Here’s a quick guide to how to get started with Bitcoin. You’ve heard about it, you like the sound of it, and you want to get your first Bitcoin or part of one.
If you just want to buy and own Bitcoin you just have to do the first two steps below. If you want to take it off the Internet and store it on your own computer and have full control over it, then also do the last two steps:
Start Electrum and select File -> Open and choose the wallet you created previously. Enter the password you recorded at the time:
Electrum will open the wallet and the History tab will show all transactions so far – none in this case:
Each wallet owns a series of Bitcoin addresses where coins can be deposited. Select the Receive tab to show the first address available in your wallet, listed as Receiving Address.
[A quick detour into addresses: Note the subject of addresses is quite a complex one that we don’t need to go into here – just be aware that most wallets will manage a series of addresses for you. For example, many wallets will use a different address for every transaction for enhanced security. Also, since a sending address may contain more Bitcoin than is sent from it the ‘change’ may get sent to a third address. You don’t need to worry about this, you just rely on using the addresses the wallet suggests. If you want to see the addresses that are being managed ‘under the bonnet’ have a look at the Addresses tab to see the various Receiving and Change addresses handled by your wallet.]
Copy this address to the clipboard: you can either select it and copy or click on the Copy icon at its right-hand end. Enter a Description, e.g. ‘Initial transfer from Coinbase‘. With that done we are ready to receive Bitcoin to the copied address in this wallet.
Note that the sending platform is in control of the transaction, Coinbase in our example. It doesn’t matter how much Bitcoin you want to receive, you’ll only receive what is sent – so the other items here (e.g. Request amount) are irrelevant for our purpose. By all means click Save to record your description of this transaction, but otherwise it isn’t necessary.
Click on the Send button under BTC Wallet. to bring up the Send BTC screen. On the day I wrote this it had a message about delays in sending Bitcoin – you may or may not get that.
Paste the address copied from your Electrum wallet into the Recipient box. Check that Withdraw From shows the BTC Wallet. Under Amount click in the BTC box – this will bring up a Send Max button. Click on this to transfer out all your Bitcoin in this account (the fee is shown at the bottom). Add a Note such as ‘Transfer to my Electrum wallet‘. Press Continue.
Next you’ll see a Confirm Send screen. Check that all the fields are correct. You may need to enter an SMS code depending on your account settings.
Press Confirm. You should then get a brief confirmation message saying the transaction is going through. Go back to the Dashboard and you should see the transaction is listed under Recent Activity as Pending.
Now you have to wait. You may get an email confirmation from Coinbase that it is going through.
A transfer can take from minutes to hours depending on how busy the network is and how much Coinbase spent on fees to transfer the money (they probably default to a low fee). A transaction has to be confirmed by a number of different nodes on the blockchain and these transactions will come through one by one. If you click on the transaction in the Coinbase you can see how many Confirmations have gone through.
The first sign that the transfer is definitely happening may be seen in Electrum on the History tab. With luck this will show the transaction as it is confirmed, with the Description that you entered above and saved.
If you double-click on the transaction you can see the confirmations counting up.
As the confirmations come in the ‘Unconfirmed’ message changes to a clock face that fills in segments and goes from red to green.
When the transaction is complete it will show a green tick (you can see the details on the Addresses and Coins tabs and by double-clicking the transaction line):
It will also be shown in Coinbase as no longer pending (and if you double-click it there under Recent Activity it will be marked Completed).
It’s done. Your Bitcoin has been successfully transferred from your Coinbase account to your private Electrum Wallet. There it can only be transferred out using your private seed or password, otherwise there is no way for anyone to access it.
There are lots of ways to hold your Bitcoin but they can mostly be divided into exchanges and wallets. If you put your Bitcoin on an exchange like Poloniex, Bitfinex, Bittrex or Kraken then really you’ve handed your Bitcoins over to the exchange provider to look after.
If, however, you want complete personal control over your Bitcoin then the only way to ensure that is to create your own wallet and hold your Bitcoin there. The difference from an exchange is huge – only you can deposit and withdraw money there because you’re the only person who knows the passphrase or seed (like a complex password). Whereas with an exchange you have to ask the exchange provider to deposit and withdraw money – you can’t be sure they will, though they usually will, and it’s up to them how long they take to carry out a transaction.
Here I’ll explain how to create a Bitcoin Wallet that is entirely yours to control. The example I’ll use is Electrum which is one of the biggest and most respected. Like most Bitcoin Wallets (and related software) it’s a software app that’s free to use.
To download the software go to https://electrum.org/#download and choose the most appropriate version for your device. I’m on Windows and have gone for the Windows Installer for the Latest Release (2.9.3 at time of writing). You could instead choose the standalone executable if you didn’t want to install it (you could then put it on a USB stick, for example).
Once downloaded run the installer as appropriate for your device (note that if you have an older version of Electrum installed it’s clever enough to upgrade the program without losing your data).
