How to Buy Bitcoin: The Ultimate Guide
So you've heard all the hype, the revolutionary digital currency that's reshaping money as we know it. You've finally decided you want a piece of the cake.
Great.. but how exactly do you buy Bitcoin? The process can seem daunting simply because it's unexplored territory, but we assure you, it's a straightforward process.
We know saying things like "it's easy" or "it's really simple" won't help calm the nerves. So sit back and relax while we guide you step by step on how to buy bitcoin safely and easily.
First things first, we'll explain all about bitcoin and how it works so you can better understand what you're buying.
Background of Bitcoin
To begin understanding bitcoin, you need to understand the word first. 'Bit' means ones and zeros, and 'coin' simply means money.
So bitcoin is quite literally called digital money. It’s growing to unprecedented levels these days, inviting investments from all over the globe.
Bitcoin is the future and will soon become the world’s most used currency in the coming years.
Therefore, you need to be prepared for this, and the first step is to know what is bitcoin and how it works.
Here’s a comprehensive overview that will help you understand it better.
What is Bitcoin?
After its launch in 2009, bitcoin became the face of the global cryptocurrency craze.
It’s a decentralized form of currency that cannot be controlled by central financial institutions like governments or banks.
At its core, bitcoin is basically just a file with an intrinsic value that the system stores as a transaction after purchase or receipt.
Within a bitcoin transaction, there are three fundamental elements: the transaction output, transaction input, and the total transferred amount.
Input is the bitcoin address of the payer, while the output is the bitcoin address of the recipient. If you keep your bitcoins in a digital wallet, it will have a bitcoin address that will act as your transaction id.
The Bitcoin system is powered through a peer-to-peer network of individuals, just like the volunteers of Wikipedia who create the pages and add information.
Cryptography drives its software and basic security.
These aspects make Bitcoin a code-driven currency instead of the physical value of gold/silver currency or trust-backed fiat currencies like dollars, yens, etc.
How Does Bitcoin Work?
To understand bitcoin, it’s also necessary to see how it works. Here are a few key elements about bitcoin that will help you understand how bitcoin works:
- The Blockchain:
Blockchain is the open-source code that powers the bitcoin’s public record of transactions.
Every transaction in a chain attaches itself to the code and becomes a part of the permanent transaction registry.
- Private and public keys:
Every wallet for bitcoin contains two keys: one public and one private. Together, they enable the users to sign and initiate the transactions digitally and establish authenticity.
Miners are a network of ‘volunteers’ who confirm each transaction and get paid for their efforts in a certain amount of Bitcoins.
Mining is a decentralized process that confirms or validates each transaction that occurs and registers them into the permanent registry in a chronological manner on the blockchain.
Numerous miners develop a consensus on each transaction and agree on the system’s state for it to happen. The confirmation only occurs under strict cryptographic rules that prevent users from altering, duplicating, or fabricating the record.
- Decentralized Networks
Bitcoin is based on a decentralized network of nodes (miners) who then verify each transaction between two parties.
These nodes are thousands in number and are spread across the world.
This acts as one of the bitcoin network's security layers because it makes it almost impossible for cyberattacks to occur since even if one of the nodes is attacked, it will not alter the rest of the nodes in the network.
Now that you understand the background and basics of bitcoin, you're probably wondering how safe it is to invest in a digital currency?
Don't worry, we've got you covered. Read below as we outline some key safety features built into bitcoins code and why blockchain technology is so secure.
Is Bitcoin Safe to Buy?
Many people ask questions like is bitcoin safe to buy or whether its protection protocols are up to the mark or not.
Unlike normal currencies that we use every day, bitcoin has a special operating mechanism that enables it to function independently of any financial regulations of third party intermediaries.
So does the absence of third-party insurance like that of a bank make Bitcoin unsafe? Is bitcoin safe to buy?
Let’s explore what makes them safe:
- Encryption and Safety:
Bitcoin doesn’t have typical, run-of-the-mill encryption.
Blockchain technology, one of the world’s safest mechanisms, ensure its protection from all sorts of fraud that can occur.
Blockchain technology is like a society of volunteers, connected via computers. There are a huge number of them.
They encrypt each transaction on Bitcoin’s system and record it on their registers, all of them, together.
