Bitcoin, bitcoin, bitcoin. All anyone is talking about these days is bitcoin.
OK, so maybe not everyone is talking about bitcoin, but having had its breakout year in 2013 (rising 6,000% in value) bitcoin, and by extension the dozens of other cryptocurrencies which have sprung up in the last 12 months, are now the topic of conversation around dinner tables, in pubs and at the water cooler.
I've heard lots of people say they were going to buy bitcoin, while the more knowledgeable were already planning on getting into litecoin, dogecoin, vertcoin, sexcoin or whatever the cryptocurrency-of-the-week was - but most people never took the plunge and actually bought some.
The problem is that actually getting on the cryptocurrency ladder is not that easy.
There are no bitcoin notes you can go to a bank and swap for your pounds, euro or dollars, so how do you go about getting your virtual hands on some?
You can of course mine some bitcoin - a process we have covered in detail here - but unless you are willing to spend thousands on a mining rig, it'll take too long to mine enough bitcoin to do anything with it.
Most other cryptocurrencies are easier to mine, but if you really don't want to get into mining, then you can swap cold hard cash for bitcoins without too much hassle, and from there the cryptocurrency world is your oyster.
Bitcoin - the gateway drug
While it is possible to buy other cryptocurrencies like dogecoin or litecoin using real world currencies, for those of us in Europe, it is not that easy.
If you are looking to get into cryptocurrencies to make a quick profit, then bitcoin probably isn't the one to start with, but in order to explore the nether regions of cryptocurrency land, then the first step has to be to buy some bitcoin.
But bitcoin is too expensive
Don't worry that a single bitcoin currently costs over £500, you don't have to buy a whole one, you can buy fractions of a bitcoin through online exchanges to match the amount of real money you want to invest.
Using an exchange
There are two ways of buying bitcoin in the UK. One is straightforward, the other is not.
The not-so-straightforward method involves registering with a cryptocurrency exchange - the most well-known of which is probably Mt. Gox. While these exchanges operated for years without needing to know your identity, they now do and the process is both tedious (scanning, emailing and verifying identity documents) and time consuming.
Only some of these exchanges are accessible to UK residents and your bank will charge you a fee (up to £10) for wire transfers, meaning this is really only an option for those getting seriously into the cryptocurrency business
The straightforward way of getting on the bitcoin ladder is by using one of a growing number of UK-based services which allow you to pay using a bank transfer, Barclay's PingIt service or Natwest's Instant payment service.
Actually buying bitcoin
Having chosen the easier option, you now need to decide which service to use. The best-known is BitBargain, which is easy-to-use, fast and reliable, but there is also Bittylicious, bit121 and QuickBitcoin - all of which offer similar servcies.
In each of these, buying bitcoin is very straightforward. Here is how it works on BitBargain:
- Sign up for an account (without having to provide an ID).
- Choose if you want to buy bitcoin or litecoin
- Choose how much bitcoin you want to buy (0.1, 0.25, 1, 100 etc)
- Choose your payment method (bank transfer, PingIt etc)
- Find matching offers from bitcoin sellers
- Choose an offer
- If the seller agrees, they will send you their bank details
- Send the specified amount using your own online banking
- Wait for verification from seller
- And voila, you're a bitcoiner
Where is my bitcoin?
When you sign up for one of these services, you automatically get a bitcoin wallet, and that is where you money will be kept, but you don't want to keep it here, as a lot of services charge you a tax of 1% just to keep it there.
Get a wallet
A bitcoin wallet is where you store the cryptographic key which lets the bitcoin network know how much bitcoin you own.
You need to keep this key safe in order to use your bitcoin in the future. You have two options of where to store it.
In an online wallet which is accessible wherever you are, or in an offline wallet which is store on a specific device (your phone, laptop, PC etc).
While the offline wallet cannot be accessed remotely, it also means it isn't susceptible to theft by cyber-criminals.
The choice is yours, but once you do decide, to get your wallet's address (so you can send and receive bitcoin) open your wallet and get the address (by clicking the 'Receive Bitcoin' button).
Once you have your wallet's address, go to the wallet which your bitcoin is key is stored in, paste the new address into the 'Send to' field and press Send.
This is possibly the scariest part of the whole process, as it can take a long time (sometimes days) for the transfer to go through meaning your bitcoins are lost in cyberspace for a time, but as long as you have entered the right address, they will eventually turn up.
I have bitcoins, now what?
This is where it gets interesting. Bitcoin can be used to pay for an increasing amount of online services from pizza to flights on Virgin Galactic space flights.
But it can also be used to make an investment in other cryptocurrencies.
Once you have bitcoin in your wallet, all you need to do is go to one of the exchanges selling dogecoin, litecoin, vertcoin or any of the dozens of cryptocurrenices available today, and trade them.
Lists of the exchanges can be found on the websites of each of the cryptocurrencies, and I've lists links to the exchanges of some of the more popular cryptocurrencies here:
So don't be afraid people, the world of cryptocurrencies isn't that scary, and who knows, this time next year you could be a dogecoin millionaire.