When that’s complete, close the installer and run Electrum (e.g. in Windows via an icon on your desktop). Then select File -> New/Restore. Choose a suitable wallet name (or accept the default if you plan to only ever have one). This will create a new wallet (the option to Restore only applies if you’ve previously created an Electrum wallet and want to reuse it).
Next you will be asked ‘What kind of wallet do you want to create?‘:
Wallet with two-factor authentication: this requires a second device, typically your smartphone, as an extra security layer
Multi-signature wallet: this is where two people are required to confirm a transaction (a bit like joint signatures on a bank account)
Watch Bitcoin addresses: this allows you to monitor a Bitcoin address elsewhere (e.g. in a hardware wallet) but not make transactions with it
In most cases you should choose Standard wallet. If you are going to hold a lot of Bitcoin in this wallet you could research and choose Wallet with two-factor authentication. Here we’ll go with Standard wallet.
Next you’ll be shown the wallet generation seed. This is like a complex password, one that is made up of 12 individual words. Record this as it is the key to your wallet – lose it and you could lose the Bitcoin in the wallet.
If you are only going to hold small amounts of Bitcoin in this wallet then you may choose to store this seed electronically, e.g. copy the words to a Word document. However, if you are going to hold any significant amounts in this wallet then take the advice on the screen and write the seed on a piece of paper.
This avoids the risk of your device being hijacked (e.g. by malware) and your seed – and all the money in the wallet – being taken (an interesting property of Bitcoin is that if someone has your seed they don’t need to access your wallet – they can create a new wallet on their PC containing your money). Keep that piece of paper very safe – it could be far more valuable than your passport, bank cards, etc.
On the next screen you type in the seed so Electrum can confirm you really did record it! A bit painful, but a valuable check.
Once you’ve done that you have to enter a password to encrypt your wallet. I recommend you don’t make one up yourself (humans are very poor at creating passwords that can’t be cracked by computer). Instead go to Passwords Generator and create a new one with the following settings:
Press Generate Password then write down the password and the mnemonic below it (to help remember and confirm it). You can write this on the same piece of paper as the seed since in most cases your Bitcoin can be accessed with either.
Type in the password (not the long mnemonic) – don’t be tempted to copy and paste it (what gets used by Electrum needs to match how you read what you’ve written down). Leave Encrypt wallet file ticked and press Next.
There is a brief ‘Electrum is generating your wallet addresses‘ message then Electrum opens on its main view. It will default to showing a History tab listing transactions on the wallet – at this point it will be empty.
The bottom status bar will show the current Bitcoin value – if this is showing in dollars (USD) you can set it to pounds (GBP). Go to Tools -> Preferences -> Fiat -> Fiat currency and select GBP:
Here I’ll describe the buying process for when you are ready to buy your first Bitcoin. Don’t forget, by following the referral link above you’ll get about £7 ($10) of Bitcoin for free so long as you buy at least £80 worth.
Login and click on the Buy/Sell tab – you will then be asked to ‘complete your account’:
Click on the Add a Payment Method button. Next you will have to choose between adding a Bank Account or a Credit/Debit Card.
Choose Credit/Debit Card for now as its fast and easy. Later, if you want to buy larger amounts of cryptocurrency, you may want to add your bank account.
Fill in your debit card details as usual. Press Next.
Once you have a payment method set up, when you click on Buy/Sell you will see this screen:
Check that Buy and Bitcoin are selected (you can also buy Ethereum and Litecoin here – but they’re for another day). Your debit card should be showing as Payment Method.
On to the amount. This is up to you but I suggest £100 for your first purchase so you get the free £7 from Coinbase. Obviously if you’re keen you could buy a lot more, but as ever you shouldn’t risk more than you can afford to lose – bitcoin pricing is volatile.
Enter your amount in the £ box (symbol GBP) – your card will have a weekly limit on it (typically £500) and the green bar will show how much of this limit you are using. The limit for this week will go down by the amount you spend here but will then creep back up again day by day.
The BTC box will show how much Bitcoin (symbol BTC) your money will buy. In the screenshot Bitcoin was worth about £4176 so £100 buys 0.024 BTC (100/4176). In practice there are fees coming in so you get less than this.
[A quick detour into fees for those interested. The most obvious fee is that Coinbase charges about 4% on your purchase so you get £96 worth of Bitcoin. However, like at a foreign exchange desk you are also having to accept Coinbase’s view on what Bitcoin is actually worth at the moment you buy it which can be higher than the market rate. If you look closely in the screenshot you can see Coinbase is quoting slightly different BTC values in the Bitcoin box on the left and in the ‘You are buying’ box on the right’, plus this can be different from the live value shown in the main dashboard.]
Check you’re happy with the summary in the You Are Buying box and press the Buy Bitcoin Instantly button.
