Guides

How to Use & Store Bitcoin Safely

Published

6 hours ago

November 15, 2024

Ever since its 2009 development by the mysterious Satoshi Nakamoto, Bitcoin has become foundational to the cryptocurrency and fintech landscape. As the first decentralized cryptocurrency, Bitcoin has driven significant growth in blockchain technology, becoming the most visible and widely adopted coin on the market. With the ability to conduct seamless transactions on the blockchain, Bitcoin has been adopted as legal tender in some countries and embraced worldwide for a variety of uses.

Today, Bitcoin is used by people globally for various services. Notably, Bitcoin has gained adoption not only as legal currency in El Salvador but also for every day transactions—whether trading a pizza from Papa John’s or depositing funds at online casinos and sports betting websites.

Bitcoin’s value lies in its enhanced privacy, cryptographic security, and the development of encrypted wallets that ensure safe transactions on a global scale. Let’s dive into how Bitcoin works, how to use it, and the best ways to keep it secure:

What is Bitcoin (BTC) & How Does it Work?

Despite being around for more than a decade, newcomers may still wonder, “what is bitcoin?” Simply put, Bitcoin is a decentralized digital currency that operates independently of any central bank. Instead of relying on a traditional financial institution, Bitcoin transactions are verified by networked computers through a process known as mining, which involves solving complex mathematical problems. Once mined, Bitcoin can be transferred directly to others or used for purchases with bitcoin-accepting vendors, with each transaction recorded on a public ledger—the blockchain.

This decentralized, peer-to-peer system ensures that all Bitcoin transactions are transparent yet pseudonymous. Even though each transaction is publicly available on the blockchain, the identities of the transacting parties can remain private.

How to Use Bitcoin Online

Before first buying and using bitcoin, you will need to set up a wallet in which to store it. Here’s a simple guide to start using Bitcoin:

Set Up a Wallet: Choose a secure Bitcoin wallet for your needs. You’ll need both a public key (like an account number) for receiving funds and a private key (like a password) for authorizing transactions. Many hot wallets and cold wallets are available, each with its pros and cons for different users.

Find Vendors that Accept Bitcoin: Many online services and products now accept Bitcoin, although some may only accept other cryptocurrencies. Once you’ve found a vendor, you can use your wallet to send Bitcoin directly for goods or services.

Send Bitcoin to Other Users: Bitcoin transfers are similar to traditional bank transfers, though they remain independent of banks. Ask the recipient for their wallet address, then transfer funds directly to their wallet.

How to Store Bitcoin Safely

When using Bitcoin, securing your funds is critical. Here are key wallet types and best practices for safe Bitcoin storage:

Hot Wallets: These are digital wallets connected to the internet, such as mobile or web apps. Hot wallets are convenient for frequent transactions but are more vulnerable to cyber threats. When using hot wallets, consider diversifying to reduce risk.

Cold Wallets: Cold wallets, like hardware wallets, are offline storage solutions, ideal for long-term holdings. These wallets are disconnected from the internet, making them less accessible to potential hackers. While they’re more secure, they can be less convenient for immediate transactions.

Seed Phrases and Private Keys: When you set up a wallet, you’ll often receive a seed phrase—a recovery phrase that enables you to restore your funds if you lose access to your wallet. It’s essential to keep both your seed phrase and private key secure and offline. The public key can be shared with anyone for receiving Bitcoin, but the private key must remain private to ensure the safety of your funds.

Why You Should Use Bitcoin

There are many reasons why people choose to use Bitcoin, and here are some of the most popular benefits:

Privacy and Decentralization: Bitcoin’s independence from central banks and financial institutions allows users to make private, pseudonymous transactions. This feature makes it an appealing choice for those looking to protect their financial privacy.
Global Payment Solution: Bitcoin allows users to conduct transactions across borders without worrying about exchange fees. You’ll only need to pay a small transaction fee on crypto exchanges, with no need to exchange fiat currencies like dollars to euros.
Wider Acceptance: With increased adoption, Bitcoin is now accepted by a growing number of companies and online platforms. Whether it’s for gaming on sites like Stake.com or making everyday purchases, Bitcoin’s utility continues to expand.

Bitcoin: The Future of Finance

Bitcoin offers a decentralized, secure method of conducting transactions that emphasizes user control, privacy, and a simplified financial process. As Bitcoin continues to grow in use and adoption, learning how to use and store it safely has never been more critical. Following these best practices can help you protect your assets and enjoy the benefits of this revolutionary digital currency.

