So, the Bitcoin rally is starting again (it doesn’t matter when you are reading this, there is always a rally coming soon!) and you are ready to buy your first Bitcoin. Or perhaps you purchased Bitcoin back in 2013 for other...purposes, and need a refresher course to get back in the crypto game. Either way, there are currently many different ways that you can buy the very first cryptocurrency.
Let’s get started.
Getting a Bitcoin Wallet
In another Alexandria article, we already explained what exactly a Bitcoin wallet is. If you have outstanding questions, take a look over there — but the most important thing you need to know is that a Bitcoin digital wallet functions differently than a bank account.
Each Bitcoin wallet has both a private and a public key. The public key is used by anyone, anywhere, to send Bitcoin to your wallet address. Your private key is only for you, and you need it to access your funds — so it's best to write it on a piece of paper and keep it safe from the prying eyes of the world.
How do you get a Bitcoin wallet? You first need to choose which type of wallet you want — hardware, cold storage, paper wallet, etc. — and then go to that infrastructure and get started.
Buying Bitcoin on Cryptocurrency Exchanges
Buying Bitcoin on cryptocurrency exchanges is one of the most user-friendly ways to purchase Bitcoin. CoinMarketCap actually has a “How to Buy Bitcoin” guide of crypto exchanges, where you can compare an exchange’s location, regulation, fees and payment types with its competitors. When choosing a Bitcoin exchange, look for one that operates in your jurisdiction and has a payment method you are comfortable with — for example, if you want to buy Bitcoin with a credit or debit card, you’ll need to find an exchange that accepts cards, and ideally for the smallest fees possible.
If you choose to buy Bitcoin on a cryptocurrency exchange, you may also have to go though Anti-Money-Laundering and Know-Your-Customer measures like submitting a government ID with a selfie, which can sometimes take several days to be authenticated.
Buying Bitcoin P2P or on Decentralized Exchanges
Buying Bitcoin on a peer-to-peer network like LocalBitcoins or decentralized exchanges can be similar to buying Bitcoin on a centralized Bitcoin exchange — but there are key differences.
On LocalBitcoins, for example, you yourself are in charge of finding a seller with a price that’s acceptable to you. LocalBitcoins sellers may have different restrictions, like only accepting a certain type of bank transfer, or only wanting to sell a certain amount of Bitcoin. The benefits of using a peer-to-peer service like LocalBitcoins is that the transfers are usually instantaneous — once you put your fiat currency into escrow, the seller has a certain window of time, usually 80 minutes, to send you your Bitcoin. If they don’t follow through, your money is released back to you, and you can try again.
On a decentralized exchange, buying digital currency in general is easy, but buying Bitcoin specifically can be difficult. This is because Bitcoin does not have smart contract support, so it needs to be “wrapped” in order to be bought and sold on a decentralized exchange. For more information on “wrapping,” see CMC Alexandria’s article on Wrapped Bitcoin. Atomic swaps are another feature that can be used to buy and sell Bitcoin on a decentralized exchange, but it also has its minuses — they are more suited to infrequent trades than day trading.
It is possible to trade Bitcoin on a decentralized exchange without wrapping it or using an atomic swap, but this requires the exchange to use a fast off-chain matching engine that is able to deal with state channels across various blockchains — if you don’t understand what that means, that’s normal for someone just starting to buy their first Bitcoin! And as you can see, there are other options.
Buying Bitcoin With a BTC ATM
If you don’t want to deal with trading platforms in any form, Bitcoin ATMs do exist that allow you to purchase Bitcoin right on their physical interface. A Bitcoin ATM is similar to a regular ATM — but it transacts in Bitcoin. Obvious, right?
While some BTC ATMs allow you to insert your cash to buy Bitcoin, some allow you to do the opposite, and sell your digital assets for cash, like USD — but we are talking only about buying Bitcoin right now!
Some Bitcoin ATMs require you to follow AML/KYC procedures like entering your phone number or showing an ID, while others don’t — it just depends on the provider.
Buying Bitcoin With PayPal
Last, but certainly not least, is the option to buy Bitcoin with PayPal. This step means that you can sidestep learning about exchanges, peer-to-peer protocols or decentralized exchanges and just stick with something you are familiar with.
PayPal announced in October 2020 that they will allow their customers to buy and sell cryptocurrencies, including Bitcoin, from their PayPal account. While this method of buying the oldest crypto might not sit well with those old-school cypherpunks that live and breathe decentralization, buying Bitcoin through PayPal for a first-time crypto user is a pretty user-friendly way to be introduced to the world of cryptocurrencies.