Coinbase will ask you to confirm and authorise the transaction:
Again check it then press the Confirm Buy button. Coinbase will tell you that it is confirming the transaction:
This screen will sit there and I’ve found it does no harm to click away from it, it won’t affect the transaction.
A short time later the Bitcoin will appear in your account. The subject of how Bitcoin is transferred and how long it will take is a big topic in its own right (essentially the speed depends on how large the fee is that Coinbase spends on the transaction). Suffice to say it should arrive within 10 minutes but may be much faster. If there’s a lot happening in the Bitcoin market (e.g. the price is changing fast and lots of people are buying and selling) then it could take longer.
Anyway, your dashboard will update to show that the transaction was successful and you now own some bitcoin:
The percentage figure just tells you how much of your ‘portfolio’ is in Bitcoin. Since you haven’t yet bought any other currency in Coinbase it will say 100%.
If you want to review a transaction in detail, such as your first purchase, you can click on it in the right hand column, for example:
It shows how much BTC you got (note, all cryptocurrencies are recorded to 8 decimal places, though not all decimal places are always shown), how you paid, the fee, etc. The Completed status shows that the transaction is confirmed, initially this may show Pending until it has fully gone through.
That’s it – you are now the proud owner of some Bitcoin! There will only ever be 21 million Bitcoin in existence so you own something that no-one else can own (that’s part of the reason why its value is trending upwards).
Further blog posts will cover how to securely store, lend and trade Bitcoin. Welcome to the crypto community!
This is an introduction to buying Bitcoin for those new to cryptocurrencies in general and to Bitcoin in particular. The first step is to open a ‘wallet’ – a software app or website – to hold your cryptocurrency.
Here I’ll show you how to do this in Coinbase. This claims to be “the world’s most popular Bitcoin wallet” and is certainly very well known. As well as being popular it is also very easy to use. It is not the cheapest nor the most fully featured wallet and so we’ll look at other wallets later for those more experienced with cryptocurrencies. It is, however, perfect for newcomers.
Note this is an referral link – this means you’ll get about £7 ($10) of free bitcoin when you buy your first bitcoin and so will I. Your first purchase needs to be worth at least $100 (about £75) so I suggest you buy £80-£100 to be sure you get the free money.
When you follow that link you’ll see a webpage like the following:
Complete the form (First Name, Last Name, Email and Password), the Captcha, and agree to the Ts & Cs. Click Sign Up. A good place to get a password is PasswordsGenerator – choose a length of 16 characters and include symbols, numbers and upper and lowercase characters. Make sure at this point that you have record the password somewhere, e.g. a new document. You will need a lot of passwords when dealing with cryptocurrency and the general rule is that if you lose the password you can lose the money! Get into careful organisation now.
A Coinbase account will be created for you and you’ll see a screen that says ‘Verify Your Email: We sent a verification email to <your email address>. Click the link in the email to get started!’
Go to your email inbox, find the Coinbase email and click on the Verify Email Address button/link. Return to Coinbase and you’ll see a new Coinbase screen with a popup message that says ‘Your email has now been verified. Thank you!‘ Close the old Coinbase screen.
The new Coinbase screen will say ‘Welcome <first name> – Let’s get started > Complete the following steps to get your first bitcoin or ethereum!‘ Select the Individual button unless you’re working on behalf of a business. Press Next.
On the next screen choose your country (if it’s not already set) and enter your mobile phone number. The number is required for security – Coinbase will text you a ‘2 Step Verification’ security code to login with. Press Next.
Enter the code Coinbase sent to your phone on the form on the next page. Press Verify Phone Number.
Once that’s passed you come to a payment method screen. You can return to this later – for now Press Skip, I’ll do this later. You’re now into Coinbase.
You’ll see the main Dashboard, as show below.
This shows a chart and statistics of the current Bitcoin status (price, change since last month in £, change since last month in %). You can change the timescale to 1 hour, day, week, month, year, or All time. There are also tabs to see the same data for the Ethereum and Litecoin currencies instead of Bitcoin.
Below left you’ll see your account status. Below right you’ll see the value of coins in Your Portfolio (zero at this point).
Before you’re ready to buy your first Bitcoin you need to Verify your identity. To move to this step you can click on ‘Complete your account‘ bottom left, or just attempt to Buy (on the top menu) or add a payment method.
The screen will show ‘Select ID type‘, choose whatever you want (e.g. Driver’s License).
You will need to take a live photo of your ID so you are asked to choose to do this with either your mobile phone’s camera or your PC’s webcam, it’s up to you. I found it easiest to use the phone – once you select this you get messages on your phone to take you through the process.
I chose to photograph my driver’s licence – I did this with care in good lighting on a plain surface (white paper on a kitchen worktop) otherwise it can fail. Once you’ve taken front and back pictures on your phone control goes back to the PC. You get a message confirming that the ID is being verified:
Once it’s complete you’re back at the Coinbase Dashboard and ready to buy your first Bitcoin.