Walkthrough—Buying Bitcoin via Online Currency Exchange
Episode #6 of the course The basics of Bitcoin by John Saddington
Hello and welcome back to lesson six of ten! We’re more than halfway through. If you are still feeling a bit nervous about making your first bitcoin purchase, I’ve created a quick visual walkthrough of one local currency exchange that can give you a good feel for how it will operate.
I’ll use one of the more popular US-centric currency exchanges, called Coinbase, to capture screenshots and walk you through the process.
A Quick But Important Note on Privacy
As a reminder, depending on where you are, not all currency exchanges are readily available online, so you’ll have to double-check BitcoinAverage.com for ones for your own geography and country.
It’s important to note that once you engage with a country-specific currency exchange, you are bound to local laws and regulations that may require sensitive and personal data. Remember, bitcoin has the advantage of keeping your personal information completely private, meaning that you do not have to reveal your name or physical location/address to send and receive. But the moment you use a country-specific currency exchange, which touches the traditional systems and markets, these country-specific regulations come into play, and you will most likely have to give up your identity to participate. In short, you may have to reveal your identity (and thus your privacy) for the sake of convenience in order to purchase bitcoin online.
Once this is done, all associated bitcoin transactions to your address(es) can be identified and tracked. This is one of the reasons why many bitcoiners keep and maintain dedicated accounts that aren’t linked to these types of exchanges and wallets.
A Visual Walkthrough
As mentioned, I’ll show you how everything works on Coinbase, but it has a similar experience to many of the online exchanges that could be used as well.
First, you’ll have to create a new account with all your information. Make sure you use a very secure password—it’s even better if you use a system like LastPass or 1Password to create a really difficult password that’s hard to guess or crack.
After you confirm and verify your email address. you’ll be able to log in and see the currency exchange dashboard with the current exchange rates.
One thing to consider before purchasing any bitcoin through any digital currency exchange is to audit the security systems they have. That means if they don’t have, at the minimum, two-factor authentication, then I’d move on and try another service (make sure to close down and delete your account).
So, the best next thing after you log in is to walk through any security measures that the exchange has and add as much security as possible. This may include authentication via SMS (text message) or even using a separate application, such as Google Authenticator or Authy.
After securing this new account, you have the opportunity to add a payment method, which may include your bank account, PayPal, or credit card:
I’ll go ahead and add a credit card for this demonstration. Then the system will request confirmation by making two withdrawals on my account, which I will have to verify:
Coinbase and many others transact immediately, so verification is quick, but this isn’t the case for all services.
Next, I’ll verify my identity, which is typically a government-issued ID card such as a driver’s license and/or passport. Each system will require something different, so make sure you have these handy.
This can take a bit of time to verify, so hang in there. Systems like Coinbase are growing wildly right now, so they’ve had some scaling issues. Patience is a virtue, as they say.
Finally, the next step is purchasing your first bitcoin. As you can see on the image below, I’ve purchased $100 USD worth of bitcoin, which gives me at the current currency exchange value of $18,944.56 per BTC, a total of 0.0051 BTC.
I’m officially in the game! And if you’ve followed along using one of these systems, you are now the proud owner of bitcoin.
But Wait, What If I Want to Sell My Bitcoin?
That’s a great question, and thankfully, these currency exchanges allow you to also sell your existing bitcoins in the same interface. Selling them is as simple as purchasing in most instances. Of course, if you sell bitcoins at a higher rate than when you bought them, then you’ll make a nice little (or big) profit.
Tomorrow, we’ll talk a little about why this matters outside the unit of currency itself and where this might all head in the short- and long-term future.
Until then,
John
Recommended book
Mastering Bitcoin: Unlocking Digital Cryptocurrencies by Andreas M. Antonopoulos
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