While doing so, they ensure that they hide all personal information away from prying eyes, both online and off.
Even if some hacker breaks into one of these computers, they won’t be able to take anything away because thousands of other volunteer computers like the one they hacked with intact data.
- All records are public
You probably think that it’s not safe, aren’t you?
Well, you’re mistaken. Public records mean that all the transactions people make using bitcoins are transparent, and the public can access them.
This doesn’t mean that the anonymity of the people who exchange or use bitcoins is compromised in any way.
It only means that it’s impossible to scam, cheat, or defraud the system.
Once a transaction record goes public, it’s irreversible. It means that once you purchase or sell your bitcoin, no one can demand it back.
Thousands of people are watching over your money so that no one can steal anything.
With more than ten thousand nodes as of now, Bitcoin has servers worldwide that help its system keep track of transactions in the system.
Why is that important? Well, if one of the servers in the grid takes a hit during the attack, the others in the system can pick up its slack. In the case of a cyber-attack, this integrated grid of nodes renders it pointless.
No one can take data from Bitcoin’s servers unless they attack thousands of servers simultaneously, which is extremely unlikely.
Okay, so now that you understand that the technology is extremely secure, let us show you how to store your bitcoin.
So How Do you Store Bitcoin?
Essentially there are 2 types of ways to store your bitcoin, a hot wallet (online) and a cold wallet (offline).
Join us below while we further explain the difference between hot and cold wallets!
Hot vs. Cold Wallets: What's the Difference?
See, both of the above wallets will help you store your bitcoin.
The most significant difference is that when it comes to hot wallets, they directly connect to the internet.
On the other hand, cold wallets are a way of storage that operates offline.
Typically, the funds stored in hot wallets are readily accessible when compared to cold wallets.
However, each of these wallets has its set of pros and cons. That being the case, let’s take a look at each wallet and discuss its pros and cons.
What is a Hot Wallet?
Truth be told, Hot wallets are quite common. But unfortunately, this type of storage has the highest risk.
A hot wallet is a tool that typically allows traders to send and receive cryptocurrencies in real-time.
You don’t need a dedicated bank to conduct your transactions on a hot wallet.
Hot wallets are connected directly to the internet, and for you to gain access to your wallet, you will have to go online.
Generally speaking, hot wallets are easier to access compared to cold wallets. More importantly, hot wallets accept more tokens.
Pros of Hot Wallets
- Hot wallets are free.
- You can access your hot wallet easily through your smartphone or desktop.
- Hot wallets are easy to use.
Cons of Hot Wallets
- Hot wallets are vulnerable to hacks.
What is a Cold Wallet?
In case you want to store your bitcoin for the long term, then the best option is to go for cold wallets. That’s because cold wallets operate offline, and they have the highest level of security.
There are different options when it comes to cold wallets, including paper or hardware wallets. A hardware wallet is like an external device such as Ledger Nano S or even Trezor.
These external devices will help you store your private keys. A paper wallet is simply a piece of paper with your private and public keys printed on it.
Pros of Cold Wallets
- You can store large amounts of bitcoin for an extended period.
- It has a higher security level compared to other forms of storage.
Cons of Cold Wallets
- It can be inconvenient when it comes to daily transactions.
Cold vs. Hot Wallets: Which is Better?
The answer to that question really depends on what you need.
If you need high security and don’t mind the accessibility issue, then cold wallets are your number one option.
But if you need quick and direct access to your bitcoin, then hot wallets are your best option.
All in all, understanding the advantages and limitations of both wallets will help you diversify your options. Each of these storage types will help you in one way or the other.
Therefore, it’s best to consider both options if you have a large bitcoin investment.
Congratulations! You now understand the fundamentals of bitcoin and know how to safely store your bitcoin, which puts you ahead of 90% of the population. Below we'll show you all the different ways you can buy bitcoin!
How to Buy Bitcoin With a Credit/Debit Card
This is probably the easiest way to purchase bitcoin due to almost all cryptocurrency exchanges accepting credit/debit cards as a payment option.
If you'd like to use your credit/debit card to purchase bitcoin on an exchange but aren't sure which exchange to pick, don't worry; we've got you covered! See our list of the Best Cryptocurrency Exchanges in 2021.
