Bitcoins are virtual. Bitcoins do have a value, but they are not tangible, which means you can’t simply pick them up at the corner store.
Bitcoins must be purchased through bitcoin exchanges. Fortunately, bitcoin can still be purchased through traditional currency (such as credit or debit cards).
Bitcoin gambling works like traditional casinos. Players need funds to gamble. In traditional casinos, players use cash. In bitcoin casinos, then players need to buy bitcoin.
So how do you buy bitcoins?
The first step is setting up a bitcoin wallet. Just like a traditional wallet stores cash and credit cards, a bitcoin wallet stores bitcoin. Essentially, a bitcoin wallet is the account used to buy, sell and store bitcoin. The wallet has a unique ID that enables transactions to occur.
There are a variety of ways to setup a bitcoin wallet. Each method has pros and cons based on how one plans to use bitcoin and their level of computer expertise. The main options are:
- Store bitcoin on computer.
- Store bitcoin via an online, web service (in the cloud).
- Store bitcoin in a ‘vault’ service that requires multiple verifications.
Security and ease of use are the most common reasons that people choose how to setup a bitcoin wallet. Computers help prevent hackers, but can be lost or corrupted. Vault service can be difficult to make transactions. Web services vary by provider and can be susceptible to hackers.
For those that are new to bitcoin, than a well-respected bitcoin wallet (linked to a bitcoin exchange) is likely the best approach.
How to you buy bitcoin?
Bitcoins are typically purchased through an exchange. Bitcoin exchanges vary, but for those new to bitcoin, then find an exchange that meets your needs. Popular exchanges provide customers with secure access, but are likely regulated, which means some anonymity is given up.
Basically, the exchange act like a bank and need to verify its customers. Regulated exchanges work within the financial system (rules vary by country) to ensure customers pass standard banking laws. The government and exchanges want to prevent money laundering through bitcoin transactions.
The best bitcoin exchanges depend on your location, but here is an overview of some well-respected and secure exchanges.
With a bitcoin wallet linked to an exchange, then you are ready to buy bitcoin. To buy bitcoin, then you need to deposit money into your wallet. Typically, this means linking your bitcoin wallet to an existing bank account (which is where you may give up some anonymity).
Like all financial transactions, it may take 2-3 days for the money to be transferred and cleared into your account. Fortunately, once your wallet is funded, the processing time is cut to almost nothing using bitcoin.
The exact actions to purchase bitcoin will vary between exchanges, but there is typically a buy and sell bitcoin button. Simply follow the steps to make your transactions. Bitcoin exchanges do charge for buying and selling bitcoin. Typically this fee is around 1%, which is less than the 2-3% major credit card networks charge businesses. The transaction fee is also much less than the roughly 10% money transfer companies charge to send funds to others.
Bitcoin transactions settle within the same day, so you’ll be able to see the bitcoin in your account shortly after purchasing.
Bitcoin Exchange Warnings
There are a few things to note when using exchanges.
First and foremost, unlike bank deposits, there is no guarantee that bitcoin funds are secure and safe. There are instances, like Mt. Gox, where bitcoin accounts were hacked and people lost their money. Although exchanges may require proof of identity similar to creating a bank account, they do not provide the same protections (like deposit insurance).
Second, because there is some ambiguity with bitcoin, certain banks may discriminate about transferring funds to bitcoin exchanges. Fortunately, there is a network of bitcoin advocates that collect and share these institutions around the world.
As bitcoin continues to grow, then the more traditional financial institutions will work with customers to understand how bitcoin works. Governments vary in thinking about new technology related to money, but seem to acknowledge the positive ramifications of bitcoin. It is important to note that rules and regulations differ between countries and will likely change over time.
Fortunately, for individuals, then the exchanges create simple interfaces to set up accounts and make transactions. The most important thing to note is your bitcoin wallet address and start making transactions around the web.