If you want to purchase Bitcoin (BTC) but have not taken the plunge yet, you’re not alone. Many people have reservations about buying Bitcoin and wonder if it’s safe, how to get started, and how long it takes to buy Bitcoin.
Luckily, you do not have to understand all the technical details of how Bitcoin works to invest in the digital asset. Anyone can invest in Bitcoin, though there is a learning curve to understand its appeal and potential benefits as part of your investment strategy.
Before we get into the finer details of where you can buy Bitcoin and other popular cryptocurrencies, let’s first understand what they are. Then, we will dive into ways you can buy Bitcoin and how long the process takes.
- Announced in 2008 and launched in early 2009, Bitcoin is the world’s first and most valuable cryptocurrency by market capitalization.
- Unlike fiat currencies, where governments are in charge of your money, Bitcoin runs on the blockchain, a decentralized ledger system.
- The easiest way to purchase Bitcoin is through a reputable exchange, where it can take seconds to days to buy it depending on a few factors.
Introduction to Bitcoin and the Crypto World
In August 2008, an anonymous entity registered the domain name Bitcoin.org. Two months later, an unknown person or group used the name Satoshi Nakamoto to announce the arrival of Bitcoin via a white paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System.” On January 3rd, 2009, Block 0 (the first Bitcoin Block), was mined, creating the world’s first cryptocurrency.
Cryptocurrencies are digital or virtual currencies that operate on a peer-to-peer network, meaning no government or central authority controls them. That also means you can send Bitcoin to anyone without third-party involvement, such as a bank.
Bitcoin nodes use a proof-of-work (PoW) system, a blockchain consensus mechanism used to verify and add new blocks of transactions onto the chain through cryptography. The goal of proof-of-work is for miners to compete by solving math puzzles to prevent anyone from gaming the system. Validators, or miners, get rewarded with newly created Bitcoins and transaction fees for verifying and committing new blocks of transactions onto the chain.
Bitcoin rewards get halved every 210,000 blocks. In other words, the reward for mining Bitcoin transactions gets cut in half every 4 years, thus reducing the inflation rate and driving the price of Bitcoin up predictably. In 2009, the block reward was 50 new Bitcoins and today it is 6.25. In 2024, the block reward will fall to 3.125 Bitcoins.
Unlike fiat currencies like the dollar or euro, there are no physical Bitcoins. Instead, Bitcoin is represented in a “digital wallet” that holds proof of your Bitcoin investment and other digital assets. These wallets are encrypted, and the owners are anonymous (for the most part). Not all cryptocurrencies are Bitcoin. Since the introduction of Bitcoin, thousands of different crypto (also known as altcoins), including Ethereum, Solana, Cardano, and Polkadot, among others, have entered the market.
You also do not need to purchase a whole Bitcoin! Bitcoin is divisible to eight decimal places or 100 millionths of one Bitcoin (one satoshi). Similar to purchasing fractional shares of stock, you can buy a fraction of a Bitcoin or any other crypto. Bitcoin hit a peak value of slightly over $67,000 in November 2021 after starting the year at around $32,000. Since then, it has fallen to ~$25,860 as of September 2023. But if we look back in time, since its inception, the value of Bitcoin has grown more than 10M%!
Blockchain: The Technology Powering Crypto
Before we go any further, let’s take a quick look at what blockchain technology is and how it works behind the scenes to power cryptocurrencies. Often described as a “public ledger,” the blockchain is a decentralized database run by a network of nodes, allowing for more secure, transparent, and private transactions (though that does not mean it can’t be hacked).
Today, tech companies like Meta, Netflix, and Apple host your data on private servers. With blockchains, no one person or single authority owns or controls who can write to the blockchains. Anyone who has access to the internet can download a copy of it and start contributing.
Blockchains are comprised of series of blocks, with each block storing a group of transactions. Think of each block as a storage unit for your data from when it is created up to now. Blockchains use existing cryptography schemes to add new blocks and is immutable, meaning you cannot overwrite or delete existing data. As new blocks get added, a chain of blocks gets formed, creating a history of blocks.
Data within the blockchain is secured via encryption. Bitcoin uses the SHA-256 algorithm, a hashing function where transaction data stored in a block is encrypted into a 256-bit on the blockchain.
How Long Does It Take to Buy Bitcoin?
