How to Use Bitcoin in 5 Ways (A Beginner's Guide)

Bitcoin was the first cryptocurrency ever created, introduced to the world by a pseudonymous creator called Satoshi Nakamoto back in 2009 as an alternative to traditional fiat currency. 

This virtual currency isn’t owned by any one central authority, for instance a bank or government. Instead, it's created, distributed and stored on a decentralized ledger system known as a blockchain. 

Despite facing numerous challenges (such as mining bans in certain locales), Bitcoin has grown to become a blue-chip digital asset and the world's largest cryptocurrency by market capitalization. Nevertheless, if you’re a beginner, you may find Bitcoin a bit intimidating, despite its global popularity in the crypto space.

The truth remains, however, that interacting with the Bitcoin network isn’t as complex as it may seem. In this article, you'll find everything you need to know about using Bitcoin, including choosing the right Bitcoin wallet and how to use Bitcoin to amplify your profits.

Key Takeaways:

• Bitcoin was the first cryptocurrency ever successfully introduced into the global financial system as an alternative to fiat currency. 

• It remains the world’s most popular cryptocurrency, and largest by market capitalization.

• You can use Bitcoin for cross-border payments, as a store of value, to pay for goods and services and even to earn passive income.

Choosing Your Bitcoin Wallet

When you buy Bitcoin, you need to find a wallet to store it. Well, not the leather or synthetic kind you probably own. As you may already know, Bitcoin is a virtual currency, which means you can only store it in a crypto wallet. A crypto wallet is a software program that allows you to interact with Bitcoin, but more importantly, it’s the digital vault that keeps your Bitcoin safe. 

There are two types of wallets: hot and cold. Hot wallets are connected to the internet, while cold wallets operate offline. 

Let’s take a look at each type.

Hot Wallets

Hot wallets are also called hosted wallets, since they’re automatically created for you when you buy Bitcoin on a third-party platform. They’re the easiest wallets for beginners because they don’t require any more action from you. Hot wallets include web wallets, mobile apps and browser extensions. 

Hot wallets are pretty convenient for storage of small amounts of Bitcoin. Since they provide easy access, users actively trading Bitcoin or withdrawing and depositing frequently will also find them handy. The biggest drawback of hot wallets is that they’re always online, which makes them vulnerable to hacking.

Some of the most popular hot wallets that accept Bitcoin are Exodus, Guarda and Trust Wallet, among others.

Cold Wallets

On the other hand, cold wallets are tangible objects that include hardware and paper wallets. A hardware wallet is a physical device — usually a USB stick — that requires a software program to run all of its operations. 

Cold wallets are a good storage option for long-term investors, or for users who prioritize security for their large Bitcoin holdings. These wallets come with an extra layer of protection because they’re almost entirely offline. Some popular cold wallets for Bitcoin are Ledger, Trezor and KeepKey. 

How to Choose the Right Wallet

To choose the best wallet for you, here are a few factors to consider.

• Security

Keeping your Bitcoin safe is your first priority. Make sure that the wallet you choose has enhanced security features, such as two-factor authentication (2FA) and fingerprint recognition protocols. Ultimately, cold wallets guarantee the best security for your assets.

• Reputation

Before entrusting a company or device with your Bitcoin, refer to different forums, such as Reddit, to see what other users are saying about it. If they flag a wallet for breach or other security flaws, you need to move on to a more reputable option.

• Access

There are two types of wallets in this category: custodial and noncustodial. Custodial wallets, typically used by centralized platforms such as crypto exchanges, store your private keys on your behalf. This type is suitable for beginners, since it’s easier to use and to recover. A noncustodial wallet gives you access to your private keys, which means you're in complete control of your assets. 

As a beginner, you may have to trade off security for ease of use, but we encourage you to find a cold wallet for your Bitcoin as soon as you get comfortable navigating the crypto space. Among the best Bitcoin wallets to consider are Exodus Wallet, which includes support for cold storage, and Trezor for its robust security.

