How bitcoin works for Nigerians

Learn everything you need to know about bitcoin and how it works for beginners in Nigeria. In this article, you'll learn everything you need to know about where to sell bitcoin in Nigeria, best site to buy bitcoin in Nigeria, bitcoin companies in Nigeria and the legality of bitcoin in Nigeria.

What is bitcoin

Bitcoin is an electronic currency, a cryptocurrency that works using computer codes. It works by verifying transactions over a public distributed ledger called the Blockchain. Bitcoin was founded in 2009 by an anonymous user or group named Satoshi Nakamoto.

How bitcoin works

Bitcoin works using a public distributed ledger called a Blockchain to keep track of transaction records from the beginning of the first transaction till the latest transaction. Users of the Blockchain broadcast their transactions which is added to a block by the network nodes. The network nodes sign and verifies the transaction and add it to its own ledger called block, validate the block, add its to the Blockchain, and then broadcast to other nodes to save a copy of the block. Bitcoin uses a bitcoin address which is analogous to a users bank account to receive bitcoin. To spend bitcoin, you require a private key if you are signing your transaction by yourself, but most of the time, the control of these key is usually entrusted in the care of a third party in the case of online wallet.

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Bitcoin wallets

Bitcoins are usually stored in wallets. The security of the wallets are mainly dependent on the level of control the users have over their private keys. Some wallets such as online wallets are the least secure because the user's private keys have been entrusted in the care of the wallet providers. Trusting that the providers are the good guy and their keys are well secured from hackers. Some of the wallets and their usage are given below:

Full client

This type of wallet works directly with the bitcoin core program. To create this type of wallet you need to download the whole Blockchain from the genesis block which is about 150 gb data in size. This is the most secure form of wallet as there's no need for trusting a third party for managing of wallet credentials. The full client checks the validity of mined block, preventing it from transacting over a chain that alters network rules. Because of the size of full client and its complexity, it's not situable for computing devices.

Light weight wallet

This is a light weight version software that consults the full client to send and receive transaction without downloading the entire blockchain. Because of this, lightweight wallet are faster to set-up on a low powered, low bandwidth devices like smartphones. Using lightweight wallet, however, requires the users trusting the server as it's prone to errors. Lightweight wallet, unlike full client, follow the longest blockchain and do not ensure it's valid, requiring trust in miners.

Paper wallet

This is a paper printout that contains all the necessary credentials needed to spend bitcoin. Paper wallet are secure as you can safely keep the paper offline and safe from being stolen by hackers as common with information stored online. However, if the paper is lost and you do not have these wallet information committed to memory, your bitcoin is lost for good.

Online wallets

These are the easiest to set up. They are usually provided as services by major cryptocurrency exchange. The credentials to access wallet are stored with online wallet providers rather than on user's hardware. As a result, the user must have complete trust in the wallet provider. A malicious provider or a breach in sever security may cause entrusted bitcoin to be stolen. An example of online wallet providers is blockchain.info. You can register on the website to create you own bitcoin wallet in minutes.

Hardware wallet

These are specialized devices manufactured to securely store user's private keys offline.

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How to own bitcoin or receive it in Nigeria

There are several ways to owning bitcoin in Nigeria. Bitcoin can be owned through; buying, mining and faucets.

Buying bitcoin

Bitcoin can be bought from exchanges. All of these exchanges require registration to a website and a common request for identification documents. However, there are online individuals that do sell bitcoin which you can consults for your bitcoin purchase. Note that to buy bitcoin you need a bitcoin wallet. You can also register on P2P exchange like Binance which are available in Nigeria and most countries across the globe.

You can also check buy bitcoin worldwide for available bitcoin exchanges in your country. Simply, click here, select your country and payment method, and available bitcoin exchanges in your country will be listed out. Then, you can make your research about each exchange and select your preferred exchange. Most bitcoin exchanges usually require users to verify their identity by requesting them to upload their identity documents. With bitcoin exchanges, you can buy bitcoin with any payment method supported by the exchange. Some exchanges allow you to own a bitcoin wallet within the exchange itself, thus acting as a wallet provider. Just like other wallets, you can send and receive bitcoin. However, if you are in Nigeria and you are looking for the best way to buy bitcoin easily and instantly, click here.

