There may be far more different cryptocurrencies available to today's consumers than those of even a few years past, but that doesn't mean that bitcoin has lost its edge. In fact, it remains the world's favorite form of crypto despite all of this alternative currency's recent competitors' efforts.
Although the use of bitcoin as both an investment tool and a means of making real-world financial transactions has actually become quite commonplace, some consumers are still hesitant. Readers who haven't yet given bitcoin investing a shot for themselves are often abstaining due to anxiety over the unknown. This article is intended to clear up some of the confusion that remains around bitcoin mining, buying, and spending so that those who are still on the fence can get more comfortable with these processes.
Buying vs. Mining Bitcoin
The term “bitcoin mining” refers to the decentralized process of creating new bitcoins by using computer algorithms to solve complex ciphers. When this cryptocurrency was still in its infancy, bitcoin mining was a feasible option for most consumers who had decent computers. Today, though, it requires far more powerful hardware and bitcoin miners must purchase dedicated Application Specific Integrated Circuits (ASICs) just to keep up.
Although bitcoin mining is no longer as lucrative, or as feasible for the average consumer, as it used to be, purchasing bitcoins has become easier than ever. Consumers can purchase bitcoins using credit or debit cards, PayPal, wire transfers, other forms of cryptocurrency, or even cold hard cash. Choosing how to buy is largely a matter of availability and personal preference, but more about that later. First, let's take a look at the pros and cons of buying bitcoins instead of mining them, to begin with.
The Pros and Cons of Buying Bitcoin
Bitcoin is by far the most widely-accepted cryptocurrency across the globe. It is accepted by many online and brick-and-mortar retailers and remains popular as a form of alternative investment. As a result, an impressive number of exchanges have sprung up to cater to clients around the world who want to buy and sell bitcoin, making it easier than ever.
Given the increasingly high real-world cost of mining bitcoins, there are few reasons that readers who have not already invested in the required technology could possibly have for getting into bitcoin mining now. This may not always be the case, since the difficulty level of mining changes depending on network fluctuations. Currently, though, this level of difficulty is extremely high and mining is no longer particularly profitable.
How to Buy Bitcoin
Now that it has been established that buying bitcoins outright is really the most sensible option for those who are new to the cryptocurrency game, it's time to take a look at how to go about doing so.
The first step for most readers will be to find a bitcoin wallet. Casual buyers typically opt for either online wallets or mobile wallets, both of which offer easy access and cloud-based storage solutions.
Online wallets are extremely convenient, but they do come with some risks. For instance, if a reader using a mobile bitcoin wallet loses his or her phone and it winds up in the hands of some disreputable hacker, all of those bitcoins could wind up being lost forever. Most online and mobile wallets do feature some form of security protocol, though.
Those who intend to invest a good deal of fiat currency into bitcoin and want some extra protection might be better off opting for a hardware wallet or a software wallet. Hardware wallets offer a far more secure way to store bitcoin, but they do cost money. Software generally wallets fall somewhere in between hardware wallets and online wallets in terms of both security and convenience.
When push comes to shove, most casual investors tend to use online and mobile wallets, though, thanks to their convenience. Not only can they be accessed from anywhere, but many exchanges and peer-to-peer platforms offer their users access to full-feature bitcoin wallets for free.
Most crypto exchanges and peer-to-peer platforms allow their users to buy bitcoins with credit or debit cards, PayPal, and wire transfers. Readers who want to purchase bitcoins with cash will have to find a bitcoin ATM, which can be a bit of a hassle depending on where they live. For simplicity's sake, it's much easier for readers who are new to crypto to get started by signing up for an account online.
Exchanges vs. Peer-to-Peer Platforms
There are two main ways to buy bitcoins online. They are known as bitcoin exchanges and peer-to-peer (P2P) platforms. Although their user interfaces are often fairly similar, there are a number of differences between these two systems.
Bitcoin exchanges allow clients to buy bitcoins online using their credit cards, debit cards, or PayPal accounts, but they often place certain limitations on their users. These limitations may include setting low trade limits, lengthy transaction times, or even the refusal of credit cards. There's a good reason for these limitations, though.
Bitcoin transactions work just like cash transactions. Once the exchange has been made, there's no going back. PayPal, debit, and credit card payments are all reversible. The purpose of the limitations described above is to protect these bitcoin exchanges' clients from getting fleeced by disreputable “buyers.”
Peer-to-peer platforms are a little bit different. Some of them operate just like the exchanges described above, while others offer secured loans instead of direct transactions.
The benefit of choosing a platform that offers secured loans is that there's no need for lengthy waiting periods, low purchase limits, and other inconveniences. Instead, readers can either borrow or lend bitcoins to each other through a secure, automated process. Once the payment has been made, the bitcoin will be transferred to the borrower's wallet.
Where to Find a Bitcoin Exchange
One of the few advantages of using a bitcoin exchange instead of a P2P platform is that there are tons of options available. Some of the most popular of them are Coinbase, Bitpanda, and Bitstamp. Readers who go this route should exercise caution, though, as these and other exchanges often charge staggered fees depending on transaction size, require users to set up bitcoin wallets using third-party services or place limitations on where their clients can place transactions, to begin with.
Where to Find a Reputable Peer-to-Peer Platform
Readers looking for a P2P platform will find that there are fewer alternatives out there but they come with distinct advantages over traditional exchanges. Arguably the two most popular P2P platforms are LocalBitcoins and xCoins.io. There are, however, some major differences between these two services.
While xCoins.io is a genuine P2P lending platform, LocalBitcoins operates more like a traditional exchange. Although the platform itself only charges users a 1% fee on each transaction, the sellers who use it also set their own fees. This can lead buyers, and especially novice buyers, to spend far more than they should. Using LocalBitcoins also requires a good deal more legwork since clients on the platform will be responsible for evaluating each potential seller's trustworthiness themselves.
The xCoins Advantage
Unlike LocalBitcoins, xCoins.io is a genuine P2P lending network. It is designed to facilitate anonymous, efficient transactions between borrowers and lenders so that they don't have to worry about high exchange fees or disreputable sellers. There's no need to go through the hassle of finding a seller who has a solid transaction history and charges reasonable fees. Instead, readers who opt to use this novel P2P bitcoin lending platform can simply put in a request to borrow bitcoins from a verified lender and wait while xCoins does the rest.
Borrowers can confirm that their bitcoins have been transferred by checking their transaction status and most transfers take just 10 to 40 minutes. Although the actual xCoins platform does not offer refunds, borrowers can request refunds from their lenders at any time and will pay only their loan interest, origination fees, and payment processing fees. Coupled with the fact that the platform has advanced security protocols in place to protect its users against fraud, this makes xCoins a great option for anyone who isn't sure how invested they really are in bitcoin investing.
Although most readers will likely want to dip their toes in the water before jumping in the deep end, eventually they may want to buy bitcoins in bulk. While it's possible to buy in bulk without incurring unreasonable fees, don't expect to pay less than market value. The best bet for readers who want to get serious about investing is to check out a few different platforms and choose one that offers a good balance of security and reasonable pricing.
The Bottom Line
Whether readers are just looking to make a few purchases or they want to invest small amounts of money in crypto as a means of deciding if they want to start buying in bulk, bitcoin remains one of the most popular options. Readers who have come this far should now be equipped with all the knowledge they need to get started buying bitcoin online. Just choose a platform and a payment method, set up a wallet, and start buying, selling, and trading today.