So by now you may have seen the trailer for the BBT episode on Bitcoin. If you haven’t seen it, then perhaps you’ve seen one of the endless news stories about it droning on all month long. If so, I offer some help in figuring out how to play the Bitcoin Lotto. I’d advise you think of it as a lotto so if you don’t end up making 500% back on your money you’re not disappointed. It even sounds like there are going to be Bitcoin Options so you can insure the position if you’re interested in that kind of thing. Below I’ll lay out in simple terms how to play the lotto for friends and family.

Bitcoins and other Cryptocurrency

What is a Bitcoin is a valid question. It’s basically a spot in a ledger. A deed if you will. The difference is that the ledger is unlike any other ledger of its kind. It is encrypted and encoded in a way that makes it completely unforgeable. Even for large government actors. In this way, holding a Bitcoin is irrefutable proof that you can unlock some portion of that ledger and give your entry to someone else. All seems rather like trading tulips, and it is, but then again paper money is similar. It’s a hard to forge proof that you hold some amount of stuff. A Bitcoin is a hard to forge proof that you hold some amount of stuff. Money is backed by your governments authority, bitcoin is backed by millions of hours of computing cycles. Both based on some basic level of trust. Trust the government, or trust the cryptography (computing power).

Cryptocurrency is the larger field of all Bitcoin like things. After Bitcoin a bunch of other projects started making similar products. After Apple, there was Windows. After Windows there was Linux. Same with Bitcoin. After Bitcoin there was Litecoin. After that Etherium. Just like Apple/Windows/Linux, some like one choice better than others. As far as I’m concerned, Bitcoin is the lotto ticket with the biggest payout, Litecoin is the easiest to buy/sell/give. Ethereum will likely be the most useful of them all one day

How to get them

There are a few ways, good and bad, to get Cryptocurrency. Some of them are totally above board, some are a bit less above board, and other are just plain sketchy. Keep in mind, as of right now, sending Bitcoin from point A to point B can cost $5-$10. So if you are convinced you only want Bitcoin, keep that in mind. Other Cryptocurrency like Litecoin were made to be cheap to transact in. I’d advice Litecoin until you have a few $100 dollars in Cryptocurrency, then exchange it for Bitcoin. Here are some general options on buying:

  1. Coinbase.com - The Bitcoin Bank. This is a US regulated and IRS audited bitcoin shop. Since it’s a US shop it falls under US jurisdiction and you’re a bit less likely for them to just pick up and run off with your money. Also understand that the IRS can legally ask for all customer records. You have to keep close notes of what you buy and sell so that you file your taxes correctly. This isn’t a big thing now, but it will be soon. New accounts can take from 2-4 weeks to be approved by the IRS and other regulators. You will pay about a 2% fee to buy over $200, much higher fees below that.
  2. GDAX Exchange - This is just another Coinbase site, the difference is that this is the Exchange. That means you can buy on the open market at a lower fee. Here you can buy with no fees for orders over $100. This will take another 1-2 weeks above the Coinbase wait in order to transfer money. Could be quicker with a wire, but those are expensive.
  3. Changelly.com - This is a Czech based company that will let you buy Bitcoin with Visa / MasterCard (for now). Similar sites have been shut down by Visa / MasterCard in the past, but this one seems to have had a pretty successful run. The advantage is you can create an account and buy fairly quickly. You can also use Chagelly to turn your Litecoin into Bitcoin when the time is right. The downside is that they are a foreign company with your credit card info.
  4. Bitcoin Stock - There are two major players here… GBTC in the US and COINXBT out of Sweden. Honestly I like the Swedish one better since it tracks the price closer and doesn’t trade at a premium. It is about $50 / share but it’s hard to find a stock broker that will buy into the Swedish exchange, and when they do, it can be an extra $50 in trading fees. The US one is easy to get at must brokers and can be bought in a ROTH IRA as well. It sometimes trades at insane premiums like 30%-90% above the Bitcoin price. It’s hard to buy at $1500 / share, but Stockpile is offering it in fractional shares at very low trading fees. In the next year or so there should be a bunch of other Bitcoin stocks, so this market will develop. Do watch out for shady Bitcoin IRAs. These are licensed brokers that take a 100% Bitcoin position. Some might be legit, but I get real nervous looking at some of these shops. Stockpile, Ameritrade, Fidelity, and the other discount brokers are all legit and should offer no worries.
  5. Beg / Barter / Trade - You can always sell your XBox for Bitcoin, and you are very likely to find a buyer. If you know someone who has Bitcoin you could also ask if they would sell you some. There are Bitcoin meetups and the such that allow people to buy small amounts.
  6. SketchyExchange.com - There are no shortage of sketchy Bitcoin exchanges… Beware, these are often scams and generally end poorly. If you don’t know much about them, stay away.

How to hold them

In order to hold Bitcoin you need what is called a wallet. This is the term for a software program that keeps track of your coins keys. The keys are very long account numbers where they coins will eventually be deposited. There are public parts of a key called the address and private parts called the private key. The main point here is that you have to keep the private key hidden and safe. Anyone that gains access to the private key has all your coins. If you lose your private key, you have lost all your coins. So ensure you know how to save and secure your keys, because this is literally where your coins are. Here are some of my suggestions.

  1. Coinomi (Android) - This is a fairly safe Android wallet that has fairly good security. The private key is encoded in set of 15 random words. It’s a sentence that makes no sense, but there is a mathematical rule to it that will generate the keys for your wallet. This nonsense sentence IS your private key… keep it safe.
  2. Jaxx (PC/Mac/IOS/ChromeOS) - Similar to Coinomi this is a multi-coin wallet that uses a 12 word nonsense sentence. Be aware that JAXX got a bad rap a while back for leaving the private keys on the hard drive of some systems, so do be careful. Use system encryption if possible, and don’t get a virus, they will look for these keys.

Once you have installed one of the wallets you can add coins to it. Bitcoin / Litecoin / Ethereum. When you do, you will get an address that coins can be sent to. This is how Changelly will be able to send you your coins. Exchanges like Coinbase/GDAX will often offer to hold your coins on thier site, and that is fine, but if the site ever goes down, or they get shutdown you could lose your coins.

Reward

If you made it this far, know me, and have a Litecoin address…. drop me a line and I can send some coin your way.