Bitcoin currently only clears about 7 transactions per second. In contrast, Visa processes 24,000 transactions per second while Mastercard handles 5,000. It can take a Bitcoin transaction anywhere from a few minutes to a few hours to occur, though the average confirmation time is ~10 minutes.
Many factors affect transaction times, including the total network activity, hashrate, and transaction fees. If the Bitcoin network gets congested, the mempool will have a backlog of transactions. The mempool, short for Memory Pool, is where the transactions wait to get picked up by a validator with other pending transactions. When this happens, that usually leads to users paying higher transaction fees to get their transactions processed faster.
Typically, a Bitcoin transaction goes through multiple confirmations on the blockchain before it’s cleared to mitigate the risk of unconfirmed transactions getting reversed or the crypto getting spent twice. Whenever a new block gets created, that’s when a confirmation takes place.
If you’re buying from an exchange, for example, you can expect it to take anywhere from a few seconds to a few days to buy Bitcoin. Exchanges like Coinbase and Kraken require users to go through a verification process to confirm that you are who you say you are. By law, they require customers to comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) checks to prevent money laundering and fraud.
After you sign up for an exchange and verify your identity, you will have to link a payment method, like a credit card or a bank account. That is necessary for the exchange to confirm that you have money to buy Bitcoin. Once you have done all of this, you can buy as much Bitcoin you’d like.
Checking Bitcoin Transactions Times
You can use sites like Blockchain.com and Statista to figure out the average time it will take to complete a Bitcoin transaction or transfer. You can also get more guidance on how much transaction fees to add. If you submit a Bitcoin transaction with lower fees than others, your transaction will likely get ignored in favor of people willing to pay more. In the meantime, your payment may get stuck in a list of unconfirmed transactions until miners have more time to process it.
Verifying Bitcoin Transactions
You can use a blockchain explorer, such as the CoinMarketCap blockchain explorer, to confirm that your Bitcoin transaction has been validated. All you need to do is input the transaction hash to see the transaction status and whether it’s valid.
Speeding Up Bitcoin Transactions
Aside from raising your transaction fee to get your transaction processed faster, another option is to transfer during off-peak periods to avoid congestion. You can check the mempool size chart on the Blockchain explorer to see when the number of unconfirmed transactions is low.
Alternatively, layer 2 scaling solutions like the Lightning Network attempt to increase Bitcoin’s transaction speed to make it as fast and cheap as possible by offloading some of the traffic from the main blockchain. This solves Bitcoin’s scalability issue by processing transactions at a faster rate off the main chain.
Deciding Where to Buy and Store Bitcoin
When deciding where you want to buy your crypto from, there are several factors to consider. You want to do some research to make sure you are buying crypto from a trusted crypto exchange or brokerage. Some exchanges are notorious for shutting down, running away with people’s money, or getting hacked.
For example, in May 2022, Terraform Labs’ LUNA token crashed from $120 to 2 cents while its algorithmic stablecoin TerraUSD (UST) depegged below $1. This wiped out over $60B of value and caused a ripple effect on other major crypto players, including Celsius, Voyager, Three Arrows, and Hodlnaut. Even now, over a year later, some of my crypto is still stuck in Celsius with no withdrawal options.
While easier said than done, these are all scenarios you want to avoid. To find a good exchange to buy from, start by checking out reviews from real people, such as friends and family. You can also scour YouTube, Reddit, Discord, and Twitter to see what others are saying about the exchanges.
Crypto exchanges let you buy and sell Bitcoin for various fiat currencies. You can also buy and sell other digital tokens like Ethereum and Solana. There are currently over 200 exchanges across the globe that let you trade and invest in cryptocurrencies.
Some crypto exchanges only deal in crypto. These are called “pure play” exchanges. Others also let you trade fiat currencies like the U.S. dollar for cryptocurrencies. These are called “fiat exchanges.” It takes a few days to move cash from your bank to a fiat exchange as your funds move through the ACH bank transfer system, which checks for money laundering.
These exchanges operate in a very similar manner. To place an order, enter a Bitcoin exchange and input the amount of Bitcoin you want to buy or the amount of fiat money you want to spend buying Bitcoin. Next, choose between market or limit orders. Then click the “buy” button. There are also a few spot exchanges where you can trade Bitcoin for other cryptocurrencies.
Headquartered in San Francisco, Coinbase is a publicly traded company that operates exchanges of Bitcoin, Ethereum, and other crypto assets with fiat currencies in 32 countries and Bitcoin transactions and storage in 190 countries worldwide. As one of the leading digital asset exchanges globally, Coinbase has been described as one of the most influential companies in the cryptocurrency space.