For this example, we're going to use an exchange called Binance, all exchanges are pretty similar, and you will be able to get an idea from the example below.
Step 1: Sign up for an exchange
Step 2: Click 'Buy Now' or 'Buy Crypto' on the main dashboard when you first sign in.
Step 3: You'll be taken to the page below, choose your native currency, select that you want to buy bitcoin and then add your card details just as if you buying anything else online.
Lastly, click 'Buy BTC.'
Yes, it's that easy!
Congratulations, you've just purchased your first bitcoin!
Once you've completed this straightforward 3 step process, you can expect to see your bitcoin within a minute or two; if not instantly, your bitcoin is now being stored in a 'hot wallet' on the exchange.
How to Buy Bitcoin with PayPal
PayPal is one of the most famous online platforms for transactions. After bitcoin made its name, PayPal also made things favorable, making it easy to buy bitcoin through PayPal.
However, it is still challenging to find authentic platforms from where you can buy bitcoins with PayPal without getting scammed.
Below are some great, credible sources that you can use to buy bitcoin with PayPal.
Buying bitcoin with PayPal via eToro
eToro is one of the easiest ways that allow you to buy bitcoin with PayPal.
The drawback of using eToro is the time it takes to transfer the bitcoins you bought to your wallet. If you want to keep your eye on bitcoin prices, eToro is the easiest broker to use.
The main drawback of eToro is that it isn't available in quite a few countries. The positive aspect is the low fee it requires to make transactions.
Buying bitcoin with PayPal using LocalBitcoins
LocalBitcoins is a proper marketplace; unlike eToro, you can buy bitcoins with PayPal easily as buyers and sellers are connected directly.
This increases the chances of getting scammed, so you have to choose your seller and buyer carefully.
Don’t make transactions until the source is credible.
The transfer once you buy bitcoins is quick, and the variety of sellers is also huge as people from different parts of the world are surfing the platform.
The downside is the fee they take on transactions; it is relatively higher than other platforms.
Buying bitcoin with PayPal using xCoins
People usually get confused with xCoins.io and Coins.com. xCoins.io is a different kind of platform; they don’t offer to sell you bitcoin; instead, they lend you bitcoins.
xCoins is a bitcoin lending company. You can take loans in the form of bitcoins; all you have to do is verify your ID through simple steps and then transfer the amount equivalent to the bitcoins you want along with interest and other fees.
Xcoins is one of the oldest platforms allowing bitcoin transactions, but most people don’t use it because they get confused by their business model or interface.
Buying bitcoin directly from PayPal
In October 2020, PayPal decided to get in the game directly by forming a partnership with Paxos, allowing direct purchases of bitcoin and different cryptocurrencies directly from their digital wallet.
This made things easier for people; they can now pay the retailers or merchants using bitcoins bought from their digital wallet without repercussions.
There is no chance of being scammed or any kind of risk as you are using PayPal directly.
The transaction fee varies between 1.5 and 2.4 percent, depending on the size of the purchase you made.
However, there are a few drawbacks to this platform.
Users cannot transfer the bitcoins to different accounts or withdraw the money to use them somewhere.
Another major drawback is that this service is only available in the US for now. It is expected that these drawbacks will be removed in the future by Paypal.
How to Buy Bitcoin With Skrill
Like other digital wallets, including PayPal, Payoneer, etc., Skrill is also a famous and secure platform that thousands of people worldwide use.
You can easily buy bitcoin using Skrill if you already are a user of Skrill.
It is quite popular for bitcoin transactions and dealings due to its quick transfers and authenticity that many other platforms still lack in.
Skrill is supported by many platforms where you can directly deal with the seller and buy bitcoins using Skrill.
Below are some platforms that can allow you to buy bitcoins using Skrill easily:
Buying bitcoin with Skrill using LocalBitcoins
LocalBitcoins has a vast coverage worldwide; it provides a decent environment for the sellers and buyers to interact in. the communication is done directly, and no third party is involved.
There is a variety of purchasing methods being offered by the sellers, Skrill being one of them.
You need to find a legitimate seller with a reasonable bitcoin price offering, and if they accept digital transactions, you can buy bitcoins using Skrill to pay them.
You need to perform verification of your ID, depending on the trader you are dealing with.