Payment methods available for buying bitcoin

In Nigeria, most people prefer buying bitcoin from individual exchanger while some prefer going to cash exchanges. Whether you prefer to buy from an exchange or buying directly from individuals, you still need to use one form of payment or the other. The following are the different available payment methods for buying bitcoin in Nigeria and abroad.

Buying bitcoin using bank transfer: The most popular payment options for buying bitcoin in Nigeria. Most people prefer this method because of the ease with which account to account transfer can be easily initiated from one bank account to another on mobile apps and bank websites. This method is cheaper and requires only N52.5 interbank transfer fee for transfer between different banks.
Buying bitcoin with credit or debit card: If you prefer buying bitcoin from exchanges in Nigeria, card payment option might not be new to you. This option can be very easy but this convenience of buying bitcoin comes at a price. The fees are high. Buying bitcoin with bank credit or debit card can take as high as 1.5% fee and this can be risky for merchant because of fraud, reversal or chargeback.
Buying bitcoin using PayPal: There are several reasons why a person might want to buy bitcoin with PayPal. People who live in countries where PayPal are not fully supported but through certain tricks managed to operate a PayPal account for the purpose of receiving payment for online jobs might resort to converting their PayPal earnings for bitcoin. Likewise, people living in jurisdictions like China that ban bitcoin trading or activities might sought for other means of obtaining bitcoin and remitting payment through payment companies such as PayPal, Skrill, okpay, alipay and WeChat. Buying bitcoin with PayPal, like using debit or credit card, is expensive because of high risk of fraud, reversal and chargeback in which buyer request back for their money after receiving bitcoin.
Buying bitcoin with mobile recharge: Mobile recharge is yet another seamless and convenient method of bitcoin purchase. People buying bitcoin from another country can utilise the possibility of sending mobile recharge, also called airtime, internationally and use it as a form of moving cash. There are people that will gladly accept mobile recharge as a form of payment especially in Nigeria. Just like other online payment methods, mobile recharge comes at fee and can also be expensive.
Buying bitcoin with gift cards: Gift cards such as iTunes, Amazon, Steam wallet, Google play, Walmart and others store value gift cards can be purchased physically in stores or electronically online and used as a payment option for purchasing bitcoin. The purchased card is then sent to the bitcoin sender for bitcoin. Buying bitcoin with gift cards comes at a very high price just like other electronic methods of payment. Some P2P exchanges that support trading of gift cards for bitcoin can be used to buy bitcoin with gift cards.

Mining bitcoin

This involves donating your computing power for bitcoin transaction validation and record keeping. As bitcoin transaction validation requires lots and lots of computing power to achieve, donating your hardware calculating powers comes with a reward which includes transaction fees and mined block reward. You'll only get this reward if your computing power is high enough to solve the computer puzzle and a block is mined. Mining bitcoin has become and is becoming increasingly difficult for the average Joe. Due to the high amount of computing power requires to solve the cryptographic puzzle, it's now a business for big companies with specialised machines unlike during the early stage when bitcoins were mined using home PCs. :(

Faucets

This is a reward system in form of apps or website that dispenses Satoshi as a reward for completing online tasks, captcha and traffic generated for them. These rewards are usually meagre and requires lot of effort to amount to tangible gains.

How to spend your bitcoin in Nigeria

You can spend your bitcoin in various ways ranging from: sending bitcoin to family and friends, selling bitcoin for cash, payment of goods and services, and bitcoin investment.

Sending bitcoin to family and friends

Bitcoin can be spent as a gift to family and friends. Just like money, you can transfer bitcoin to your family or friends wallet as a gift which I'm sure they'll gladly appreciate :). To send bitcoin to another person, all you need is their bitcoin address and from your wallet, you can easily initiate the transfer of any amount to the address. Once, your transaction is confirmed on the Blockchain network, the recipient will receive bitcoin in their address.

