How and Where to Buy Bitcoins
You’ve been hearing a lot about bitcoins recently, right? It's all over various different media. There is talk of bitcoins on the tv. There is talk of bitcoins on social media. Everyday new articles are being published about bitcoins. Yet, despite all the incessant talk of bitcoins, no one is actually talking about how to actually buy them? Funny, right?
Don’t worry, I felt the exact same thing when I heard about bitcoins. Everyone’s talking about bitcoins but no one’s actually talking about buying bitcoins. In this article, we will avoid all of the superficial talk of bitcoin and actually discuss how and where to buy bitcoins. Seriously, once you’ve read the article, you will have a fairly good understanding of the various avenues of getting bitcoins.
How to Buy Bitcoins
There is nothing special or difficult about buying bitcoins. It is more or less like shopping online. All you need to know is where to buy them and how to store them. Let me walk you through all of the ways you buy bitcoins and the options you have for storing bitcoins.
A video explaining how to buy bitcoin using Coinbase
Before we talk about buying bitcoins it would be more appropriate to discuss a few vital prerequisites for buying bitcoins. You know, such as getting a bitcoin wallet, without which you can’t really hold bitcoins.
Types of Bitcoin Wallets
A bitcoin wallet is also known as digital wallet. It is a software or an app where bitcoins are held. These wallets come in many shapes and sizes. There are computer based or local wallets, mobile app wallets, online or digital wallets and even various types of hardware wallets including paper wallets. Let’s briefly look at the types of wallets before going any further.
1. Local Wallets
Local wallets are simply downloadable software such as armory wallet. These wallets have to be downloaded onto a computer and installed as any computer software. Once you have a wallet, you can generate something called a private key, which is more or less your wallet account number. You use this account number to send or receive bitcoins in your wallet.
Using a local wallet is like storing your bitcoins or money onto your computer. You would need access to your computer in order to access your bitcoins. You can even make backups of your local wallet for security purposes. For example, if your computer dies, you can use the backup to retrieve the software in a different computer.
2. Mobile Wallets
Mobile wallets are basically apps for your smartphone. They are pretty much like downloading an app on your smartphone and using it to store bitcoins. Think of Google Wallet. Although Google Wallet is not a bitcoin wallet, it is a digital wallet of sorts.
GreenAddress is another example of a bitcoin mobile wallet. You can download it onto your smartphone and use to store, send or receive bitcoins. The advantage is that you can have access to your bitcoins as long as you have your smartphone. And, if you lose your smartphone you can effortlessly retrieve the bitcoins.
3. Web-Based or Online Wallets
Web based wallets are pretty similar to cloud storage. Your bitcoins will be stored with the service provider. The major advantage to online wallets is that you can have access to your bitcoins at all times as long as you’ve access to the internet. It might not be the safest method of storing bitcoins, but it is ideal if you need to make small purchases as in the case with cash.
4. Hardware Wallets
Hardware wallets, as the name suggests, are physical storage devices dedicated for storing bitcoins and other cryptocurrencies. It is by far the safest method for storing large quantities of bitcoins. These devices offer a number of vital security measures. For example, if you lose your wallet, you can still retrieve your bitcoins without any real effort.
5. Paper Wallets
Paper wallets are, kind of, similar to hardware wallets. It is pretty much like holding bitcoins in the form of cash. You print out a piece of paper with an address written on it. The address will contain the bitcoins. So in essence, you can exchange bitcoins as you would exchange cash money.
Now that we’ve covered how to store bitcoins, it's high time we talk about buying bitcoins. There are a number of way we can buy bitcoins. The best place to buy bitcoin is through a bitcoin exchange.
First let’s go over what exactly is a bitcoin exchange, how it works and then we can look at some of the best bitcoin exchanges.
What are Bitcoin Exchanges
A bitcoin exchange is like a stock exchange but instead of buying or selling stocks, we can exchange our traditional money for bitcoins or other cryptocurrencies.
For example, I can exchange my US dollars for bitcoins or exchange my bitcoins for Euros. Different exchanges accept different currencies and cryptocurrencies. You would ideally want to use an exchange that supports your local currency.
Essentially, it is a digital marketplace, where buyers and sellers of bitcoins can exchange cryptocurrencies for other currencies at the current market price.
Before we look at some of the more established exchanges, any change you’re wondering how to buy bitcoins with credit card? Well, don’t worry. Most exchanges accept credit cards among other options. We will talk about this after looking at a few bitcoin exchanges.
