If you are lucky enough to be reading this, we are witnessing the growth of Bitcoin on-ramps sprouting up in every part of the world. It’s hard to appreciate how early we are in this space, but it truly is still early. Nine to ten years ago, it was much harder and far from straightforward to obtain any Bitcoin directly from a website. One would either have to buy them from someone in-person or they would have to be comfortable using computers and then learn how to set up a miner to earn Bitcoin. It was not until 2010, the user dwdollar on bitcointalk.org brought up the need for an exchange to have the community agree on price. The proposed exchange, bitcoinmarket.com, was later overtaken by it’s successor, Mt. Gox. Despite the meandering journey that Bitcoin has taken in becoming more accessible, there is still quite a bit of confusion on how to buy Bitcoin and we hope to cover enough options to get you started.
1. Exchanges
There should be at least one or two exchanges available for everyone around the world to purchase their Bitcoin. If you are based outside of North America, a comprehensive list of exchanges may be found on bitcoin.org.
Bitcoin only
Additional Bitcoin only exchanges outside of the US
- Canada: BullBitcoin
- Australia: Amber
- UK: CoinFloor
How many exchanges should I be signed up for?
This all depends on your own location and situation. For the hardcore Bitcoiners who only purchase their Bitcoin off of “Bitcoin only” exchanges, it may be helpful to have contingencies set in place. Let’s say for whatever reason, you need to offload some of your Bitcoin as quickly as possible. Your first option is of course the Bitcoin only exchange you originally purchased your Bitcoin from (Swan Bitcoin is the exception). The process should be fairly straight forward and just as simple when initially making your purchases. But for whatever reason your preferred exchange is down and you are unable to execute your sell orders. You have the option to either wait until the exchange comes back online or you may try one of the other available exchanges. Keep in mind that it is still early in the space and these Bitcoin only exchanges are not available everywhere. If you have access to at least one, that is great but in the case of an emergency, you have to rely on that exchange operating 24/7 without interruption. This is not to say that any of the above exchanges have a history of being down during large volume days, but during the 2017 bull run there were many exchanges experiencing an influx of new user sign ups. The large growth in sign ups were not anticipated and exchanges had to go through periods of growing pains. These issues were causing certain services or whole platforms to crash and be unavailable for periods of time.
There is also the envious problem of reaching your daily or monthly limit of purchases. Once you reach your purchase limit, it is not guaranteed that an exchange will increase your limit. In this situation you will have to wait a certain amount of time before purchasing more Bitcoin. If you are bursting at the seams with capital to invest, it may be wise to reach out to the exchange’s support while applying to other exchanges. The exchange may offer different services depending on how much capital you wish to invest. Below are a few other exchanges to consider signing up for:
Crypto Exchanges
Some exchanges offer loans or credit options for purchasing Bitcoin. Use debt sparingly and with your own discretion. You do not want to put yourself in a position where you are forced to sell your Bitcoin in order to cover debts.
At some point, most exchanges will offer a lot of the same features and competitive rates as the space matures.
Pros of centralized exchanges:
- Convenience.
- Fast transactions.
- High volume and liquidity.
- Support services are helpful and aware of customer needs.
Cons of centralized exchanges:
- During periods of growth, an exchange may not have enough staff to quickly resolve issues for their customers. This depends on the exchange.
- Personal information is required to purchase and sell Bitcoin. You must trust that the exchange does not lose your sensitive data and information.
- If you store your bitcoin on the exchange, the site controls the keys to your coins.
- Exchanges are an ideal target for bad actors.
2. Bitcoin ATMs
What is a Bitcoin ATM?
A Bitcoin ATM allows users to purchase Bitcoin with cash or a debit card. Similar to a banking ATM, they are kiosks located in similar spaces. Most are bought or rented by store owners and may be found in coffee shops, pharmacies, and malls. Unlike a banking ATM, you will not need an account to purchase Bitcoin but they may ask for a phone number. Some may require an account but if you prefer to purchase Bitcoin without handing over your sensitive information, a non-KYC Bitcoin ATM may be an ideal option for you.