You can buy any volume of bitcoin and cryptocurrencies as there is no limit on purchasing. You can also sell bitcoin for Skrill funds if you find an appropriate buyer.
Buying bitcoin with Skrill using BitPanda
BitPanda is also one of the famous platforms if you want to buy bitcoins using Skrill.
This platform mostly favors the European traders because it only accepts EUR transactions, as it is based in Austria.
To buy bitcoin using this platform, you need to do a full verification of yourself. It is required to provide a scanned copy of your ID and proof of address.
Once you are done with the verification you can buy bitcoins of any volume between 10,000 EUR daily and 300,000 EUR monthly.
There is a fee on transactions that aren’t mentioned directly by the BitPanda platform, but they are included in the bitcoin.
Buying bitcoin with Skrill using LakeBTC
LakeBTC is a renowned and well-known platform, which allows its users to keep both the local currency and cryptocurrencies in their accounts.
It is also relatively cheaper than other platforms, using a Skrill option, the only fee you need to pay is the maker fee ranging between 0.2% to 0.1%; this amount depends on the volume you purchased or sold in a month.
To trade bitcoin, your Skrill account needs to be fully verified. Unverified users cannot make trades as they are not allowed to use local currencies.
The transaction time is very quick, and transfers are done instantly.
How to Buy Bitcoin Anonymously
Bitcoins are precious these days, and they’re only projected to grow from here. In such a scenario, it’s only sensible to invest in them.
However, many people want to keep their identities hidden and buy bitcoin anonymously for security and protection from theft or cyber-attacks.
If you’re wary about your protection and security, here’s how you can buy bitcoin anonymously:
How to Buy Bitcoin Anonymously in Person
There are two main ways to buy bitcoin anonymously without revealing your identity despite going out to buy personally.
The first way is to use a Bitcoin ATM or BATM. Bitcoin ATMs are automated machines that you can use to convert your fiat currency to cryptocurrency. You can use the internet to find the nearest BATM around your location. You can also lookup ways that you can do so without leaving any traces.
However, even if you want to play by the book, you can complete your transition from normal to cryptocurrency; the BATM will be more discreet than other centralized systems.
If you'd like to search for your nearest bitcoin ATM, simply click here.
Apart from that, you can also find Bitcoin sellers who are willing to sell you bitcoins for cash.
Using websites like Localcryptos, local.Bitcoin.com, or Localbitcoins, you can filter out individuals nearest to you willing to sell their bitcoins in person.
You’ll have to contact them and find out whether they’re willing to meet you in person.
The terms and conditions of different websites may vary, but generally, people don’t mind if you buy bitcoin anonymously from them in a cash deal.
The downside to this is the trust factor, and you’ll have to build trust with regular communication and starting with smaller amounts. You can use social media sites like Facebook, LinkedIn, etc., for this too.
How to Buy Bitcoin Anonymously Online
If you’re looking for ways to buy bitcoin anonymously online sitting in the comfort of your own home, you’ll need a peer-to-peer exchange platform like local.Bitcoin.com, Localcryptos, etc.
From gift cards and bank transfers to PayPal and other digital means, there’s a whole wide range of payment options that you can use to pay the sellers.
Your identity can only be revealed to the person you’re buying the bitcoins from no third party.
If concealing your identity from the seller is important for you, it’s possible to pay them from an account that’s not in your own names, like a trading account or a PayPal business account.
There are many Peer-to-Peer bitcoin exchange platforms available, and there are many ways to circumvent them through identity revelation.
Additionally, you can also pay a third party like students, unemployed people, etc., to buy Bitcoin for you.
Bitcoin is the name of protecting your financial assets against all that is unexpected.
You can place a safeguard against economic uncertainty, government crackdowns, black swan events, etc.
Simply put, buying a bitcoin as anonymously as you can is a significant investment for your future self.
It’s your job to protect your own identity and keep your bitcoins safe from any cyber offensive.
As you can see, there are many different ways to purchase bitcoin.
Bitcoin is growing every day, and with it, so are the technologies and platforms that support it; as time goes on and bitcoin becomes widely adopted, you'll be able to purchase it almost anywhere.
This concludes our ultimate guide on how to buy bitcoin; if you have any questions, please leave a comment below!
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