You can also get Bitcoin through an exchange, where you can trade between different types of traditional currency and cryptocurrencies.
For example, you can trade from bitcoin to USD, and from USD to bitcoin, naturally.
Exchanges are important because they set the price of bitcoin, since they define the market value.
There are a lot of exchanges, some more reputable than others, so it’s important to do your own due diligence in choosing which exchange to use.
For example, there’s the distinction between centralized and decentralized exchanges.
Centralized exchanges are easy to use and easy to access, but could pose a risk for your funds.
There have been some infamous hacking incidents over the years.
Think of the Mt. Gox hack and bankruptcy, and also the more recent BitFinex hack in which approximately 120,000 bitcoins were stolen.
As a general rule of thumb, it’s never safe to keep your money in exchanges in the long term.
A lot of people do this, and it’s unfortunate when they lose all their funds when a hack does occur.
[decentralized exchanges] So naturally, following the trend of decentralizing Everything for security reasons, we now have decentralized exchanges They don’t rely on a third party service to hold the customer’s funds, or do any of the mission critical back end work.
Instead, trades only occur directly between users (think P2P).
Generally this is done by creating proxy tokens, or assets, that represent certain amount of fiat or crypto currency.
Decentralized exchanges can also be trustless.
You don’t have to trust the security or honesty of the exchange since the funds are held by you in your personal wallet, and not by a third party.
Some examples of decentralized exchanges are Bitsquare, Bitshares, Openledger, NXT, CounterParty, etc.
Decentralized exchanges might not necessarily be better than centralized exchanges, especially since large centralized exchanges are generally backed by powerful companies that can invest in high security, but of course, do your own due diligence.