcoin from an exchange to one of the addresses of your wallet and you are done. However, there are different types of wallets, including desktop wallets, hardware wallets, phone wallets, web wallets, and paper wallets. We will explain them in details in the next post, please stay tuned!

Some friendly reminders when you store your Bitcoin in a wallet:

  • Write down your 12-word seed. Keep it safe and never expose it online because you need them to recover your Bitcoin in case there are any failure in your computer/hardware wallet
  • Encrypt your wallet with a good enough password
  • Never expose your private keys to anyone as they have the direct control of your Bitcoin
  • Hence, try not to use services that require you to import the private keys. If you really have to, make 100% sure that the website/service is credible instead of phishing attacks
  • Again, beware of phishing attacks and double check everything before sending your Bitcoin

What’s next?
As you can see, understanding the technology and procedures to even just buy and hold Bitcoin can be extremely daunting and it indeed has a deep learning curve, especially when we also have to consider a proper security measure. If you even want to have a diversified exposure to the booming altcoin market, it will be even more difficult as one has to handle several different wallets. Therefore, at Cryptomover we allow investors to have such exposures without worrying the wallets and security issues by creating a single token, C10, which represents 85% of the cryptocurrency market. Please do check out our website if you want to know more!

© 2018-2019