Founded by Brian Armstrong and Fred Ehrsam in 2012, Coinbase began as a platform for trading Bitcoin only. In 2016, they added support for Ethereum. Today, you can buy and sell more than 100 cryptocurrencies on Coinbase.
While Coinbase is not FDIC-insured, the company carries crime insurance that protects a portion of your digital currency against losses from theft. It is legal and regulated in every country in which it operates. The platform and mobile app are also fairly intuitive and easy to use compared to other crypto exchanges.
While some of my crypto is in my Coinbase account, I also have had accounts with other platforms, including Gemini, BlockFi, and Celsius. I recommend avoiding Celsius indefinitely as it is going through bankruptcy. I also took all my crypto off of BlockFi last year, which had halted withdrawals due to the FTX contagion.
eToro is a social trading and investment platform that allows users to trade various financial assets online, including stocks and crypto. The company was founded in 2007 by brothers Yoni and Ronen Assia and has since grown to become one of the largest online trading platforms in the world, with over 20 million registered users from 140+ countries.
eToro is regulated by the Financial Conduct Authority (FCA) and provides many deposit options, low fees, and has more than 25 coins available for purchase and trading. What differentiates eToro from other exchanges is that it offers a unique way for users to trade financial assets by allowing them to copy the trades of other successful traders on the platform.
The social aspect makes it an ideal platform for those new to online trading, as they can learn from more experienced traders and potentially make profits themselves. In addition, eToro also provides research and analysis on various markets and asset classes, which can help you make informed investment decisions.
Kraken is a cryptocurrency exchange founded in 2011. Headquartered in San Francisco, Kraken is one of the largest and most popular exchanges in operation today. The exchange offers a wide variety of digital assets for trading, including Bitcoin, Ethereum, Litecoin, Monero, Ripple, etc.
Kraken has built a reputation as one of the most secure and reliable platforms for buying and selling cryptocurrencies. The platform uses advanced security features to protect user accounts from hacking attempts and is the only crypto company with a Special Purpose Depository Institution (SPDI) license. Kraken also offers 24/7 customer support to help users with any issues they may have while using the platform.
Unlike other exchanges that only offer one trading interface, Kraken offers several different ones. You can also stake your assets and earn interest with no minimum deposits and a declining fee structure. Overall, Kraken is a leading crypto exchange that provides users with a safe and easy way to buy and sell digital assets.
A crypto hard wallet is a physical device that stores your private keys and allows you to sign transactions offline. Hard wallets are the most secure way to store your cryptocurrencies. You may have heard of the phrase, “not your wallet, not your keys.” As we’ve seen with the fallout from Terraform Lab earlier last year, and more recently, FTX, crypto exchanges can (and will) halt trading and withdrawals when things go wrong. So, many crypto enthusiasts recommend self-custody over exchanges.
The Ledger Nano S Plus is one of the most popular hard wallets on the market. It looks like a USB flash drive and is small enough to fit in your pocket. With the Ledger Nano S Plus, you can manage over 5,500 digital assets and have up to 100 apps installed simultaneously. It is currently priced at $79.
Trezor is another popular hard wallet brand that offers similar features to the Ledger Nano S Plus. The Trezor Model One comes at a cheaper cost than the Nano S Plus at $69, but supports a fraction of the coins and tokens at 1,800+ as of September 2023. Trezor also has a slightly larger screen than Ledger’s device, making it easier to view your transaction history and confirm each transaction before you sign it offline.
The process of mining bitcoin involves using special software that solves complex mathematical problems to verify each block of transactions added onto the blockchain. While early miners were able to mine using only their personal computer’s CPU or GPU, today’s miners mostly use specialized hardware known as an ASIC (Application Specific Integrated Circuit) to be competitive.
ASICs are expensive but offer significant advantages over other types of mining hardware. They consume less power, produce less heat, and mine faster than any other type of miner on the market today. Alternatively, you can try joining a mining pool using your personal computer. Mining pools are groups of miners that work together to combine their computational power and compete with ASIC mining farms.
The Bottom Line
Before you buy Bitcoin or any other cryptocurrency, consider your financial profile, risk tolerance, and investing goals. Is this something you want to invest in for fun? Or is this a serious investment that you want to make money off of? If you are looking for a quick way to make money, investing in Bitcoin probably isn’t the best move, as this is a very risky type of investment.