Getting Started with Bitcoin, Part 4: How to Acquire BitcoinsSubmitted by JixMainstream on Tue, 04/16/2013 - 15:13
So you've thought about it, weighed the pros and the cons, and now you want to get your hands on some bitcoins. What do you do?
There are two ways to get bitcoins: Mine them, or exchange other currencies, goods or services for them. Since most people don't have high-end computer hardware, let's forget about the mining.
The most common way to get bitcoins is through an exchange site. There are many exchange sites to choose from, the most popular being MtGox. MtGox facilitates about ~65% of online bitcoin currency exchanges. That brings some advantages and some drawbacks. Gox has a wide variety of funding options and is probably the simplest to use for beginners. However, as the largest exchange, Gox becomes a point of weakness for the flow of Bitcoins, in that it becomes a target for hackers, or as we saw on 4/10/2013, can be over-loaded with legitimate traffic. Also, as the largest exchange, it is also under the most regulatory scrutiny.
On that note, I want to make a quick aside regarding the recent finCEN announcement: This regulation is specifically targeting Bitcoin EXCHANGES, to ensure that they are not participating in any financial crimes, such as money laundering, identity theft, fraud, or terrorist financing.
What that means for you: If you wish to use a finCEN-compliant exchange (which MtGox has been for quite some time), they will require photo-ID and possibly other identification. (Obviously, if you are going for complete anonymity, this is not the way to go.) If you cash out over $10k, they will be obligated to disclose it. Cashing out less than $10k wouldn't be reported unless via court order (for example, if you - for whatever reason - WANTED to get back into fiat, didn't bother to pay capital gains, and now you're suddenly driving a Lamborghini).
Here's what the finCEN regulations DO NOT mean: that transactions within the Bitcoin network will be traceable, that your activity will be monitored, or that your bitcoins will be subject to confiscation by the US government. Once you are inside the Bitcoin network you may spend anonymously (so long as you take the necessary precautions).
With that out of the way, let's get back to picking an exchange. Now each exchange has a little something different to offer. This list gives a synopsis of each exchange. If your goal is to simply buy bitcoins, stick with MtGox. If you're going to try to play the market, it's entirely up to you! (When I'm in the mood for a gamble, I like to dabble in the alternate crypto-currencies on BTC-E.com and vircurex.com. I think it goes without saying, but in case it isn't entirely obvious, !!!CAUTION: PLAY AT YOUR OWN RISK!!!)
Alright, so you've picked an exchange that meets your goals, you've made an account, and now it's time to fund that account. Depending on the exchange you select, your funding options will vary. Since there are so many options, I'm going to highlight the two most common methods: Dwolla and BitInstant.
Dwolla is a money-transmitter who interfaces directly with a few bitcoin exchanges, most notably, Gox. While they are known for their incredibly low fees (often free, with a max of $0.25!) the time it takes to ACH the money from your bank account via Dwolla can take a few days. Dwolla is another entity who has long been in compliance with finCEN regulations, so if you wish to use their services, you'll need to provide some identification. (A close runner-up is AurumXChange, which has an easy-to-use site, but charges slightly higher fees. Again, check with your exchange for your complete list of options.)
Then there's BitInstant. BitInstant offers a selection of money transfer options including CASH DEPOSIT at your local CVS, Wal*Mart, and a whole host of other brick and mortar locations (via Western Union). If you need your bitcoins immediately and are willing to pay a higher transaction fee (~3.99%), this is the way to go!
Using an exchange is an easy way to get bitcoins, but it requires sacrificing a bit of privacy if your exchange is finCEN-compliant. If you're interested in buying bitcoins for cash, but want to stay off the radar, consider using a site like localbitcoins.com or tradebitcoin.com to find other humans in your area who are willing to sell. While you will avoid the slow, bureaucratic process of using a money transfer service and exchange, local dealers will often charge a little more than the market price for their time and effort.
A word of caution to those who buy and sell bitcoins person-to-person: Do not mention "PayPal" or any such payment services. A notorious scam in the bitcoin world is to pay via PayPal, and once the non-reversible bitcoin transaction arrives, charge-back the PayPal payment. The "buyer" keeps his money AND the Bitcoins. NEVER offer to pay via PayPal (or similar), or you will be seen as a scammer. And of course, never - ever - sell bitcoins for PayPal! ...EVER!
