Buying Your First Bits
Now that you have your first wallet and you’ve linked your bank account or debit/credit card it’s time to purchase your first bits. But before we jump to that it’s time for a short lesson.
Bitcoin can be a lot of numbers, especially fractions. What’s worse is that there are many players in the Bitcoin ecosystem that use different denominations. On top of that the denominations are often abbreviated. But don’t worry. I’ll go over the most widely used ones so you’re ready for them:
- 1 Bitcoin (BTC) = 1000 Millibitcoin = 1,000,000 Bits = 10,000,000 Satoshi
- 1 Millibitcoin (mBTC) = 0.001 Bitcoin = 1000 Bits = 100,000 Satoshi
- 1 Bit or Microbitcoin (uBTC) = 0.000001 Bitcoin = 0.001 Millibitcoin = 100 Satoshi
- 1 Satoshi = 0.00000001 Bitcoin = smallest denomination of Bitcoin
There are a lot more denominations out there as people feel comfortable with different sized numbers, but these are generally the ones you’ll run into. Most places generally stick to the full Bitcoin denominations, choosing to use the fractions. However, Bits are becoming more and more widespread and it’s not hard to see why. Because people are used to two decimal place denominations such as Dollars and Cents, a Satoshi can be easily thought of as a Penny, a Bit easily thought of as a Dollar, and a Bitcoin easily thought of as a million Dollars. This, however, makes value exchange between Bits and Dollars a bit harder when doing mental conversions.
Many services such as Coinbase allow you to set your denomination in the Settings section. If you’re more comfortable with Bits, just set Coinbase to display in that format. I, however, recommend sticking with the full BTC and fractions and getting used to doing the math to convert between the denominations when needed. But I’ll leave that choice to you.
The main reason I’m bringing this point up is to show that Bitcoin is divisible to very, very small amounts. Remember this when you go to purchase. You don’t have to buy a whole Bitcoin. You can buy smaller fractions. Someone may even give you amounts smaller than a Penny just to show you how it works!
Now that you know how Bitcoin is broken up, let’s get to how you buy some. I’m going to stick with Coinbase and Uphold for the purposes of this tutorial because that’s the services we started with in the first tutorial. In the future you should be able to take the skills you learn here and apply them to other services.
In Coinbase click on Buy/Sell Bitcoin, choose how much you want to buy, either in US Dollars or in Bitcoin. Coinbase has the advantage here because you can set the amount in either currency. If you only want to buy $5 you can input that into the USD box and it will show how much Bitcoin you will receive for that amount. If you know you want to buy 0.5 Bitcoin you can input that into the BTC box and it will how you how much US Dollars you will be charged for that amount. Select which Payment Method you want to use. Once you’re ready click Buy Bitcoin. The US Dollar amount with a 1% (minimum $0.15) fee will be deducted from your bank account and the appropriate amount of Bitcoin will be deposited to your account in Coinbase. Another neat feature with Coinbase is that you can set it up to make this same purchase repeatedly on a schedule. If you want it to always buy $10 worth of Bitcoin every two weeks when you get paid, you can do that!
In Uphold you have what are called “cards”. These are like wallets for each currency you wish to use. Since we’re buying Bitcoin, go to the Bitcoin card. You will then to to Add funds. You will then select a funding method: Bank account, Credit/Debit card, or Bitcoin Network. Since this is about buying bitcoin, I’m going to assume you’ll want to use one of the first two. Once you choose you can enter a Bitcoin amount to buy. If you click on BTC and choose USD you can then enter the amount of Us Dollars you wish to spend. Uphold will calculate the exchange and present you with some numbers. Once you’re ready click on Confirm. The US Dollar amount will be deducted from your bank account and the appropriate amount of Bitcoin will be deposited in Uphold.
Depending on which site you are using to purchase and your method of purchase, your bank account or debit/credit card will be billed. Your bitcoin may not be deposited into your account for a few days. Until then you’ll see it in a “pending” status. This is not a failure of Bitcoin. This is due to the current banking system being slow. This is one of the many reasons fans of Bitcoin love to point out.
But, hey! Congratulations! You now own your first bits. So, what do you do with them? Check out my next tutorial to see how you go about sending Bitcoin.