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Guides

6 steps to move an old 401k into a bitcoin IRA

Published

3 weeks ago

October 21, 2024

admin

Bitcoin could be on the verge of a major new bull run. According to Tuur Demeester of Adamant Research, in his publication How to Position for the Bitcoin Boom, we may be in the early stages of a new multi-year bull market that could propel bitcoin prices into six figures.

“During this accumulation phase, we expect bitcoin to trade in a range of $22,000 to $42,000, until a new multi-year bull market pushes it well north of $120,000,” Demeester noted.

Imagine securing a substantial allocation of bitcoin before this bull run begins—an allocation that could appreciate completely tax-free, funded by an old retirement account that you might have totally forgotten about!

Step 1: Purchase hardware wallets

The first step is obtaining the tools you need to ensure your bitcoin is secure. A hardware wallet allows you to store your bitcoin keys offline, giving you full control of your funds.

Begin by purchasing a couple of hardware wallets, such as those offered by Trezor or Ledger. Unchained currently supports a range of devices, including the Ledger Nano X, Trezor Model T, and Coldcard Mk4. Check out the full list of hardware wallets Unchained supports.

For optimal security, it’s recommended to buy directly from the manufacturer, but purchasing from a trusted third-party retailer, like Best Buy, is also acceptable. This is especially true in the context of multisig which eliminates any single key as a single point of failure.

Make sure to get at least two wallets—you’ll need both to set up your Unchained IRA vault.

Step 2: Create an account on Unchained.com

Next, go to Unchained and create an account. The process is simple: provide your name, email, phone number, and create a strong password. Unchained takes your privacy seriously.

Once your account is created, select the type of account you need—in this case we’re creating an IRA account. If you prefer personalized assistance, consider opting for Unchained’s Concierge Onboarding, where a bitcoin custody expert will guide you through every step.

Step 3: Create your Unchained IRA account—with no setup or account fees for the first year!

Now it’s time to set up your IRA account. With an Unchained IRA, you can save bitcoin in a tax-advantaged manner while maintaining full control of your keys. There is no third-party risk because you hold the keys—ensuring that no one else can access your bitcoin.

Setting up an account is straightforward—there are no setup fees, account fees don’t start until the second year, and you can see trading fees on our pricing page. Unchained’s IRA offers both Traditional and Roth options, allowing you to choose the best fit for your retirement strategy.

Step 4: Follow the Self-Service guide for vault setup

After setting up your account, it’s time to set up your multisig vault—one of the most secure ways to secure bitcoin. Multisig requires more than one key to authorize a transaction, which mitigates the risks associated with custodian and exchange hacks, bad business practices, or individual mistakes.

You can set up this secure multisig configuration in under an hour using Unchained’s Self-Service Onboarding. Simply follow the guide at diy.unchained.com to get started—if you’re using two hardware wallets to build your vault, you’ll choose the Lead custody model.

Step 5: Roll over your existing 401k/IRA

Next, you’ll need to fund your new IRA, and there are a few ways to do it: an IRA-to-IRA transfer, a 401(k)-to-IRA rollover, or an annual contribution. The most common method is rolling over funds from an existing 401(k) or IRA into your new Unchained IRA.

While this process can feel tedious—particularly if your 401(k) administrator needs to issue you a physical check—it is straightforward. Once you receive your funds, Unchained will convert them to bitcoin with our trading desk and deposit them into your IRA vault.

If you already hold bitcoin in another IRA, you can do an in-kind transfer to move your bitcoin directly to Unchained without converting to cash first. If you want to learn more about how to fund your IRA, we have a full Knowledge Base article for that.

Step 6: Enjoy the benefits of tax-advantaged bitcoin

Congratulations—your retirement savings are now secured in bitcoin! Unchained offers flat annual fees. Starting in year two, you’ll pay a flat $250 annual fee for your IRA account.

Holding bitcoin in a tax-advantaged account combines the inflation resistance of bitcoin with the benefits of an IRA. Most importantly, you remain in charge of your bitcoin—not an exchange or third party. If the bull run is approaching as many suspect, the Unchained IRA could put you in position to watch your retirement savings grow.

This article is provided for educational purposes only, and cannot be relied upon as tax or investment advice. Unchained makes no representations regarding the tax consequences or investment suitability of any structure described herein, and all such questions should be directed to a tax or financial advisor of your choice. Statements regarding market or other financial information, are obtained from sources that we believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information.

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