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Buying/Information about Bitcoin/Litecoin?


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Hello everyone! So, my dad wants to buy some bitcoin and/or litecoin and hes been asking me about it. I told him what I know but I don't know very much. I know the basics but nothing beyond that, and I have never personally purchased it so I know nothing about that. I told him that I would come on here and ask though because all of you usually give the most reliable information. =)

 

So basically, what are some good/reliable websites to use when purchasing bitcoin? How does the "wallet" work and how once you purchase bitcoin from another peer, where does it essentially sit? Does it sit on the website you bought it through, or on your own personal server or what? And really whatever other knowledge you guys/gals can provide that you may think isn't considered basics knowledge that we can benefit from.

 

Also, I know Stefan has plenty of videos on bitcoin, but please don't post them. I have watch some of his videos and this may sound silly, but I actually have trouble following all of it and once I get lost, I get very lost. Sometimes it is easier for me to learn by hearing a few small things, asking a few questions to understand better, and then moving on to more small things and more questions. So I would prefer simplified information if possible because I am new to economy/currency education, attempting to get into it learning how these "systems" work, but some of the videos I watch are just too confusing for me. Thanks in advance for any help I receive and I am sooo sorry Stefan that I said I don't understand your videos on bitcoin because I really love all your work and it really is only the bitcoin videos I get lost on.

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Here is a thread I wrote a while back titled Bitcoin: Getting Started. If you have any other questions, feel free to add them to this thread or write to me in a PM.

 

Wow man, thanks a ton for that article you posted! It was actually a huge help with a lot of great information. However, there are a couple questions I still have that I didn't see on your article and/or was confused about.

 

Firstly, where are the bitcoin being held? So say I buy bitcoin through coinbase. Does the bitcoin sit in my account on coinbase? Does it get transferred to my wallet software on my computer? Where exactly does it sit? (Sorry for probably a simple question, but I truly get confused about this for some reason).

 

The other question I have is about the entire Mt. Gox (probably misspelled) situation. How did people lose bitcoin if Mt. Gox was only the middle man? Or were they the bank too? Basically, I am trying to figure out how to be as secure as possible and to understand who has access to any bitcoin I purchase.

 

Thanks again for the great article you posted! I just emailed it to my dad and I am going to read over it again tomorrow when I have a fresh thinking brain, but if you could help me with the stuff above, that would be a HUGEEEE help! =)

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Firstly, where are the bitcoin being held?

There are held in a P2P fashion on a ledger that is known as the blockchain. Everyone who runs a bitcoin node had a copy of the ledger. The coins cannot be spent unless you send the private key with the spend order.

 

 

So say I buy bitcoin through coinbase. Does the bitcoin sit in my account on coinbase? Does it get transferred to my wallet software on my computer? Where exactly does it sit? (Sorry for probably a simple question, but I truly get confused about this for some reason).

The coins are on coinbase's wallet. They only let users withdraw a small percentage of their total bitcoin holdings at any one time as the rest is in "cold storage" (aka untouched and unaccessible by the internet).

 

However, no matter how reliable the system is, I would not recommend opening yourself to third party risk by storing coins with a third party. Use coinbase as an exchange and maybe a way to spend petty cash, but any large investment I would highly recommend creating a paper wallet and storing them in a safe and secure location.

 

 

The other question I have is about the entire Mt. Gox (probably misspelled) situation. How did people lose bitcoin if Mt. Gox was only the middle man? Or were they the bank too? Basically, I am trying to figure out how to be as secure as possible and to understand who has access to any bitcoin I purchase.

These were people who opened themselves up to third party risk. Mt Gox had access to all of their user's coins and they did not have a working cold wallet storage system. People who used Mt Gox as their storage opened themselves up to the third party risk of needing to trust Mt Gox. Bitcoin attempts to eliminate third party risk and it should not be re-added by the user when possible.

 

 

 

If you are going to store coins in savings, use a reliable exchange and then send the coins into cold storage as soon as you can so that you are not exposed to trusting the third party. Read up on paper wallets and cold storage. In general, people understand physical security hundreds of times more than they understand digital security, so I generally advocate a physical solution with backups whenever people are getting into bitcoin, for all coins except the petty cash that you plan on possibly spending in the near future.

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There are held in a P2P fashion on a ledger that is known as the blockchain. Everyone who runs a bitcoin node had a copy of the ledger. The coins cannot be spent unless you send the private key with the spend order.

 

The coins are on coinbase's wallet. They only let users withdraw a small percentage of their total bitcoin holdings at any one time as the rest is in "cold storage" (aka untouched and unaccessible by the internet).

 

However, no matter how reliable the system is, I would not recommend opening yourself to third party risk by storing coins with a third party. Use coinbase as an exchange and maybe a way to spend petty cash, but any large investment I would highly recommend creating a paper wallet and storing them in a safe and secure location.

 

These were people who opened themselves up to third party risk. Mt Gox had access to all of their user's coins and they did not have a working cold wallet storage system. People who used Mt Gox as their storage opened themselves up to the third party risk of needing to trust Mt Gox. Bitcoin attempts to eliminate third party risk and it should not be re-added by the user when possible.

 

 

 

If you are going to store coins in savings, use a reliable exchange and then send the coins into cold storage as soon as you can so that you are not exposed to trusting the third party. Read up on paper wallets and cold storage. In general, people understand physical security hundreds of times more than they understand digital security, so I generally advocate a physical solution with backups whenever people are getting into bitcoin, for all coins except the petty cash that you plan on possibly spending in the near future.

 

Dang, still sooo confused hahaha. Well, I am going to read more into all of it tomorrow and look up cold storage and paper wallets. If I can't figure it out over the next few days, I might come back to ask more questions. Sorry but thanks a ton for the help. I am just a noob and understanding this stuff for some reason. Anyways man, thanks a bunch and you have a wonderful night/morning/day :P

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Dang, still sooo confused hahaha. Well, I am going to read more into all of it tomorrow and look up cold storage and paper wallets. If I can't figure it out over the next few days, I might come back to ask more questions. Sorry but thanks a ton for the help. I am just a noob and understanding this stuff for some reason. Anyways man, thanks a bunch and you have a wonderful night/morning/day :P

No problem, it can be very confusing stuff. I am happy to answer any questions you may have.

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