With that, we've pretty thoroughly covered your options for buying bitcoin. While buying them is probably the most obvious way to get bitcoins, there are other, much more creative ways to do so, without ever having to sign up on an exchange site or money transfer site. The best part is that these alternative methods also help to stimulate the Bitcoin Economy, which makes EVERYONE'S bitcoins more valuable!
The first one is pretty simple, and it's something anyone can do: Sell some stuff! You've all heard of eBay, and I'm willing to bet that most of us have bought something from it. Well, the Bitcoin world has its own version of eBay, called "Bitmit." It's certainly not as refined and pretty as eBay, but that's to be expected from a site with just a fraction of the volume. That doesn't make it any less easy to use, however! I have personally listed items on Bitmit, and it is incredibly simple.
If auction sites aren't your thing, there are of course other options, such as an incredibly active marketplace on the bitcointalk forums. This site is more akin to classified ads where users just list what they want to buy and sell. Items range from seeds to sports cars. If you choose to sell (or buy) items on this site for bitcoins, it is recommended to use an escrow to ensure that you don't get scammed. Remember, there are no charge-backs with Bitcoin!
Perhaps, though, you prefer dealing face-to-face. If that's the case, there's nothing preventing you from listing "bitcoin preferred" in an ad on Craigslist, and see what sort of reception you receive!
So far I've explained a number of methods for obtaining bitcoins: Buying them from an exchange, buying them from locals, and selling goods for bitcoin, but now I want to talk about what I believe is the absolute BEST way to get your hands on bitcoins: EARN THEM!
Bitgigs.com is one of a few jobs sites for people willing to hire/work for bitcoin. Admittedly the work there is rather limited (tech-heavy jobs) and there are many more prospective workers than employers, so the competition is fierce. Although it's not an official job board, the bitcointalk marketplace's Services sub-forum is, hands-down, the best way to find work for bitcoins! It is certainly more active than any other Bitcoin job board on the net, and has a much wider variety of contractors and employers!
Alas, most people, I'm assuming, don't have the option or desire to change their jobs, or even to take on extra work. For the majority of us who work full-time jobs for USD, there is still hope: If your company uses Expensify for its expense reports (or even if you're a contractor who uses Expensify to bill clients), you can now request reimbursement in bitcoin! It won't guarantee that your employer will pay in the currency, but it will help to spread bitcoin awareness, and put much-needed social pressure on others to adopt (or at the very least, research) bitcoin.
This has been by no means a complete list of methods to acquire bitcoins, but I have attempted to cover the most common ways to do so. And now that you know the basics of Bitcoin (What is a Wallet?, Selecting a Wallet, Where do Bitcoins Come From? and now How to Acquire Bitcoins), you are ready to become a Bitcoin user!
Since you're ready to fly on your own, this will be the last of my "Getting Started" articles. I know I've left a lot of loose ends (specifically in regards to Bitcoin security) and I promise that I will address these topics in the near future. Until then, I want to thank you all for the positive feedback on these articles. The response was much greater than I had anticipated! As before, I will try to answer as many of your questions as possible, but I have received an enormous number of inquiries and private messages, so I won't be able to get to everyone. There are many more experts on this site who will be able to provide answers as well as (if not better than) I can.
Lastly, thanks to Michael for not only running this great site, but for featuring a few of these article on the front page. Bitcoin is complicated to understand, and there's a lot of mis-information floating around. That, combined with our skeptical nature makes something like Bitcoin even more difficult to trust. The goals of the liberty movement synergize so perfectly with the goals of Bitcoin, which is why we Bitcoiners are so enthusiastic about sharing this information with other liberty-minded individuals! What drives us is the hope that, with Bitcoin, we will finally be able to opt out of centrally-controlled bankster-manipulated funny-money. In spite of the violent rejection by some members of this community, Michael gave me the opportunity to help dispel a lot of the myths and FUD surrounding Bitcoin, and for that, I want to personally thank him.
Until next time,
Peace Gold & Love (and Bitcoin),