Buying Bitcoin is often seen as a long and complicated procedure. In 2023 this couldn’t be further from the truth.
Buying Bitcoin today is more often than not a one-click experience and can be considered as easy to use as services like PayPal.
That being said, there are many different ways to achieve the same thing. So, how do you buy Bitcoin? Today we’re going to break down all the ways you can buy Bitcoin and a brief how-to on completing your first purchase. Consider it a beginners guide to cryptocurrency.
Step 1: Where to store your bitcoin
First, it is wise to remember the old crypto adage – not your keys, not your crypto. This refers to where you keep your crypto holdings. As with buying Bitcoin itself, there are a few options where you may keep it.
But to keep it simple, we’ll only break it down into two categories – custodial wallets and self-custody crypto wallets.
A custodial wallet is when you leave your Bitcoin on the crypto exchange where you purchased it.
self-custody crypto wallet:
Also known as a non custodial wallet, it is where you keep your Bitcoin in your own wallet. When you hear the saying “not your keys, not your crypto,” they are talking about keeping your crypto in a self-custody wallet, because if it’s in someone else’s wallet it is far less secure.
Of course, both have their pros and cons. While custodial wallets are the most convenient, they also have more liability of going under due to the volatility of the cryptocurrency marketplace mixed in with bad business practices.
Alternatively, non-custodial wallets mean your Bitcoin belongs to you and you alone. No one has control over your funds and how it moves except you. Not the government, banks, or anyone else… unless you approve the transaction, of course.
So, providing you keep your wallet secure and don’t give your password seeds (private keys) to anyone, the Bitcoin in your wallet is truly yours, regardless of what happens to the exchange where you purchased it.
This is how Bitcoin’s founder, Satoshi Nakamoto, intended the system to be used. The main benefit is that it means if the bitcoins are in your wallet they cannot be lost if the crypto platform you bought them from enters administration or suffers a hack.
The downside is if you forget your password seeds, or if someone else finds the seeds to your wallet, then you are out of luck. There is no intermediary to fall on for compensation, as self custody means you are in full control but also must take full responsibility for your funds.
Once you’ve decided between a custodial or non-custodial wallet, the next thing would be to pick one of these three places to purchase your crypto.
Step 2: How do you buy bitcoins
First, we’ll talk about the original and in our opinion, best cryptocurrency marketplace. Peer-to-peer exchanges, also known as P2P or wallet to wallet exchanges. Elbaite is Australia’s most trusted wallet to wallet crypto exchange.
Wallet to wallet crypto exchanges:
Back when cryptocurrency first began, there were no exchanges. There were simply those who had bought or mined Bitcoin – the process of creating new Bitcoin, which is done so every 10 minutes through verifying network transactions – and those who wanted to buy Bitcoin.
So, to buy in the early days, you needed to find a website that offered a Bitcoin marketplace and acted as the intermediary between the two parties to ensure an honest transaction occurred.
In short, if Person A wants to sell some of their BTC for X amount of $. Person B must place X amount to the intermediary website, which holds this amount until it has been confirmed by the blockchain that Person A has sent the BTC to Person B.
As the Bitcoin network is a publicly viewable ledger, there is no trust involved as it’s visible to all three parties when the transaction has finalised.
Once finalised, the funds held by the intermediary are released to the seller.
The advantages of a wallet to wallet cryptocurrency marketplace like Elbaite are their simplicity and security. Wallet to wallet marketplaces provide a place for buyers and sellers to interact without the need for any advanced technical know-how. Simply download a free self-custody desktop or mobile wallet app like Coinomi, Exodus, or Metamask if you’re looking for alt-coins, and you’re ready to go.
All of the wallets above offer one-click services to buy, sell, send, or receive cryptocurrencies. One-click to copy your Bitcoin wallet address, which you send to the seller on the wallet to wallet exchange, and they then transfer the Bitcoin by clicking send on their wallet and entering your address.
With wallet to wallet exchanges, you don’t have to worry about exchanges falling apart. You don’t have to worry about legislation crippling your access to your investment, and you don’t have to provide any more personal information than you’re willing to give.
For those who want simplicity and long-term security, then wallet to wallet exchanges like Elbaite remain the best option available.
Decentralised exchanges (DEX).
Like Wallet to wallet platforms, decentralised exchanges, more commonly known as DEXs, require you to have a self-custody wallet before participating.
