Key points to consider

The three key points to consider when buying bitcoin are:

1. Payment method
2. Platform/venue used
3. Where your bitcoin goes

Credit cards, bank transfers, payment apps (PayPal, Apple Pay, Google Pay, Samsung Pay, and so on), face-to-face cash transactions, and even barter are all options. Each payment option has advantages and disadvantages in terms of convenience, privacy, and fees.

Digital wallet providers, centralized spot exchanges, OTC desks (private ‘Over-The-Counter’ exchange services used largely by high-net-worth people), peer-to-peer markets, and even payment programs like PayPal are all platforms/venues for buying bitcoin.

Of course, buying bitcoin in person is also an option. You could, for example, give your friend cash in return for an agreed-upon amount of bitcoin.

As for where your bitcoin goes after you buy it, the options are:

1. Into a Bitcoin wallet you control (ie. a ‘non-custodial’ wallet like the Bitcoin.com Wallet)
2. Into a Bitcoin wallet someone else controls (eg. a centralized cryptocurrency exchange or a payment app like PayPal).

Not your keys, not your bitcoin!

You never need to obtain permission to use bitcoin if you keep it in a wallet you control (known as a ‘non-custodial’ wallet). This means you can get your bitcoin without having to wait for a third party to approve the transaction, such as a controlled exchange. It also means you can transmit bitcoins to anyone, anywhere, at any time.

Many custodial Bitcoin wallets, on the other hand, have strict limitations on what you can do with your bitcoin. For instance, you may be needed to register an address before sending bitcoin to it, and you may be required to wait several days before withdrawing funds. Withdrawals of any kind are not authorized in some instances (PayPal, for example). It’s also not uncommon for your account to be completely frozen. You may be locked out of your account without appeal if you’ve been deemed a security or fraud concern, for example.

You may also modify the ‘network fee’ each time you send with the best non-custodial Bitcoin wallets. When you’re not in a hurry, you can save money on transaction costs; when you are, you can spend more to transmit faster.

Non-custodial wallets are, perhaps most crucially, more secure. You won’t have to worry about being hacked as long as you follow key management best practices, and you won’t be exposed to counter-party risks like a centralized exchange being hacked or going bankrupt.

If you don’t already have a bitcoin wallet, check out the Bitcoin.com Wallet, an easy-to-use, non-custodial Bitcoin wallet that millions of people trust.

Why do I need to verify my identity to purchase bitcoin?

When you use a government-issued money to acquire bitcoin through an exchange service, you’re dealing with a regulated company. Know Your Customer (KYC) and Anti-Money Laundering (AML) legislation governing money transfers must be followed by such businesses. Customer information, such as identity documents and, in some cases, proof of address, must be collected and stored in accordance with these regulations.

What are the fees for buying bitcoin?

The cost of purchasing bitcoin varies depending on the payment method and platform/venue. If you’re buying bitcoin from a friend and paying cash, for example, you’ll simply have to consider the ‘network charge’ for transmitting bitcoin from your friend’s digital wallet to yours.

If you’re paying by credit card or bank transfer, you’ll need to account for the fees associated with those methods.

Furthermore, exchange services charge extra fees to facilitate exchanges. These charges cover the exchanges’ operating expenses plus a tiny profit margin. In general, larger transactions result in cheaper overall costs, so it’s typically a good idea to avoid making a lot of minor purchases.