Bitcoin is the daddy of digital currencies. First launched in January 2009 by Satoshi Nakamoto, Bitcoin (BTC) is a cryptocurrency and global payment system. It operates as a peer-to-peer network, where transactions take place between users directly, without any intermediary. The transactions are recorded in a public distributed ledger called a blockchain.
First and foremost, Bitcoin is a digital currency that utilizes a peer-to-peer network to facilitate transactions between people, and this network is known as blockchain. Its most prominent feature is the fact that it is the first currency to operate on a decentralized platform, which means that no single authority or person can control the Bitcoin network. Rather than being controlled by a single authority, Bitcoin is maintained by a group of coders and is run by an open network of computers, or nodes as they are sometimes called, and these nodes are spread across an entire network all over the world. The fact that the Bitcoin network isn’t controlled by anyone but is preserved by people on the network itself, has attracted a lot of attention from people all over the world who are uncomfortable with banks controlling
Choose Your Bitcoin Wallet
Before any Bitcoin purchases can take place, you will need to get a digital wallet that can store the Bitcoins. You’ll need a Bitcoin wallet regardless if you are buying bitcoins directly from other people or whether you want to use to a cryptocurrency exchange. The digital wallet contains your private key, a secret number comprising of a 256-bit string which enables you to access your Bitcoins. Your private key allows you to be able to freely move across marketplaces. The private key enables you to always have access to your wallet, no matter what marketplace you choose to use.
There are different types of wallets available, primarily software and hardware wallets. Software wallets, the most popular of digital wallets, are basically apps that connect with your regular bank accounts. Hardware wallets look very similar to a flash memory stick/USB stick and store private keys on a secure hardware device. The Hardware wallets are regarded to be a bit more secure than software digital wallets because they can be disconnected from the Internet and out of reach of hackers. Hardware wallets like Trezor or Ledger store your Bitcoins offline, so this dramatically boosts your security and offers greater protection from cyber-attacks, the only downside to hardware wallets is that they can be easily misplaced or lost.
Recommended Bitcoin Wallets
There are many digital wallets to choose from. We recommend the following wallets when discussing how to buy Bitcoin:
For further information and more in-depth digital wallet reviews, please visit our Crypto Wallets page.
Once the verification process has been complete your next job is to deposit funds into your digital wallet. Most exchanges accept US Dollars, British Pounds, Japanese Yen or Euros. Depositing fiat currency into your digital wallet will take a matter of minutes once you have linked your bank account.
Choose a Bitcoin Exchange
Once the wallet has been set up, the next step in the how to buy Bitcoin process is to choose a Bitcoin exchange to make the purchase. There are many crypto exchanges to choose from. They each have different rules, fees, and differing accepted payment methods, as well as a whole host of other factors to take into consideration.
First, you’ll need to check that the exchange accepts customers from your country. There are country restrictions in place and not all exchanges accept users from around the world.
The next important consideration is to check what payment methods are available from the exchange. The payment methods accepted differ quite considerably between exchanges. Some exchanges allow you to buy bitcoin via PayPal, whilst some exchanges only accept bank transfers. As a general rule of thumb, payment methods such as credit cards or Paypal where the buyer can request their money back, normally have higher fees, as the seller is taking any risk that you’ll cancel the payment after you receive the Bitcoin. However, payment methods such as bank transfers that cannot be reversed, are normally cheaper.
Thirdly, you’ll need to check what fees you’ll need to pay for your transactions, as these can vary wildly. There are three types of fees to consider: Fees on deposit, transaction fees, and any fees charged for withdrawals.
After determining the fees, the fourth consideration is the exchange rate. Fees are often ‘hid’ in the exchange rate and whilst some exchanges seemingly have low fees, their exchange rates are higher than found elsewhere.
Next up is deciding your buying limit, as your buying limit will be determined by your payment method and the level of your identity verification. Some exchanges have limits on the amount of bitcoins you can buy, so when choosing an exchange to buy Bitcoin, it is important to know how much you can spend and the limits that will be applicable to you.
Recommended Crypto Exchanges
The last consideration is to check out the exchange’s reputation. For full in-depth reviews, check out our best crypto exchanges.
Make the Bitcoin Trade
The final phase of the How to Buy Bitcoin process is to sign up for the exchange you have chosen and register. Most Bitcoin exchanges have a KYC (Know Your Customer) process in place. It is used to verify a customer’s identity and is something you will need to be prepared to go through. Most require just ID and a proof of residence, although a few require proof of income.
After the registration process has been completed and your identity verified, it is time to purchase your bitcoins. After the transaction is complete, the last step in the how to buy bitcoins process is to move your bitcoins from the exchange into your own personal digital wallet. This is for safety reasons and ease of withdrawal.