Sending and Receiving Bitcoin 

Your wallet comes with a public and private key. These allow you to conduct transactions on the Bitcoin blockchain. The public key is generated by the wallet, and you can show it to people when they need to send you Bitcoin or other assets. The private key is your password, and you must keep it secret. This key proves ownership of your funds and allows you to spend them.

The reasons why you may want to send and receive crypto may include:

• Purchasing crypto or sending crypto to a buyer

• Receiving a payment, gift or airdrop

• Moving crypto across exchange wallets

• Moving crypto from a web wallet to a hardware wallet, and vice versa 

How to Send Bitcoin

This procedure may vary depending upon your wallet, but generally includes the following steps:

1. Make sure your wallet has Bitcoin

2. Select Send

3. Copy and paste the recipient’s address into the recipient field, or scan the QR code

4. Put in the amount of Bitcoin you want to send

5. Confirm the address of the recipient 

6. Select Send to complete the transaction

Tips for Beginners

To make sure you never lose your Bitcoin due to user error, try the following strategies:

• Send small amounts of Bitcoin to yourself, for instance from your mobile wallet to a desktop, as a transaction test. Practice both QR code scanning and copy/pasting methods until you're comfortable sending and receiving Bitcoin.

• Make sure that the Bitcoin you're sending matches the proper corresponding address. Familiarize yourself with Bitcoin's abbreviation (BTC) to avoid any errors. 

• Lastly, double and triple-check the recipient's address and the amount you wish to send, because once a transaction is confirmed, it's irreversible. 

How to Receive Bitcoin

1. Share your public address — it could be a QR code or a string of letters and numbers

2. Open your wallet and select Receive

The sender does most of the work here. All you’re required to do is send your address and wait for Bitcoin to reflect in your wallet. Occasionally, the sender may give you the transaction ID, which allows you to monitor the transaction’s progress.

Getting Your Bitcoin

There are two ways you can get Bitcoin 一 buying it or mining it.

Mining Bitcoin

Bitcoin mining is the process of validating transactions by generating a cryptographic solution that legitimizes them before they’re packaged into blocks and added to the network. This keeps the integrity of the network in check.

The Bitcoin miner that reaches a correct solution first is rewarded in Bitcoin from the fees. But be warned: Bitcoin mining isn’t easy. When Bitcoin was first released, it was possible to mine on a personal computer or GPU. However, this didn't last for long because as more Bitcoin miners joined the network, it became harder to solve the mathematical puzzles, also known as hashes.

Currently, you need sophisticated hardware to mine Bitcoin, such as application-specific integrated circuits (ASICs), which cost thousands of dollars to speed up the process. These machines are built specifically for mining and can generate trillions of hashes per second. 

Safe to say, your chances of mining Bitcoin alone are close to nanoscopic. The other alternative is to add mining software that’s compatible with Bitcoin to your personal computer and join a Bitcoin mining pool, which is a group of miners who use their collective computational power to compete against 24/7-run ASIC farms. Even then, if you solve the problem first, you’ll have to share the returns — currently at 6.25 BTC per block (which will reduce to 3.125 BTC in the next Bitcoin halving). It may not be worth the effort and resources invested.

As a beginner, mining may not be the best option to acquire Bitcoin. It's expensive and lengthy, and as some experts predict, your chances of receiving 1 BTC are 1 in 16 trillion!

Let’s get to a more practical way of obtaining Bitcoin. 

Buying Bitcoin

Bitcoin is the most popular cryptocurrency, so you can easily obtain it in various ways.

• Cryptocurrency Exchange (CEX)

Digital currency exchanges like Bybit allow you to buy Bitcoin, store it in your hot wallet and conduct your transactions. As we discussed earlier, moving your crypto from your hot wallet to a more secure cold wallet is prudent.

• Wallet Apps

Most wallets provide mobile or web-based apps that allow you to purchase Bitcoin at the best market prices. As with exchanges, these wallets can also automatically hold your Bitcoin and facilitate Bitcoin transactions.

• Bitcoin ATMs

Bitcoin ATMs look like regular cash ATMs, except that they allow you to use cash or debit/credit cards to buy Bitcoin. These ATMs are found in malls, airports, restaurants and gas stations. Once you purchase BTC, you can direct it to your preferred wallet. The best option is to have a wallet ready before visiting a Bitcoin ATM.

