Whether you’re primarily an online poker player, gamer, or sports bettor, you’ve likely seen the rise in use of bitcoin (as well as other “cryptocurrencies”) right in front of your eyes thanks to its increasing prevalence within online gaming and casino platforms. With the numerous benefits cryptocurrency use provides operators, it is likely to be a trend that continues growing over the coming years. Can you imagine a future where all online transaction take place via the blockchain?
But before we can get there, let’s dial it back and look at everything you need to consider before popping your Bitcoin cherry. To the newcomer, making your first bitcoin transaction may appear overwhelming, but take solace: not only is the initial setup easier than it seems, but once completed, every future online transaction will be faster and cheaper than anything you’d been using before. The important thing is to take your time getting familiarized with each part of the process to make sure there are no breaches in security along the path.
Before conducting bitcoin (or any cryptocurrency) transactions, it’s important to familiarize yourself with two terms that are vital to the process:
1. The Wallet
Just as physical currency tends to be stored within a wallet, so too does cryptocurrency. There are many options available for bitcoin storage; all cryptocurrency wallets fall under two distinct categories:
Any device that stores bitcoin without being connected to the internet is considered a cold wallet. Due to many shared characteristics, cold wallets can be thought of as personal bitcoin vaults: cold wallets are currently the most secure option available for storage, and cold wallets are best-suited for long-term and large quantity storage. Examples of cold storage wallets are Trezor Wallet and Ledger Wallet. Cold wallets are highly recommended for any cryptocurrency holder and will increase the security of your investment more than any other tool or strategy.
Any wallet that requires an internet connection for storage and withdrawals/deposits is considered a “hot wallet”. The hot wallet can be compared to a physical wallet or purse: hot wallets are less secure than cold wallets since they are stored on the cloud by a third party of your choosing, and hot wallets are best-suited for short-term and/or frequently accessed storage. Examples of hot storage wallets include: Coinbase, Blockchain, Electrum, Jaxx, and many more. Although there are many hot storage wallets available, Coinbase will be used for the sake of this discussion due to its ease-of-use and ability to make bitcoin-to-fiat (physical currencies such as $USD, €Euro, £GBP, etc.) transactions. Note however that the cryptocurrency community has not always seen eye-to-eye with Coinbase management on various blockchain issues including scaling and fees, so do your own research and ensure you feel comfortable with the operator before selecting an online portal.
2. The Exchange
In many ways, cryptocurrency exchanges aren’t much different from the stock market exchange. To an extent, the exchange also shares the same function as the “cashier” tab of online poker clients; just as virtual poker chips are exchanged with physical currency at the cashier, the exchange is the bridge that links to your bank account, credit card, PayPal, etc. for exchanging virtual and physical currencies with cryptocurrencies such as bitcoin. Although cryptocurrency exchanges can be “played” in a similar fashion to that of the stock market, the focus of this article is solely centered around the process of using an exchange to obtain bitcoin.
Some of the most popular cryptocurrency exchanges include: Binance, Bittrex, BitMex, Bitfinex, and many others. Note that many of the exchanges have closed new user registration until they can upgrade their systems to handle the surging demand, so you may need to shop around before you can get up and running.
Storing your bitcoin and other cryptocurrency on an exchange is one of the least secure methods of storage and is not recommended for anyone but experiences day-traders.
Your First Bitcoin Transaction
Now that you have a basic understanding of the key terminology involved with purchasing bitcoin, let’s dive right into setting up the hot wallet Coinbase (inadvertently, Coinbase’s in-house exchange will be setup simultaneously; GDAX’s existence enables Coinbase to buy/sell bitcoin directly to users, however, the option to make bitcoin trades manually on the exchange is still available to the user by visiting gdax.com).
1. Visit Coinbase.com, select “Get Started”, and follow the simple instructions to create a new account.
2. Next, select “Settings”, then “Linked Accounts” and complete instructions to add the bank account, debit card, or credit card of your choice. Not that a number of the payment options will be restricted by your location and card/account type.
3. Once you’ve completed steps 1 & 2 you should now able to select “Buy/Sell” from the top menu and use your linked account to fund your Coinbase wallet. Congratulations, you are now part of the cryptocurrency revolution!
Important Caveat for Poker Players
It is advised that an additional wallet such as https://www.blockchain.info be used to hold your bitcoin; the owners of Coinbase apparently aren’t card sharks, as they are liable to close your account if it is determined that you are making online casino transactions via the Coinbase wallet directly. Be sure to setup an additional wallet to send your bitcoin to before making online casino transactions.