When bitcoin first came out, there was a stigma that came with it. A lot of people deemed the digital asset unsafe and a major risk. Who could blame them? Bitcoin was the first of its kind and people have the tendency of being afraid of what they don’t understand.
Fortunately, Bitcoin has evolved a lot over its 10-year life and not only is it much safer, but it’s more useful (not just used for investments anymore). There are now tried-and-tested ways of buying bitcoin (and other cryptocurrencies).
Main Ways to Buy Bitcoin and Other Cryptocurrencies
Now that Bitcoin has had time to develop and mature, there are renowned exchanges and marketplaces that allow almost anyone to buy bitcoin easily and safely. Currently, there are two kinds of exchanges: traditional exchanges and peer-to-peer marketplace. Which of them you choose will totally depend on the trading style you prefer. Some will also offer a free bitcoin wallet upon registration.
Traditional bitcoin exchanges, since they’ve been around for much longer, are the more-known and widely-used method of buying bitcoins. They’ve been around almost since the very beginning of bitcoin.
On this type of exchange, buyers and sellers are matched via order book. Once matched, the platform acts as a middleman, assisting the buyer and seller in the completion of the trade. This means that little to no interaction happens between the buyer and seller, allowing for more anonymity in the trade.
Since the platform acts as an intermediary between buyers and sellers, this type of exchange can appeal more to potential first-time investors. If there is a middleman helping out, it cancels a lot of the intimidation that new users feel when trading.
However, there is a price for having a middleman in the trade. These types of exchanges will often charge more in fees due to the extra help they’re giving. Another con to this type of exchange is that in most cases, you’ll need to link your bank account to the exchange. This can be a major problem for people. Especially people who don’t have access to bank accounts. Unbanked countries, countries with struggling economies, countries that require a lot to gain access to a bank account, etc.
Peer-to-peer marketplaces, although they’re relatively new to the scene, are growing in popularity. They help people create new real-use opportunities for bitcoin (such as making payments, sending remittances, wealth preservation, etc.)
Just like traditional bitcoin exchanges, peer-to-peer marketplaces match buyers and sellers via order book. Unlike traditional bitcoin exchanges, peer-to-peer marketplaces don’t act as a middleman for buyers and sellers. Instead, they allow traders to coordinate amongst themselves on how they want to conduct the trade. Because of this, sellers can accept any kind of payment. They can take for their bitcoin including gift cards, bank transfers, cash-in-person, and many more. The best peer-to-peer marketplaces should have hundreds of different payment methods to choose from.
On most peer-to-peer platforms, buyers will be able to input preferences (currency, country, payment method, location, etc.). The platform will show them the offers that match their preferences. Sellers, on the other hand, will be able to create offers that are tailored to what they’ll need from a buyer. They can set their profit percentage, payment method, trade expiration, and more. There is also a live trade chat feature. This allows the buyer and seller to communicate directly with one another, making coordination much easier. This sort of personalization is what allows peer-to-peer bitcoin trading to be so efficient. Since the platform doesn’t act as a middleman, fees are often lower.
Challenges with P2P
Despite them being more cost-efficient, peer-to-peer marketplaces often get a bad reputation. The number of scammers found on their platforms tends to be high. However, the best peer-to-peer platforms are catching on and evolving—implementing more security protocols to create a safer trading environment for peer-to-peer aficionados. These protocols include KYC/AML rules, escrow services, quality 2FA, and upgraded customer support services.
There is also the issue of privacy. Despite users not having to give that much information, peer-to-peer marketplaces often sacrifice a little bit of anonymity for cost-efficiency. If you’re willing to give up anonymity, you allow your trades to become easier and cheaper.
Among the Many Options
Traditional exchanges and peer-to-peer marketplaces, although they are the more popular methods, are not the only ways of safely buying cryptocurrencies. There are also methods such as ATMs that will allow you to buy and sell bitcoin instantly.
Ultimately, these are, more often than not, the options that most people are using. Neither one of them is better than the other as it depends on the trading style you prefer. If you’re okay with paying a little extra in fees for less work on the trading end, then go with a traditional exchange.
If you like trading with different payment methods and don’t mind sacrificing a little anonymity, then go with a peer-to-peer marketplace. You can try both out by investing small amounts of money first and then when you’ve chosen a type of exchange, you can proceed to invest larger