What is Bitcoin and How Do I Buy It?
When it comes to getting involved with Bitcoins for the first time, it is important to understand how they work. To help, here are some guidelines:
· Bitcoins are traded on exchanges, of which each is separate
◦ Different exchanges have different rules on how you can buy or sell Bitcoins, and different fees associated with them
◦ You will experience different prices with each exchanges
◦ Not all of them provide the same level of anonymity
- · There are multiple ways to obtain Bitcoins
◦ Mine them using specialized hardware
◦ Trade products and services for them
◦ Visit Bitcoin faucets, which give out small amounts of Bitcoins for free
◦ Purchase them – this is by far the easiest and fastest method
Bitcoins are not a stable store of monetary value right now. They often fluctuate from day to day, and even from hour to hour. As such, you never know what value you will have (in relation to the fiat: Bitcoin rate) at any given moment.
We are going to be dealing with the buying of Bitcoins through this article, so we are focusing on the exchanges. Here is a short chart to help better understand the main ones, followed by details on each of the exchanges covered.
Ease of Buying
Methods of Purchase
A short description of the main exchanges are as follows:
· Mt. Gox – Bankrupt. Do not use.
· Coinbase – this is the easiest to purchase from and allows instant buying through your bank account after becoming verified
· LocalBitcoins – this is the most anonymous service, as you are dealing with other individuals. You can be paid via cash using this method, or direct bank deposits and other methods
· BitStamp – Bitstamp is arguably the industry leader at the moment. Bitcoin prices are usually based off Bitstamp's price as they offer the highest standard of service compared to the other vendors in terms of reliability and speed.
Prior to making any purchases and sales, there are some important guidelines to keep in mind:
· Do not sell Bitcoins for Paypal. These are notorious for being disputed and once you've sent the Bitcoins out, you can't get them back. Buying Bitcoins for Paypal also has a negative stigma, making it more expensive as a result
· Be careful when dealing with cash, as this can lead to its own problems (both with fake bills and with threats). Always meet in public places
· Be aware that unless you are dealing with LocalBitcoins, your activity can still be tracked
· Remember not to throw your life savings into Bitcoins; the value of Bitcoin could go up at any point but it can also go down
Mt. Gox is by far the most well-known. At one point they accounted for over half of the Bitcoin transactions. Recently they claimed they lost 650,000 Bitcoins and is shutting down. Do not use Mt.Gox.
LocalBitcoins is much loved for their anonymity. Instead of dealing with linking bank accounts for deposits, you can trade with other people in a face-to-face transaction. This allows you to get deposits directly into your bank if you wish, but also opens up the opportunity for cash, which keeps everything anonymous. The downside to this is that you need to meet in very public areas, and ensure you are very careful. The more money that you have on the line, the more risky the transaction becomes.
Coinbase offers up both a wallet and a buying and selling platform. You can use their site for holding your Bitcoins, but you can also use it to buy more Bitcoins or sell some of yours directly to Coinbase. An awesome feature of utilizing Coinbase as a wallet is that as long as your transfers (to other addresses) are at least 0.01 BTC, they will even cover any associated fees. This makes Coinbase the only wallet that allows you to use them absolutely free. On top of this, when making purchases you can (once you become level 2 verified) buy Bitcoins using your bank account and obtain the coins immediately so you can spend them as you please. From a buyer's perspective, this is one thing that, other than with LocalBitcoins, you just won't find elsewhere. Not to mention this also has the benefit of not even having to leave the house!
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