How to use a Bitcoin ATM
Bitcoin ATMs may be found with a simple Google Maps search for your area or you may click on one of the Bitcoin ATM websites listed below. Once you find an ATM at a location of your convenience, you will have to physically go to the machine in order to purchase Bitcoin.
Bitcoin ATMs
Once you arrive at a certified Bitcoin ATM, you will be given the option to purchase Bitcoin and select how much you would like to purchase. Depending on the cash amount, the less Bitcoin you are purchasing, the less identification is needed. Also, you will need a wallet already generated on your phone or you may type in the 34 character public address into the kiosk. After scanning your wallet’s QR code, you will then be prompted to deposit your cash and then verify the amount you want to deposit. Bitcoin should then be available in your wallet.
Pros of Bitcoin ATMs:
- Access to non-KYC Bitcoin.
- Great way to obtain Bitcoin if your account is pending approval with an exchange.
- Fastest way to buy Bitcoin with cash. No need to deposit cash into your bank account and then purchase from your phone or computer at home.
Cons of Bitcoin ATMs:
- User needs to be physically in the same location as the ATM.
- The Bitcoin ATM may be out of service. If there is only one machine available in your area, this may lead to delayed opportunities in purchasing Bitcoin.
- Must make sure not to lose the printed QR code (provided by the ATM) if the user is selling their Bitcoin through the ATM.
- For most Bitcoin ATMs, you will need a Bitcoin wallet already generated.
- Higher fees and premiums when compared to prices on commercial exchanges.
3. Peer-to-peer or decentralized exchanges
What is a decentralized exchange (DEX)?
Decentralized exchanges may be used in a similar fashion to a centralized online exchange but the big difference between the two is that there is no broker or third-party to finalize transactions. All transactions are made directly from one person to another (peer-to-peer AKA p2p). Fairly similar to an OTC exchange except the transactions are made on-chain for the Bitcoin side and cash is settled through a commercial bank.
Centralized versus decentralized
A centralized exchange will require KYC (know your customer), which is a regulation that must be complied with in order to operate as a business in the US and other territories (although it is less enforced outside of the US). You will also come across the abbreviation AML which stands for anti-money laundering. These regulations are put in place to prevent fraud and protect their customers. Regardless of whether or not these laws are effective, there are still options to avoid handing over your identity and other sensitive information to purchase Bitcoin.
How to use a decentralized exchange
You can think of it as a physical market with buyers and sellers. You have the option to put in a purchase or sell price for a certain amount of Bitcoin. If there are other traders interested in your set price, they will put in an offer to purchase or sell to you. Once an agreed upon price for a specific amount of Bitcoin occurs, you will then have to fund a security deposit (with pre purchased Bitcoin) and then the seller has to confirm the transaction. There is a wait period for the next Bitcoin block to be mined and once that occurs, the transaction will be confirmed on the blockchain. The buyer is then required to send funds through a traditional bank (for example, Cash App or Chase Quickpay) and once it is sent and confirmed in the DEX, the seller may then confirm it was received on their end.
Decentralized exchanges
Pros of decentralized exchanges:
- Not controlled by a single entity.
- No approval process necessary for signing up.
- Privacy of users is held. No need to provide personal information to use a DEX.
- Direct access to sellers and buyers eliminate the need for high exchange fees.
- Faster transaction times.
- Because it is decentralized, there is less of a chance the platform will be shut down.
Cons of decentralized exchanges:
- Volume on these exchanges may be relatively low.
- Will usually have to use a bank or app to transfer your fiat directly to the seller and vice versa.
- No customer support.
- Premiums and discounts are higher than they would be on a centralized exchange.
This may seem like a lot to take in at first, but these are important things to consider when buying Bitcoin. Many readers may take the opportunity to try all three methods for purchasing Bitcoin. There is no perfect way to buy Bitcoin, it all depends on what works best for you. Keep researching on your own and connect with other Bitcoiners to see what also works for them.
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