Again, this provides a level of safety against bad business practices and means once you’ve purchased your crypto – it is yours for as long as you can remember the passwords.
The difference between a centralised exchange, like Binance or Coinbase, and decentralised exchanges, like Uniswap and Pancakeswap, is that DEXs are hosted by the users themselves.
A DEX does not have a centralised host like a company or country running it from behind the scenes. Instead, its servers and record of transactions are kept online and updated by the users themselves.
By utilising blockchain technology, it is the users who verify transactions and keep a record of all transactions to ensure the network’s integrity and security, unlike centralised exchanges who have a central governing authority, limited transparency, and local legislation to follow.
To participate in a DEX like Pancakeswap or Uniswap, you must add a web3 wallet to your internet browser. Web3 wallets like Metamask are still self-custody wallets but plug directly into your Chrome browser to allow for the same one-click experience when buying, selling, sending, or receiving cryptocurrencies.
Once you’ve signed into a DEX account and connected your Web3 wallet, the experience again becomes a one-click experience, requiring zero technical skills.
Centralised exchanges (CEX)
There is no doubt that centralised exchanges are the most convenient from the user’s perspective. However, for the price of convenience, you’re giving up security.
Let exchanges like FTX be a warning as to why centralised exchanges are losing popularity, especially during the crypto bear market.
Centralised, in this context, means a governing body at the top. It is controlled by a corporation that must adhere to the laws of the country in which they operate. Users do not have custody of their funds if they leave their funds on a centralised exchange, which means they can be taken away at any point by either the company or country in which it is operating.
Additionally, there is no exchange out there large enough to survive a run on their reserves. Without participating in rumours, it is fair to say that even the largest exchanges are not fully transparent with their finances and could be susceptible to collapse.
Of course, legally, they do not have to disclose their finances. So, when it comes to looking for certainty in uncertain times, the transparency of decentralised exchanges often tops that of their centralised counterparts.
Regardless, those looking for the convenience of a CEX simply must sign up, provide anti-money laundering details like a copy of their passport, and registered their debit or credit card.
Once they have completed this sign up process, just like the other methods listed above, buying Bitcoin becomes a one-click experience.
While, in our opinion, using a DEX is an improvement upon using a CEX, we believe P2P/wallet to wallet remains the most effective and safest way trade cryptocurrency.
Simply download a free mobile or desktop wallet like Exodus or Coinomi, write down your password seeds and secure them somewhere safe, then click the “receive Bitcoin” button to see your wallet address. Next, give this address to the person you’re buying from on the marketplace.
They then go to their wallet, click “send Bitcoin” and enter the address you gave them, and voila, in around 10 minutes your funds will be finalised, no matter where on the planet you requested them from.
In conclusion, while the convenience of centralised exchanges may be the most appealing to the uninitiated, if you are planning to hold rather than trade your crypto funds, we believe self-custody is the only sensible long-term option.
When it comes to trading, we recommend wallet to wallet/P2P. This is because wallet to wallet exchanges remain unaffected by the performances of centralised or decentralised exchanges. That is because their business model acts more like a regular website that simply connects buyers directly with sellers.
By participating in wallet to wallet/P2P, you can be sure no rogue actor in the background is misappropriating user funds and potentially threatening your investment in ways you didn’t even know were possible.
Wallet to wallet trading is simple to explain, unlike using a DEX or CEX. It’s as simple as trading any other item with strangers on the internet. The wallet to wallet/P2P exchange acts as a trusted intermediary to ensure a fair trade occurs.
Wallet to wallet exchanges like Elbaite do not lock your funds into their exchange token, as P2P exchanges usually make their money by adding a small fee per transaction. Elbaite charges a 1% buyers fee and has ZERO fees for sellers.
No staking, no exchange token offering better rates on trading, and no misappropriating locked user funds to act as leverage in risky trading opportunities.
Regardless of which method you pick, we hope you have found this guide useful, and we hope it has left you with a better understanding on how to complete your first Bitcoin purchase.
Elbaite is the Australian cryptocurrency exchange that allows you to buy & sell crypto directly from your crypto wallet. Make an account today to start your crypto investment journey!
Disclaimer: The information on this website is purely for information. Elbaite is not a financial adviser, and nothing stated here is to be taken as financial advice. You should seek independent legal, financial, taxation or other advice relevant to your financial situation before making any investment decisions.