Despite a roller coaster of a week for digital currencies – or perhaps because of it – the world can’t get enough of Bitcoin and its crypto brethren. But thanks to the complex nature of these digital currencies, the barrier to entry for the average person remains unnecessarily high. One could argue that this is for the best – as I’ve said before, nobody should buy into any digital currency with more money than they can afford to lose due to their volatility. But what if you have a spare $100 just itching to be turned into algorithm-based money – where do you start? Right here, that’s where.
How to buy Bitcoin
The one that kicked off the current cryptocurrency craze, Bitcoin remains the most sought-after and valuable of all the available digital currencies (of which there are many). At the time of this writing, one whole Bitcoin will cost you about $700. But there’s no need to buy a whole Bitcoin because the currency can be divided into tiny fractions, up to eight decimal places.
Bitcoin can be purchased through an endless number of so-called exchanges. But for newbies like yourself, the best bet is Coinbase. Backed by Silicon Valley heavyweights, Coinbase combines the two things you need to get some Bitcoin under your belt: A wallet (to receive, send, and/or store your Bitcoin), and an exchange (to buy the Bitcoin with US dollars).
Once you create a Coinbase account, you’ll need to link a bank account and verify your phone number. You can also add a credit card as a backup, which will enable your Bitcoin transactions to happen faster in the future, and is a step I recommend.
At this point, you can buy Bitcoin, but you will have to wait a few days for the transaction to go through while Coinbase verifies all your details. The price of Bitcoin will be locked in when you make your purchase, however, so if the exchange rate jumps or dives, your cost remains the same. Coinbase has a history of being extremely cautious about fraud, so don’t be surprised if it takes a while for you to complete this process, or if future transactions don’t go through.
Note: Even if you want to get into Bitcoin alternatives (altcoins), you essentially need to set up a Bitcoin wallet and purchase some Bitcoin, which you will then use to purchase altcoins, like those listed below.
How to buy Litecoin
Based on the Bitcoin protocol, but with a different encryption protocol that allows for faster confirmations, Litecoin is the second most popular cryptocurrency. And it’s way, way less expensive for a whole Litecoin. At current exchange rates, you’re looking at between $15 and $20 per Litecoin (unless something weird happens, as it did earlier this week). The downside to Litecoin is that purchasing it requires far more of a runaround than Bitcoin.
As mentioned, the first step to buying Litecoin is to buy Bitcoin, so see the section above for how to do that. Now, once your Bitcoin arrives in your wallet (which can take a three or four days), you can start looking to invest in Litecoin.
Next, visit BTC-E.com, and sign up for an account. (The site is very basic looking, so don’t run off when it’s not as polished as Coinbase.) Once you’re signed up and logged in click Profile (top-right) > Funds (left sidebar) > Next to “Bitcoin” click the Deposit button. At the bottom of the page, you’ll find your BTC-E wallet address (it’ll look something like “17h3NiFm4CiHPy6nHdnetSCPhsaNxGBWrm”). Head back to Coinbase, click the “Send Money” button in the top-right. Paste the BTC-E address, enter the amount of Bitcoin you want to transfer, and send.
Once again, it may take a few days for the Bitcoin to show up in your BTC-E wallet. (To be clear, Bitcoin and Litecoin transfers are essentially instantaneous. But BTC-E warns that “transaction confirmation on the Bitcoin network can take from 1 hour and up to 3 days” in certain instances. Litecoin confirmations are faster than Bitcoin.) As soon as it does, you can head to BTC-E, click the Trade button at the top of the window, then click the “LTC/BTC” button beneath the “latest news” widget at the top. Under the graph, you’ll see a widget where you can enter the amount of Litecoin you want to buy with your Bitcoin. Finally, click the “Buy LTC” button, and the Litecoin will be yours.
Update: A reader points out below that it is (theoretically) possible to purchase Litecoin with US dollars or euros using the LiteTree exchange. I highly recommend against doing this. Users have reported too many instances of getting “scammed” by LiteTree for this to be a safe option.
How to buy Dogecoin
Dogecoin is supposed to be a joke – but that was before its value jumped three fold, and everyone started buying in and getting excited about it (which is why I’ve included it here, rather than many more better established altcoins). Based on the “doge” Internet meme, Dogecoin is a version of Litecoin (which itself is a version of Bitcoin), and is still really, really cheap. Because it’s so new, Dogecoin varies in value, depending on where you look.
For right now, anyway, there are only
three four exchanges that deal in Dogecoin – and all of them require you to purchase your Dogecoin with Bitcoin. I’d recommend using Cryptsy.
After you’ve landed some Bitcoin in you wallet, head to Cyrptsys, deposit Bitcoin into a connected address. Once the Bitcoin are in there, click the Trade button at the top of the window, scroll down to DOGE/BTC and click it. Finally, enter in the amount of Dogecoin you want to buy, click Confirm Order, and wow – now you have Dogecoin.
Note: In addition to the exchanges listed above, Bitcoin, Litecoin, and Dogecoin can all be purchased on eBay. I’ll be doing a follow-up piece to cover the ins and outs of that option.
Have questions? Let me know in the comments and I’ll find you an answer.
Clarifying language about Bitcoin and Litecoin transfers and confirmations added. H/T to @robustus for pointing out the need.