• Face-to-Face

Of course, you can also buy Bitcoin face-to-face. You can give cash to a willing seller in exchange for an agreed amount of Bitcoin. However, be aware that this poses a certain degree of risk, as you’re purchasing Bitcoin directly from a stranger.

5 Ways to Use Bitcoin

Now that you have your Bitcoin, what can you do with it?

Bitcoin was initially introduced as an alternative P2P payment method. However, its uses have gradually expanded due to its increased value and integration into the mainstream marketplace. 

Here are five ways you can use Bitcoin to explore the crypto space and beyond.

1. Use Bitcoin for Payment

There’s no doubt that Bitcoin is a valuable digital asset. But you may wonder: “Can I use Bitcoin like real money?”

The answer is YES. You can use Bitcoin to pay for goods and services as you would with fiat currency. More companies are increasingly accepting Bitcoin as a mode of payment.

Following are some of the things you can do with it.

Travel

Ready to travel the world? You can book your hotel and accommodations on numerous travel sites with your Bitcoin, like Travala and Bitcoin.Travel. You can also book your flights using Bitcoin on Alternative Airlines.

Real Estate

Buy an apartment, house or mansion with Bitcoin in countries like the United States, Switzerland and Italy on popular sites like Bithome. 

Sports 

Many sports clubs, including the Tennessee Titans, Oakland Athletics and Dallas Mavericks, accept Bitcoin as payment for tickets and purchasing NFTs.

Online Shopping

Online shopping sites like Overstock and Newegg allow customers to pay for items with Bitcoin, including clothing, electronics, toys and other household goods. 

You might ask, “How about Amazon?” 

Well, Amazon doesn’t accept Bitcoin. However, cryptocurrency e-commerce stores like Bitrefill let you buy gift cards from Amazon and many other sites with Bitcoin. Another P2P marketplace, PurseIO, connects you to people willing to exchange Amazon’s gift cards for Bitcoin.

Bitcoin Ordinal NFTs

Are you into the unique digital entities known as non-fungible tokens (NFTs)? Join the elite club of owners of the new Bitcoin Ordinal NFTs with satoshi inscriptions on popular marketplaces such as Gamma.io and Magic Eden. 

Looking for a card that gives you access to your funds wherever and whenever you need them? The Bybit Card is a physical Mastercard debit card connected to your Bybit account that allows you to pay for all the items listed above at over 90 million Mastercard merchants globally. With a few clicks, you can apply for the card through your Bybit account and begin using the virtual card immediately as you wait for the handy Bybit Card.

2. Trade Your Bitcoin

If you want to use Bitcoin to make money, two trading opportunities can make you a good profit: spot trading and derivatives trading. 

Trade Bitcoin as a Spot Pair 

A Spot pair is made of two assets that can be exchanged for each other at the present market price. For instance, you can trade your Bitcoin for fiat currency (BTC/USD) or as crypto-to-crypto (BTC/ETH).

Trade Bitcoin as a Derivatives Pair

Derivatives trading involves a contract agreement to either buy or sell a certain amount of Bitcoin at a specified price and date. The margin between the speculated price and the current market price determines your profit.

With Bybit, you can leverage different types of derivatives, such as Perpetual and Options contracts. Perpetual contracts are trading agreements that don’t have an expiration date. The terms can remain binding as long as the trader pays the required holding fees. Meanwhile, Options take on the full meaning of a derivative, as you can buy or sell Bitcoin at an agreed-upon price at a predetermined date. 

Don’t worry if all these trading terms seem a bit overwhelming. Bybit is all about making trading experience a breeze for beginners with strategies like copy trading or tools like Grid Bot trading. 

Copy trading allows beginners to follow up to 10 Master Traders at one time, and invest in trades similar those that they've made — hence, the term copy trading. This strategy helps you to execute trades and maximize profits with the least effort. 

Grid trading requires you to place orders above and below a particular price level. A grid trading bot automatically executes the orders, taking away the hassle of constant market monitoring and manual trading. 