Types of Exchanges
1. Exchange Platforms
Exchange based platforms provide a platform for buyers and sellers to trade among themselves at the prevailing price. The company facilitating the trades takes a fee, either flat rate or based on a percentage of the amount involved in each transaction. Coinbase is one of the most popular direct exchange for purchasing bitcoins.
2. Trading Platforms
Trading oriented platforms not only offer a way to buy and sell cryptocurrencies but also provide derivatives contracts for margin or leveraged trading. These platforms are ideal for short term traders looking to leverage their positions to take advantage of short term changes in prices. HitBTC is an excellent example of a trading platform.
3. Direct Exchange
Direct exchange platforms are less like a stock exchange and more like a meeting place for buyers and selling, where the company provides an escrow service to prevent fraud. LocalBitcoins is by far the most popular platform for direct exchange.
Broker-dealers are similar to foreign exchange dealers. They sell cryptocurrencies to investors at a price set by the brokers themselves. They usually make money off the spread, which is the difference between the bid and ask price. Such services are ideal for large investors or investment funds. Genesis Trading is one example of a broker-dealer specializing in bitcoins.
Top 5 Exchanges Where You Can Buy Bitcoins
Coinbase is also considered as one of the more well established and reputable exchanges. It offers a number of services including a cryptocurrency wallet, exchange trading platform and API for merchants to accept payments in bitcoins. The company offers trading functionality in 25 countries, while its wallet service is available in 190 countries.
Operates under the BitLicense issued by DFS or New York State Department of Financial Services. It is also one of the few exchanges that offers instant purchases of bitcoin using a US bank account. One of the downsides of using Coinbase is that it only a handful of cryptocurrencies.
HitBTC is a Euro-centric bitcoin exchange. The exchange is widely known for its cutting-edge matching engine technology. It also offers one of the most advanced FIX API and REST API, meaning, it attracts professional algorithmic traders, ensuring high liquidity and instant order execution.
Another advantage to using HitBTC is the large number of listed cryptocurrencies. Its users can take advantage of various different altcoins as liquidity shifts between various different exchanges, ensuring the ability to quickly profit from the market.
Bitfinex is one of the most popular and established crypto currency exchanges. Due to its size, it has one of the highest volumes of all exchanges. What makes bitfinex one of the most popular exchanges is that it not only attracts short term traders, but also large investors who would rather earn interest by lending their capital to short term traders.
Risk-averse investor can lend their capital and receive daily interest payments based on the prevailing interest rates. The exchange guarantees that the lender will receive their interest as well as capital even if the borrower or margin trader goes bust. However, Bitfinex is not ideal for people interested less established altcoins.
Poloniex is also one of the largest exchanges in terms of volume. Similar to Bitfinex, its services includes an exchange platform, a margin trading platform for leveraging trading and a lending platform for risk-averse investors to earn interest by lending their capital to margin traders.
The major disadvantage of using Poloniex is that it does not accept fiat deposits. This means, you can’t directly deposit money into the exchange. So, we’d have to first make a deposit in one of the exchanges that accept fiat currency and then transfer cryptocurrency to Poloniex.
YoBit is a bitcoin exchange based out of Russia. It is considered as one of the leading exchanges in Russia. One of the attractive features of using the exchange is the deposit and withdrawal of funds. Most exchanges can hold on to investor funds for upto a week, whereas YoBit is renowned for seamless transfer of funds.
As far as the security of the platform and investor funds is concerned, according to the company, most of investor funds are held in cold storage for maximum security. Individual users have the option to use two-factor authentication protect their accounts.
One of the downsides of using the exchange is the user interface, which is a bit detailed and have a bit of a learning curve, which most beginners will have to get around.
The world saw the first bitcoin ATM come into existence in 2013. Since then, these machines have proliferated around the world. Although they are still not very common, their numbers are rapidly increasing, especially in major cities around the world.
How Does a Bitcoin ATM Work?
A bitcoin ATM looks exactly like a conventional ATM but is a bit different in the way it works. These machines are connected to the internet instead of a bank account. It can be used to sell bitcoins, as well as buy bitcoins for cash. Bitcoin ATM providers do require their users to have an account with them in order to transact on the machine.
