How to Buy Bitcoin
Buying Bitcoin is Now Pretty Easy
Have you meant to buy bitcoin for the last three or so years, but procrastinated because the whole process seemed a bit difficult?
Buying bitcoin is no longer a complicated or sketchy process. You need not be a programmer to get into bitcoin, matter of fact you need not be particularly well-versed in the arts of the computers. You also need very little specialized understanding to protect your bitcoin, and the understanding you do need is not hard to come by.
Perhaps your issue in now psychological – this author knows how difficult it is to buy into something after it has already appreciated in price. All of us except the lucky few have been through this when it comes to cryptocurrencies. But that was the case at $10, and $100, and $500, and $1,000 as well.
Just keep in mind: there will only ever be, in the history of time, 21 million bitcoin, not one bitcoin more. If you buy just one today you will always own more than approximately 99.85% of the world’s population, which is about the same percentage of the world’s population that are millionaires funny enough. If you accept the possibility that Bitcoin will become a disruptive force in finance, then surely it is worthwhile to buy a bit. Just in case the possibility proves out.
Buying Your First Bitcoin
The easiest way to buy bitcoin is to find yourself an exchange that services your country. Some are more spoilt for choice than others, but local exchanges continue to spring up to meet local demand, there should be at least one exchange that services you. Check out our exchange comparison tool, which allows you to sort exchanges based on country and deposit option.
Go on and Take the Bitplunge
As a general rule, you should prepare a photocopy of your government issued ID and proof of address no older than six months old. Simply take a photo of these with your smart phone, send them to your email, and then upload them to the site.
Once you have been verified, wire some money over from your bank. If you prefer credit or debit many of the exchanges accept these payments, but your deposit amounts will be limited. When the cash hits, go on and make an order – our individual reviews generally lay out step by step instructions on how to do this but really, it is all pretty self explanatory. Worst case scenario, just use the brokerage services offered and pay an additional 0.8% or so.
Secondary markets might require utilizing peer to peer exchanges like localbitcoins, but this is not much more difficult than using an online exchange. Localbitcoins offers an escrow service, and releases coin when the money has been delivered to the bitcoin seller. Bitcoin sellers are local in every jurisdiction, which means they will generally accept local payment options, and often cash deposits; however, you can expect to pay a premium over the straight exchange rate you see online.
A word about fees. Obviously, the goal is to pay as little as possible. Do your research, but don’t get too emotional if you end up having to pay a bit more than you would like. True story: when bitcoin was $180 I reduced my order from 100 to 30 due to my irritation at the extra $10 charged by the brokerage. That extra $12,500 is still in the bank, and has earned approximately 0.3% interest in the interceding three years.
Now that you have bitcoin, here is how you secure it
Most of the large exchanges offer custodial wallet services, often utilizing pretty sophisticated security protocols, and may even offer insurance against theft. So why are custodial wallets almost universally scorned by bitcoin enthusiasts?
Putting your bitcoin in a custodial wallet is sort of against bitcoin’s reason for being. Bitcoin exists as an efficient store of value not only in the sense that no central monetary authority can quantitatively ease your savings, but also in the sense that you alone control your wealth. Giving that control to a bitcoin exchange outsources that control. Perhaps the exchange is doing poorly and requires a bail-in from it’s users. Perhaps your particular jurisdiction takes issue with some aspect of your account and asks the exchange to freeze your ability to withdraw. Or perhaps the exchange simply disappears. Keeping your bitcoin in a custodial account means relying on a stranger, and ask Blanche DuBois how that turns out.
There are different sorts of wallets for different sorts of functions. If you hold just a little bitcoin, you could probably just get yourself a good old HD (nevermind what HD stands for, enough to know it is the type of wallet you should be using) wallet on your iphone or android. If you are holding a larger amount of savings, best to invest $90 in a hardware wallet like Trezor. Whether you go with the Trezor or an HD phone wallet, you are the sole holder of your private key, which is expressed in human form as a series of 12 or 24 words.
If you were to lose your phone or your Trezor, your wallet could be restored on any HD compatible device by inputting those 12 or 24 words. It is thus entirely your responsibility to transcribe those words and keep them safe. Note, these words are not used in the day to day – they are not passwords for sending bitcoin or anything like that. They are the backup file of your wealth – without them if you lose your device, you lose your bitcoin.
There are two main differences between Trezor and these phone wallets. First, Trezor connects to your computer via USB, and the private key is generated on the screen of the trezor – thus, it never touches that barbaric state of nature known as the internet. The second relates to the security of your pin code, which is used to authorize the sending of funds. Trezor randomizes your pin code across a nine-digit typepad displayed on its screen, and the pin is then typed online according to the scrambled trezor pin (if that is confusing, it makes total sense when you are using it). Thus, no keystroke swiping software can steal your pin and your bitcoin, as they are unaware of which number corresponds to which place on the online number pad.
I Guess this was Really Just a Pep Talk
Reading back through this article I realize that it is perhaps less a step-by-step guide and more a pep talk. And this makes sense. The findings of my non-scientific and unsurveyed survey reveal that, next to skepticism, the largest impediment to buying bitcoin or cryptocurrency is fear of the process. If you are a process fearer I say to you: the process is simple. You don’t need a step by step screenshot guide showing you where to type your name and address and how to click a bank icon. You need to get off the pot, join the .15% and pick an exchange.