Selling bitcoin for cash and payment of goods and services

Selling bitcoin for cash can be done in exchanges like Binance. This usually requires online registration and identity verification but you can sell your bitcoin for cash by dealing directly with trusted online individuals. You can click here to learn more on how to exchange cryptocurrencies for Naira in nigerian bank account!

Besides selling your bitcoin for cash, you can also make use of your valuable coin for purchases online. The following are list of online merchants that accept bitcoin:

Microsoft

Microsoft has been accepting Bitcoin for use in its online Xbox Store since 2014. They temporarily took a pause from accepting it due to the volatility and now again are accepting it strictly for the Xbox store credits.

Bill Gates has commented on Bitcoin many times saying things such as “Bitcoin is better than currency”.

Overstock

Overstock is currently leading the way in the shopping and cryptocurrency field. Overstock goes as far to accept multiple kinds of cryptocurrency, not just bitcoins. Not only is Overstock accepting bitcoin but they are holding it too! Theses are the types of vendors that serve the bitcoin community in the best possible way! They are clearly in it for the long haul and not simply as a marketing ploy.

Namecheap

They are a pro internet freedom company used to purchase domain names and is a favorite in the cryptocurrency community for their willingness to accept bitcoin and fight for freedom. You can receive a credit on your Namecheap account by easily sending in Bitcoin.

Newegg

Newegg is a company well known in the cryptocurrency community for purchasing cryptocurrency mining hardware. They sell all sorts of computer hardware on all ends of the spectrum. Recognizing their popularity in the cryptocurrency community, NewEgg started accepting bitcoin for their hardware.

There are so many other companies or merchants that accept bitcoin as a legal means of payment. Therefore, this list is not complete or exhaustive.

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Bitcoin investment

This is another way of spending bitcoin. Bitcoin investment can be in several forms ranging from: online investment or HYIP, buying and holding of coin or trading.

Online investment

Bitcoin is known as a global currency which makes it the best choice for online investment.

Buying and holding or trading

Bitcoin can be bought and hold in anticipation for future increase in value. You can as well trade bitcoin for profits in exchanges by buying at a low price and selling at a higher price.

Problems solved by bitcoin

Bitcoin as a digital currency solves so many problems in such a way as it aims to revolutionalise the world. Part of the problems addressed by bitcoin are: decentralisation of monetary control from government, double spending problem, speedy and low fee cross-border transfer, inflation control and others.

Decentralisation

Bitcoin transaction are recorded and confirmed over a shared network of miners who runs the protocol independently on their devices and thus, no single authority has control over its operations. Unlike the conventional monetary system where government controls and oversees the supply of fiat currency. The CBN, central bank of Nigeria, has no authority over bitcoin operation. This makes bitcoin open and fair as it gives everyone over the network equal right to participate in the book keeping.

Double spending

Double spending is a shortcoming that exists in digital currency which leaves opportunity for a particular token to be spent multiple times from the same wallet. This problem was solved by bitcoin by making all bitcoin spendable existing as unspent transaction output.

Instant transaction and global payment gateway

Bitcoin succeeded in breaking the barrier that lingers for so long which make it difficult to send money globally. With bitcoin, all that's required to send bitcoin to anybody all over the world is their bitcoin address and the most fascinating thing is that bitcoin transaction comes with low fees and transfer is within 10 minutes of confirmation.

Inflation

Bitcoin overall supply is limited to 21 million units. So, there is cap to the amount of bitcoin that can exist in circulation. This reduces the tendency of value loss by excess circulation of money, thereby preventing loss of value due to inflation.

Irreversible transaction

Bitcoin transaction are irreversible. This protects merchants from loss caused by fraudulent chargebacks and there's no need for PCI compliance. Merchants can easily expand to new markets where credit or debit cards are unavailable or fraud rates are unacceptably high. The results are lower fees, larger market and fewer administrative costs.

