If you’re reading this, you might have thought about investing in Bitcoin. In fact, Bankrate recently found that 37% of Gen Xers and 22% of Baby Boomers feel comfortable investing in crypto assets. And there are more and more people who are considering crypto assets for their retirement portfolios.
If you are new to the crypto scene, you may know that there are a myriad of options and it can be overwhelming with a lot of time spent learning the lingo and understanding wallets and exchanges.
The goal of this post is to help demystify the bitcoin buying process while teaching you how to use cryptocurrency exchanges more easily. The hope is that by learning some basics, you’ll feel confident enough to take your first step into the world of bitcoin and cryptocurrencies.
What is Bitcoin
Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto. Transactions are verified by network nodes through cryptography and recorded in a public dispersed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them: 21 million.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. Bitcoin can also be held as an investment. According to research produced by Cambridge University in 2017, there are 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.
Understanding the KYC Process
Knowing how to buy bitcoin starts with understanding the KYC process. KYC stands for “Know your customer.” It’s a process that businesses and governments must go through to ensure they are meeting anti-money laundering (AML) standards.
The term KYC originates from the traditional banking system, where it is used to refer to the identity verification of customers opening new accounts. The requirement to do KYC checks is now also a key part of anti-money laundering (AML) regulations.
KYC has become a mandatory industry practice for participating in ICOs or token sales, in an attempt to avoid being associated with money laundering or terrorist financing.
The KYC process usually involves the collection of the following information:
– Date of birth
– Telephone number
– Email address
– Proof of ID (such as a driver’s license or passport)
– Proof of address (such as a utility bill)
– Bank account details
– Social media profiles
The KYC process is different for every business that requires it. Therefore, the customer must ensure that they are submitting all necessary information to their business or government agency.
Depending on what country they are located in, businesses and governments (KYC) may be required to register with a governing body such as the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
How to Buy Bitcoin
There are a few ways to buy Bitcoin:
1) Buy Bitcoin from a cryptocurrency exchange. Cryptocurrency exchanges are online platforms that will allow you to buy Bitcoin with other cryptocurrencies, or with fiat currency (i.e., USD, EUR, etc.).
2) Buy Bitcoin from a person or company that sells Bitcoin. There are many people and companies who sell Bitcoin, and you can find them online or in your local area.
Most exchanges require you to verify your account with a KYC process, so be prepared to provide information that proves your identity.
Buying Bitcoin from a Cryptocurrency Exchange
Coinbase is a digital asset exchange company headquartered in San Francisco, California. They broker exchanges of Bitcoin, Bitcoin Cash, Ethereum, and Litecoin with fiat currencies in 32 countries, and bitcoin transactions and storage in 190 countries worldwide. Coinbase offers one of the easiest ways to buy bitcoin. You can also store your cryptocurrencies on the Coinbase platform.
If you want to buy Bitcoin with Coinbase, you’ll need to create a Coinbase account and then link your bank account. Once your account is set up, go to the “Buy/Sell Bitcoin” page and select the payment method using your linked bank account. When you’re ready to buy, make sure you have your payment info handy. Then click “Buy Bitcoin” to complete the order.
The fees are cheaper if you are a verified member of Coinbase and a premium customer. For a full list of fees, go to the Coinbase Fees page.
Another popular option is Gemini. Gemini is also based in the U.S., but it only allows you to buy BTC and ETH.
The first thing you need to do is open an account on Gemini. Once you complete the registration process, log in to your newly created account.
Next, you will need to verify your account. Once your account is verified, you can add a payment method. Gemini accepts bank transfers and wire transfers.
Once your payment method is added, you can buy Bitcoin on Gemini. Simply enter the amount of Bitcoin you want to purchase and click “Buy”. Your order will be placed and you will receive an email notification when your Bitcoin has been delivered.
If you’re looking for a more detailed guide on buying bitcoin, Gemini has you covered. Head over to their website to learn how cryptocurrency works.
Tips for Buying Bitcoin from a Person or Company
When you want to buy Bitcoin from a person or company, there are a few things you need to keep in mind. Here are the steps you need to take:
1. Choose a reputable Bitcoin seller. There are many Bitcoin sellers out there, but not all of them are legitimate. Before you commit to buying Bitcoin from someone, make sure they are reputable. You can find online reviews of different sellers and read through forums to get insight into their reputation.
2. Ask for ID and proof of address. Although you may be able to buy Bitcoin from a person without going through any verification process, it is always a good idea to ask for ID and proof of address. This will help you ensure that you are dealing with a legitimate seller.
3. Pay attention to the exchange rate. When you buy Bitcoin from a person or company, you will need to agree on an exchange rate. Make sure you are aware of the current market rate and don’t agree to pay more than you need to.
4. Use a secure payment method. When you buy Bitcoin, you will need to send the seller payment in order to receive the coins. Make sure you use a secure payment method. PayPal is often not available to Bitcoin sellers for this reason, but you can use services like Skrill or even an in-person payment if you meet the seller in person.
5. Wait for the seller to send you the Bitcoin. Once you agree on an exchange rate and payment is made, the seller will send you the Bitcoin. This process can take a few minutes or a few hours, so be patient.
6. Check the transaction on a block explorer before you release payment to the seller. To ensure that everything is going as planned, check the transaction on a block explorer. This will help you make sure that the coins have been transferred correctly and that no fraud has taken place.
Other Ways to Buy Bitcoin
The Cash App is a popular payment app that allows users to easily send and receive money. It can be used to pay for goods and services or to send money to friends and family. But did you know that you can also use the Cash App to buy Bitcoin?
First, download the app from your phone’s app store. The Cash App is available for both iOS and Android devices.
(If you haven’t already, be sure to sign up for a Cash App account. You can do this by visiting the Cash App website and clicking on “Sign Up”.)
Once you have the app installed, open it and sign in.
Next, tap on the “Cash” tab at the bottom of the screen.
Tap on the card that says “Cash” to go to the next screen.
Scroll down on this page until you can see your Bitcoin wallet address at the bottom.
Tap on the “Copy Address” button next to it. This will copy the address to your clipboard so you can paste it into a Bitcoin wallet or exchange.
Now that you have your Bitcoin wallet address, you’re ready to purchase some Bitcoin.
Fees Associated with Buying Bitcoin
When you make a bitcoin transaction (when you send or receive bitcoins), you also include a fee to the network. This helps the Miners (the computers that are working to process transactions) because it incentivizes them to keep on mining, ensuring that your transaction goes through at the same speed as usual.
Bitcoin fees are calculated by taking into account:
• The number of bytes in the transaction;
• The congestion on the Bitcoin network; and
• The fee rate (in satoshis per byte) that you would like to pay.
The higher the fee, the faster your transaction will likely be processed. You can check out current bitcoin fees here.
If these steps don’t sound easy enough for someone who is not tech savvy, there are also bitcoin IRA companies such as BitcoinIRA who have made buying bitcoin super simple for people just getting started with investing in cryptocurrencies. They either purchase bitcoins themselves and store them securely offline for customers’ accounts–or they work with other brokerages to offer their clients access to trade bitcoins through traditional means.
Disclosure: There are risks associated with buying and investing in bitcoin and cryptocurrency. We are not financial advisors and this should not be taken as financial advice. Please do your own research and due diligence before purchasing and investing in Bitcoin or any other cryptocurrency.