How to buy bitcoins – 3 ways

August 1, 2015 at 1:11 pm | Posted in Uncategorized | 1 Comment

I work in a store that accepts bitcoin and I get a lot of people who ask “how do you buy bitcoin?”. So I decided to create a blog post describing the process.

tldr: use coinbase/circle if you want to buy bitcoins cheap. Use bitcoin ATM’s if you want it fast.

There are three main methods:
Method 1: Use an online service such as coinbase or circle
*Advantages*
Dirt cheap fees – 1% over spot rate.
Safe and guaranteed – Both coinbase and circle are corporations, and they are regulated as such. It’s basically like paypal, so it protects you from shadiness.
User friendly – The site is fairly straightforward to use. Slightly more complicated than paypal, but not by much.
– fast for smaller amounts – Transfers are instant

*Disadvantages*
Slow – If the purchase is large, sometimes you have to wait like a day or even a week to get the actual bitcoins. The price can change somewhat during this period and sometimes they’ll outright cancel the order if the price swings too much. As of this writing, transfers of up to $100 are instant. Anything more than that, you have to wait a week.
Account limits – There are account limits ($100 – $1000) for when you can instantly trade on coinbase (for fraud reasons).
Verification is a pain – Coinbase/circle is a government regulated institution so you have to go through a lot of paperwork/hassle to sign up for the service. It can take days. Again, it’s slightly more complex than paypal.
Not private – These companies are regulated and by law and they will give private information to the authorities if required. Your bitcoin wallet is NOT anonymous and will be traced to an identity.
Do NOT store bitcoins with their service! – Rule of thumb: if someone has access to your private key, then you don’t really “own” your bitcoins. IE, coinbase can theoretically seize your funds if they want to. This sometimes happens with “cam girls” or adult entertainment workers. To be fair, paypal does this too. Once you buy the bitcoins through circle or coinbase, immediately transfer them to your local wallet on your phone or computer (I personally like breadwallet). Rule of thumb: always store your bitcoins in a wallet where only YOU have the private key. Then backup your private key.

2) Bitcoin ATM – Visit http://coinatmradar.com/ to find an BTM near you
*Advantages*
fast – Works like a regular atm. You will be in and out in a few minutes
relatively cheap – fees are higher than coinbase (5% typically), but still cheap considering the convenience.
easy – Slightly harder than an ATM, but not by much. You have to download an app on your cell phone to transfer money from your phone to the atm (or vice-versa)
safe – since it’s an atm, you pretty much don’t have to worry about scammers.
anonymous – some bitcoin atm’s identifies you via an email address and/or cell phone numbers. You can use a throwaway “burner” accounts if privacy is a concern.

*Disadvantages*
More expensive than coinbase/circle – Bitcoin atm’s charge around 5% typically
Must travel to the BTM location – You can’t do this out of the convenience of your own home, you have to physically go there.
– Not anonymous – Bitcoin ATMs verify you through cell phones and email addresses or fingerprinting or whatever. It will not protect your privacy unless you go out of your way.

3) Peer-to-peer trading
Basically trading “on the street”. You find a guy through a friend or through a service like bitcoin-otc or Local Bitcoins or Mycelium, meet at a startbucks and make the transfer person-to-person.

*Advantages*
good customer support – people who like to do business face-to-face will prefer this method. You can ask lots of questions and the dealers (assuming you find an honest one) will be happy to help.
relationships tend to form – If you do business with the same person regularly, many people choose to bypass the middleman service and deal with the trader directly. This preserves anonyminity and
allows you to better keep your privacy than to use a commercial service.

*Disadvantages*
TONS of scammers! – Tons of scammers on localbitcoins, and bitcoin-otc. If you are naive and safety is a concern, peer-to-peer is a “high risk” option. It can be more complicated as well. Unless this person is a friend or whatever, I wouldn’t use this option.
It’s a pain to coordinate meetup times – You have to coordinate a meetup/time and place like at a starbucks or something. This can be inconvenient.
It’s expensive – trading fees are typically around 9% which is relatively high compared to the previous two methods

Those are the three main options. I am a bitcoin advocate and storeowner, so if you have any questions about it, feel free to stop by my store and talk about it.

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