2. Now you’ve realized bitcoin is the way of
the future, the next step is to get some
bitcoins. But how? This guide will help
you.
You can buy bitcoins from: regulated
exchanges, or directly from other people
selling them. You can pay for them in a
variety of ways, ranging from hard cash
to wire transfers, depending on who you
are buying them from and where you
live.
3. Surprisingly, it’s nearly impossible to buy
bitcoins with your credit card or PayPal.
This is because such transactions can
easily be reversed with a phone call to
the card company (ie: ‘chargebacks’,
one of the problems bitcoin is here to
solve). Since it’s hard to prove any
goods changed hands in a transfer of
bits, exchanges avoid this payment
method and so do most private sellers.
4. First: Get yourself a ‘wallet’
You will need a place to store your new
bitcoins. In the bitcoin world they’re
called ‘wallets’ but you could also think
of them as like a bank account. The two
main options are: (1) A software wallet
stored on the hard drive of your
computer, or (2) an online, web-based
service. Both have their vulnerabilities:
if you store it all locally on your
computer make sure you back up your
hard drive regularly in case it crashes;
and online web wallets employ varying
degrees of security, from quite good to
quite poor. It’s up to you which one you
trust the most.
5. Exchanges/Online Wallets
The range of options here seems to grow
by the week, with new businesses
coming online to cater to new markets.
Some are full-blown exchanges for
trades between paper fiat currencies
and multiple other digital currencies,
while others are simpler wallet services
with a more limited range of trading
options. Many will store amounts of
digital and/or fiat currency for you,
much like a regular bank account.
6. Exchanges/wallets are the best option if
you want to engage in regular trading
and speculation, don’t need total
anonymity, and don’t mind lengthy
bureaucratic setup procedures that
usually involve proof of identity and
supplying detailed contact information.
This is the law in most countries and no
regulated exchange can get around it,
as any company interfacing with the
current financial system must meet
‘know your customer’ (KYC) and ‘antimoney laundering’ (AML) requirements.
7. Once you’ve set up your account, you’ll
probably need to link an existing bank
account and arrange to move funds
between it and your new exchange
account via wire transfer. This usually
entails a fee. Some exchanges allow you
to make a deposit in person to their
bank account (via a human teller, not
an ATM).
8. While people in most countries can
transfer money to overseas accounts,
fees are much higher and you may face
more long delays changing your bitcoins
back into fiat currency (should you still
wish to do that). If you are required to
link a bank account to use the
exchange, it may only admit banks from
that country
9. Warnings about exchanges, wallets and banks
Despite the proof of identity requirements,
remember exchanges and wallets are not
regulated as banks otherwise. There is no
insurance for your account if the
exchange goes out of business or is robbed
by hackers. Bitcoin does not (as yet) have
legal status as a currency in most of the
world, and authorities usually do not
know how to approach thefts. Some larger
exchanges have replaced customer funds
after a theft from the exchange itself, but
at this stage they are not legally obligated
to do so. And if a theft from your personal
wallet occurs due to a security or
password lapse on your part, you do not
have any guaranteed way to recover your
funds.
10. Some existing banks see digital currency as
a threat to their business model and
have been known to discriminate
against anything related to bitcoin.
Their responses have ranged from
refusing transfers to specific exchanges,
to unilaterally closing accounts of
anyone mentioning bitcoin, without
explanation. Check this list first to see
if your bank is one of them and, for
your protection, open an account with a
bank known to be more bitcoin-friendly.