Bitcoin ATM Fees
When it comes to bitcoin ATM fees, we are compelled to offer a word of caution. The convenience these ATMs bring does come at a cost. Although rates may vary depending on individual ATM operator, all of them charge much higher fees than most bitcoin transactions.
Average transaction fees on most bitcoin ATMs range between 8 to 10%, which is no doubt quite exorbitant. However, as the number of ATMs increases as well as its users, the fees should come down as well.
Bitcoin ATM Map
Bitcoin ATM map is a service that helps us find Bitcoin ATMs near our location and also help us stay up-to-date on new ATMs. Coin ATM Radar is the most well known and widely used map for not only finding the nearest bitcoin ATM but also for finding the cheapest ATM rate.
How to Buy Bitcoin with Credit Card
Buying bitcoins using a credit card used to be quite difficult. However, that’s no longer the case and if you wish to buy bitcoins using your credit card, you shouldn’t really have much of an issue.
Most bitcoin exchanges, including Coinbase, accepts credit cards to fund your account. All you would have to do is, add your credit card information to your Coinbase or any other exchange. Wait for the verification process. Once your information is verified, you can buy bitcoins as easily as clicking on the buy icon.
How to Buy Bitcoin with Paypal
Since Paypal offers chargebacks, none of the exchanges accept Paypal as an option for buying bitcoins. But despite that, there is a way to buy bitcoins using Paypal. It involves VirWox or The Virtual World Exchange. VirWox is an exchange for a virtual currency called, SLL or Second Life Linden Dollars. It is used as the currency for a virtual world/game called Second Life.
A step by step guide for buying bitcoins with Paypal:
1. Go to VirWox and create a free account.
2. Fund your account using Paypal.
3. Go to the exchange and buy SLL by converting dollars into SLL.
4. Convert your SLL into bitcoins.
5. Now, withdraw the bitcoins to your bitcoin wallet.
Since the method involves two transactions, first buying SLL then buying BTC, you will be paying fees on both transactions. Therefore, this method would be a bit more expensive but it is a reliable way to buy bitcoins with Paypal.
As we mentioned at the start of the article, buying bitcoins isn’t difficult at all. You just need to know the various options you have and the method of payment you can use. If you’ve come this far in the article, you should be aware of all of the major avenues for buying bitcoins.
So, if you found this article to be informative and valuable, why not consider checking out of the other articles on the website? Each and every article will help you understand bitcoins and cryptocurrencies and provide you with actionable information that will help you master the future of money.
Frequently Asked Questions
What are Bitcoins?
Bitcoin is digital money based on a decentralized system of payment that is powered by its users rather than a central authority.
Who Runs the Bitcoin Network?
No one owns or runs the bitcoin network. Bitcoin is controlled and operated by its users. Although a number of bitcoin developers improve the software, they cannot unilaterally force a change on the network.
How Does the Network Operate?
As far as the individual user is concerned, it is nothing more than a software or an app that allows us to send or receive money through a decentralized network. Behind the scenes, there is a complex network operated indirectly by the network’s users.
Do People Really Use Bitcoins?
Since bitcoin’s inception, its popularity and use has been increasing exponentially. Increasing number of businesses and individuals are using bitcoins. This includes online business as well as brick-and-mortar businesses.
How to Get Bitcoins?
There are a number of ways to get bitcoins. You could receive bitcoins as a payment for the goods you sell or the services you offer. You could buy bitcoins from a bitcoin exchange. You could also buy bitcoins from someone you know. Or you could even get bitcoins by mining for new bitcoins.
Is Using Bitcoins Easy?
Using bitcoins to send or receive money is as easy as using an app. Payments are made or received using a computer or a smartphone. All you need is a bitcoin wallet, which is like an app, to get started with bitcoins.
Is Bitcoin Safe?
The best part of using bitcoins is that it doesn’t require any trust. The technology itself is completely safe. As long as you protect your bitcoins, your bitcoins should remain completely safe and secure.
Can I Make Money From Bitcoins?
A number of people look at bitcoins as an investment. Although there are risks to all new investments, it also offers potential for future gains. As long as increasing number of people adopt bitcoins, its value would continue to increase and hence, potential to make money. Read How to make money with Bitcoin.
Is Using Bitcoins Legal?
Except a handful of countries, bitcoins are not illegal is most jurisdictions. Bitcoin is increasingly being recognized as a viable way to send or receive money. For example, FinCEN, a US government agency recognizes bitcoin.