Now that you know all about buying Bitcoins, it’s time to get into the nitty-gritty of actually purchasing one. To buy Bitcoin, or any other cryptocurrency, you’ll need two things: An account with a cryptocurrency exchange and a wallet. Wtihout either of these things, you’re not doing any kind of trading be it selling or buying. Setting up either of these can be rather time consuming, depending on your technical aptitude.
Setting up an account with an exchange isn’t time consuming, because its exactly like any other website you’ve made an account for. At least it is, initially. For exchanges located in the United States there are several more hoops you’ll have to jump through before you can actually start trading. These steps are all part of the verification system that your particular exchange uses.
We went through several different exchanges and took a peek at what was necessary for verification. Some exchanges have multiple levels of verification that allow a user to have more money invested in the exchange at any given time.
Without verification your limit is $0, so good luck trading with that. Once verified users can load between $1,000 and $5,000 USD onto an exchange to begin trading with. Note that this only applies to exchanges that allow the use of fiat currency, like Kraken. Some exchanges will require that you purchase some amount of Bitcoin and use that as your medium of trade while on the exchange.
Exchanges asked for our Social Security Number, Drivers License, Passport, Tax Forms, Proof of Residence, Credit History, Bank Account & Routing Numbers, Phone Numbers, Addresses and other sundry bits of personal information for first level verification. Second-level verification can increase a users credit to around ~$25,000 USD and requires additional information. This can include your SSN (if you didn’t give it before), a recent photo, proof of previous years taxes and other financial data. Some exchanges allow for higher credit limits or uncapped ones.
Note that exchanges located outside the United States will have different regulations and requirements, some of them require no verification at all. Inside the United States exchanges are restricted in how they act or allow their users to trade by state laws.
Note that for several wallets you’ll need to set up a form of encrypted email, which will require to get a Public Key Generator. We used Mozilla Thunderbird and the Enigmail plugin to create the Public Key used to setup our accounts. Doing so is simple, first download Mozilla Thunderbird. Then, download Enigmail through their website.
Third, go to “Settings” in Mozilla, go to “Add-Ons” and enable Enigmail. From there you can generate a Public Key to use for your cryptocurrency trading. This encryption is critical due to the extremely sensitive nature of the information your exchange has, the last thing you want is someone getting hold of your Social Security Number or Passport. Use a VPN if possible when logging into your dedicated cryptocurrency email account or any exchange.
Remember that cryptocurrency exchanges have data breaches frequently, so make sure you know where your private data is.
Wallets are easier to set up, and there are a variety of them. If you’re worried about losing the Public Key that gives you access to your cryptocurrency then you can create a Paper Wallet, which literally has the access codes printed out in QR format. These vouchers with the codes can be carried around on your person, just like traditional currency would be. A Desktop Wallet can be set up on the desktop of your computer, though if something happens to that computer then your money is at risk. However, a Desktop Wallet is one of the most secure forms of wallet.
Next is the Cloud Wallet, which is a crypto wallet that’s stored on a cloud storage service. These wallets are readily accessible from anywhere that can connect to them, but rely on the security your cloud service to stay safe. Finally, there’s the Hardware Wallet, which is a form physical storage media like a USB or external hard drive that stores your crypt currencies. Setting up a wallet involved downloading your wallet software of choice and keeping it up to date. You’ll need to link your wallet to any exchanges you’re using if you want to trade.