How do I buy bitcoins?
Published on April 1, 2013 at 20:19 BST
As bitcoins become more widely recognized and used, would-be bitcoin users have a growing number of ways in which they can acquire the digital currency.
In the earliest days, An Introduction to Bitcoins notes, converting a local currency into bitcoins often required a face-to-face encounter with other fans in the same area. Mining new bitcoins into existence was also easier back then, and was possible to do without today’s advanced, energy-intensive (and expensive) mining rigs.
In “The Rise and Fall of Bitcoin,” Wired describes how early adopter Gavin Andresen gave away bitcoins “for the hell of it” via his Bitcoin Faucet (now closed). The same article also credits Florida programmer Laszlo Hanyecz with completing the first virtual-currency-for-real-world-stuff transaction: he sent 10,000 bitcoins (around $14 million worth (!) at exchange rates as of April 30, 2013) to someone in England, who then called in Hanyecz’s order for two pizzas and paid for them by credit card.
The exchange route
While many bitcoin exchanges handle transactions online, the methods of payment they accept for bitcoin purchases can vary from country to country. This can necessitate the use of an intermediary or two to complete the exchange of a local fiat currency into bitcoins.
This approach can make it difficult to buy bitcoins quickly, as completing a two-, three- or four-step process can take many minutes, hours or even days depending upon the exchange infrastructure accessible to an individual buyer.
For example, Mt. Gox, the most active bitcoin exchange, requires a would-be trader to first deposit bitcoins or a fiat currency into a Mt. Gox account. Because credit cards and PayPal don’t currently use bitcoins, this means using a third-party service such as OKPAY or Dwolla (US only), or initiating an international wire transfer or direct transfer from a verified bank account. Such bank and wire transfers can take anywhere from two to five days to complete. Outside of the US and SEPA (Single Euro Payments Area) zone, transfers can take even longer.
All this is likely to change rapidly, however, as the bitcoin economy continues to expand. Mt. Gox, for instance, expects to be able to offer Visa and MasterCard transfers by late summer 2013. Instant bank transfers from some European countries could also be possible by mid-September 2013.
Here’s how …
Lily, a first-time bitcoiner in the US, wants to buy $150 worth of bitcoins. She sets up an account at Bitstamp and – because she doesn’t want to use her bank account information – arranges to transfer funds to her Bitstamp account using the bitcoin payment processor BitInstant.
Choosing BitInstant’s cash deposit option, Lily arranges to transfer her $150 using a local Moneygram station. The BitInstant site directs her to its cash payment partner, ZipZap Inc./CashPayment.com, which sends her to an area retailer from which she can transfer her cash.
Using the Moneygram phone system in the store, Lily provides the customer service representative on the line with the account information she received from BitInstant. Once her details are confirmed, she pays her cash to the store’s cashier and receives a paper receipt that shows her funds have been transferred via Moneygram to ZipZap Inc./CashPayment.com, which then sends the money via BitInstant to her Bitstamp account.
After returning home, Lily checks Bitstamp and sees that she now has $150 (US) in her account. She goes to the “buy” section, selects how much she wants to spend (counting a 0.5 percent Bitstamp fee) and clicks the “Buy bitcoins” link. Within moments, her account shows she is now the proud owner of x number of bitcoins, depending upon the prevailing BTC-USD exchange rate at the time she hit “buy”.
Buying bitcoins in this way is undoubtedly convoluted, time-consuming and inconvenient, making it hard to take advantage in the minute-to-minute ups and downs of the bitcoin market. With the fast changes currently taking place, though, the process is certain to become both quicker and easier over days and weeks, rather than months and years.
More ways to buy … or earn bitcoins
That’s likely to mean not just online, but off. Buying bitcoins face-to-face right now can also be a challenge … not only because there might not be many traders or physical exchanges in your area, but because of the uncertainty of who/what you might be dealing with. One resource to help you locate and research your options is LocalBitcoins.com.
Of course, there’s one more way to acquire bitcoins, and that’s to offer goods or services for sale and accept bitcoins as payment. Sites like CoinWorker.com and Bitquestion (a kind-of ask.com or ehow.com for bitcoins) let users take on small tasks in return for payments via bitcoin, and small-business owners can also arrange to take bitcoin payments via online marketplaces like Etsy or through payment service providers like BitPay.
For more information, visit the CoinDesk information center article ‘How can I Buy Bitcoins?‘.