The risks involved

Bitcoin, as a popular cryptocurrency in the internet market and as promising as its future may seem, has several risk factors associated with its adoption, usage and purchase.

Traceabilty

This feature of Bitcoin also attracts crime. People can buy and sell drugs and other illegal items with significantly less risk of being traced by authorities. Bitcoins in this regard are similar to regular cash which is used by criminals. This fact may bring unwanted attention from governments that will outlaw Bitcoin. If your credit card is stolen or somebody hacks into your bank account there is a good chance you will not lose any money as banks will fix your balance. Even cash can be potentially recovered if the police acts fast. But with Bitcoin if you lose it you lost it for good. There is no mechanism to recover stolen or lost Bitcoins. If somebody hacks into your wallet where you store your Bitcoins you lost them for good. The best way to store your Bitcoins is on disk that is disconnected from the internet.

Privacy with regulated exchanges

Buying bitcoin online isn't easy and it may require identify verification which defeats one of its popular attributes which is anonymity. There are many exchanges that offer such services in various ways, but it's not as easy as transferring money to and from a PayPal account just yet. Though, bitcoin can be easily bought from trustworthy online vendor who sells them. This is likely to improve fast as more services will compete to offer convenient solutions.

Unregulated

The fact that bitcoin is unregulated gives way and opportunities for criminal use such as black market transaction, money laundering and other illegal activities.

Security risk

Bitcoin exchanges are entirely digital and , as with any virtual system, are at a risk from hackers, malware and operational glitches. If a thief gains access to a Bitcoin owner's computer hard drive and steals his private encryption key, he could transfer the stolen Bitcoins to another account.

Market price fluctuations

Bitcoin coin price is not stable and the price may vary slightly across exchanges, making it difficult as a reliable means of payment due to its price fluctuations.

Still too new

Bitcoin is only a few years old. It's possible that a competing crypto currency becomes more successful than Bitcoin or that somebody somehow finds a major flaw in the system. We don't have decades of history yet. Can't buy stuff. There aren't a lot of places where Bitcoins are accepted. Some countries have outlaw cryptocurrency due to its lack of regulation which makes it impossible for them to control it.

Bitcoin scams

New or inexperienced users may fall into bitcoin scams online. The fact that bitcoin has made popularity as the biggest cryptocurrency in market makes it a target for so many online scams.

Malware scams

Malwares in form of malicious code in a compromised device can hijack bitcoin from users, through stealing of wallet information. A malware was recently reported to replace copied bitcoin address in the clipboard of users phone, making unsuspecting victims send bitcoin to the wrong address replaced by malware.

Fake and scam exchanges

This is why you need to be wary of exchanges you buy or sell your bitcoin from or to. Some exchanges are just fake claiming to be affiliated to a reputable and well known company. They only exist just to scam people and disappear with their money.

ICO scam

ICO is an abbreviation for initial coin offering meaning a type of advenue created for startups to raise capital to launch their projects usually by asking investors for bitcoin in exchange for tokens whose value is believed to increase in future.

Pump and dump scam

This type of scam lures investors to buy a useless, worthless coin similar to bitcoin in hope the values rise in future. Usually, victims of such scams are given valueless coin in exchange for bitcoin without any way to sell it back in any recognised exchange.

Conclusion

Bitcoin is the first and most prominent cryptocurrency with potential of being successful, though several criticisms and negative thoughts exist about it, but the mission and vision that engenders this coin is sure great which make it unlikely to fail in the future as more and more improvement to the protocol could bring about major changes that may later make its widely adoption globally indisputable. Nigerians as a whole are getting more interested in bitcoin day by day and as a result more and more companies and exchanges in Nigeria are being established. Currently, bitcoin is not illegal in Nigeria, although due to the inability of Nigeria government to regulate bitcoin, the Central Bank of Nigeria warns against investment in it.