3. Invest Your Bitcoin

Bitcoin investing can be conducted on both DeFi platforms and centralized cryptocurrency exchanges. If you plan to use Bitcoin to earn passive income on DeFi platforms, you must wrap your Bitcoin. But what does “wrapping Bitcoin” mean?

Let’s start with some basics.

Investing in the DeFi space is a brilliant investment idea because it holds great opportunity. But herein lies the problem: Bitcoin is incompatible with the major applications found on the Ethereum network — where most of the DeFi ecosystem is built. The only way it can work on this blockchain is to get “wrapped.”

Wrapping Bitcoin simply means making a digital currency representing Bitcoin on the Ethereum network, denoted as WBTC. WBTC is an ERC-20 token that derives its value from Bitcoin. You can use it to invest in DeFi.

To acquire WBTC, you need to make a request to a merchant such as DeversiFi. The merchant then mints the token after locking the Bitcoin in reserve. 

Among the investment opportunities you can explore in the DeFi space are:

• Lending — Lend your WBTC to borrowers and earn interest through liquidity pools and money markets. Keep in mind that the supply and demand of a cryptocurrency determines its interest rate.

• Yield Farming — Deposit your WBTC in different liquidity pools across several protocols to maximize profits on loans.

• Margin Trading — Lend your WBTC to margin traders to earn a fee. Once you've learned the ins and outs of margin trading, you can also leverage borrowed funds to potentially amplify your profits.

Meanwhile, centralized exchanges enable beginning crypto investors to easily invest in BTC without having to learn the intricacies of wrapping the crypto. Bybit, for instance, offers you numerous platforms to earn interest directly from Bitcoin:

• Bybit Savings— A flexible and beginner-friendly way to earn passive interest yields by staking your unused BTC funds.

• Liquidity Mining— Contribute your BTC to the BTC/USDT liquidity pool to earn high yields and multiply your rewards, with up to 3x leverage.

• Dual Asset— A short-term speculation tool that allows you to earn high yields on your BTC by capitalizing on small price movements in low-volatility markets. 

4. Lend Your Bitcoin

You can lend your BTC to people looking for crypto-backed loans and earn compound interest as profit. The best way to do this is to put your assets on reputable crypto-lending platforms like Nexo that offer Bitcoin lending services at a fixed interest rate of 4%. Bybit also provides lending services for you to lend your Bitcoin in order to earn flexible interest that varies according to the market borrowing demand.

5. HODL Your Bitcoin

In the crypto space, HODL (an acronym drily referred to as "hold on for dear life”) means hanging on to your Bitcoin for extended periods. Essentially, you refuse to sell your assets, whether there’s an increase or decrease in the market price.

You may wonder, “What’s the endgame?”

HODLing Bitcoin is a long-term, passive investment strategy for traders who can’t keep up with the demanding aspects of day trading. Perhaps the biggest motivation for Bitcoin HODLers is the hope that BTC will eventually replace fiat currencies and increase in value over the long run.

As a beginner, you can utilize this strategy to shield your assets from short-term market volatility. HODLing also allows you to earn from your Bitcoin as you explore other market opportunities. 

Are you ready to HODL Bitcoin?

Bybit has the perfect tool to help you achieve this goal: Auto-Invest. It offers an easy way to schedule regular Bitcoin purchases in order to grow your holdings over a specific period. 

This strategy minimizes the risk of one-off buys and secures sustainable, long-term returns, irrespective of changing market conditions.

Closing Thoughts

Bitcoin is (and will continue to be) the epicenter of the digital money revolution. At least into the foreseeable future, adding Bitcoin to your portfolio is potentially a good investment decision.

Of course, no one can predict future events that may affect the price of Bitcoin, but the lessons of its rise, big falls and comebacks over the past decade teach us that Bitcoin is by all means a resilient digital currency.

Additionally, with Bitcoin gradually gaining acceptance in diverse mainstream spheres, including in traditional finance systems and other product and service platforms, its uses will correspondingly increase globally over time — not to mention the numerous profit-making opportunities that Bitcoin offers when lending and trading in the crypto space.

#Bybit #TheCryptoArk