For 99 people out of 100, the first cryptocurrency they think of when they think of cryptocurrency is Bitcoin. For some of those people, cryptocurrency and Bitcoin are interchangeable. This goes beyond being “iconic” and into the territory of “ubiquitous”. Everyone knows it, even if they don’t know it.
But just because everyone knows the name of the currency, that does not mean they know how it works. With cryptocurrency in particular, even something as intuitive as Bitcoin can be elusive.
One of the most pressing questions people find themselves having is: How do you buy Bitcoin in the UK?
The answer to this question has a few layers to it. So, we have assembled a beginner’s guide to helping you get started buying, storing, and possibly even trading Bitcoin.
Table of Contents:
How Does Bitcoin Work?
The most important thing to understand about Bitcoin is that it does not physically exist. This is actually true for most money.
A normal currency, such as the British pound, can be deposited in a bank in cash form and withdrawn from a bank into a cash form. But most of the time it is formless.
When people are confused about how Bitcoin works, they are usually confused as to how it can be valuable when it has no physical component. Here is a pop quiz to help you understand: You swipe your card while buying groceries.
How does the grocery store know there’s money in your bank account?
They know because the bank tells them, and they trust the bank. When you spend Bitcoin, how does the seller of whatever you are buying know you have Bitcoin? Because of the “blockchain”. Bitcoin is a decentralised currency. That means there is no big bank that everyone trusts saying it exists.
Instead, there are lots of little links in the blockchain. No individual link in the block chain has enough trust from anyone to convince them that Bitcoin exists. But thousands, tens of thousands, or even hundreds of thousands of voices agreeing that Bitcoin exists? That is even more powerful than a bank.
The Blockchain Defines Bitcoin ⛓️
It is important to underline this point, as it will have a direct effect on every transaction you make with Bitcoin: In order to have value, Bitcoin has to either currently be on the blockchain, or have been on the blockchain at some point. The blockchain requires an internet connection to validate as well.
From these rules, we can discern a few things in advance: Firstly, you cannot really trust anyone who is selling Bitcoin in person, or who is promising to deliver it by physical medium. As you will see later, it is theoretically possible to deliver it by a physical medium, but that opens you up to all kinds of fraud.
An internet transfer of Bitcoin alone will not work either. You need a blockchain application or platform in order to verify that the Bitcoin has well and truly transferred to you. Someone can take your money, say they transferred the Bitcoin, and then never do it, leaving you poorer and them richer.
A Note About Bitcoin Sizes
As of this writing, a single Bitcoin is worth 29,612 pounds. While it is possible to buy a whole Bitcoin, most people are not going to be able to make that initial investment. However, you do not have to.
You can buy percentages of a Bitcoin. Similar to buying fractional stocks, it is possible to buy fractional Bitcoins. We felt it important to say that before going any further, lest there be confusion on the matter.
The First Thing You Need to Buy Bitcoin: A Platform 📊️
While there are lots of different ways to buy Bitcoin, easily the most reliable of them all is using trading platforms that specialise in it. Even a normal trading platform that just happens to dabble into cryptocurrency will work as well, since any platform that trades crypto will have Bitcoin on it as well.
Before we go charging ahead into naming a few good trade platforms, let’s talk about why trade platforms are good. The main reason is that they already have an infrastructure set up for securities trading. Securities trading means trading things like stocks, bonds, and commodities (and many more).
Imagine you are trading a stock. How do you trade a stock quickly, while at the same time ensuring that the stock actually transfers into your possession? If a person walks up to you on the street and says, “I’ll sell you a stock for £10,” and you say, “Yes,” and hand them £10, how do you know you own the stock?
But of course, imagine if the roles were reversed. They say they will give you £10 for the stock you own. You give them the stock, and they say that you will get the £10 in the mail in a week.
Both of these hypotheticals are ridiculous but trading outside a platform is far too similar to both of them. Without a trading infrastructure, the probability of getting scammed is much higher. Trading platforms make sure that securities and payments transfer simultaneously, and not a moment sooner.
Which Trading Platforms Should You Use to Buy Bitcoin?
Now that you know why trading platforms are important, you are probably wondering what trading platforms you should try first. The answer to that depends on what you want out of your Bitcoin.
1. eToro
The easiest platform for someone to use if they have never bought Bitcoin before is eToro. It has a simple interface, a great community, and lots of tools to use in trading Bitcoins. Perhaps best of all, it has no commission fees. Commission fees are an old staple of securities trading.
They pay the broker or platform for facilitating the trade. But when trades are all done through the computer with no one verifying them except for a robot, commission fees become essentially pointless.
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2. Coinbase
If you want to go to the centre of cryptocurrency trade on the internet, then the platform you will want to use is Coinbase. This is a platform focused on cryptocurrency trade. That does not just mean it offers a lot of currencies though. Most platforms have knowledge bases that teach you all about trading.
Because Coinbase’s platform is focused on cryptocurrency, its knowledge base is too. This includes information on how to mine crypto, how to spend it, and how to spot a crypto scam from a mile away.
3. Crypto.com
The name is a bit obvious, but it is exactly what it says on the tin. The advantage of this platform is its analysis tools.
This matters even if you are only buying Bitcoin, as it can tell you a lot about when to buy more, when to sell, and how to understand the movements of the cryptocurrency market in general.
How to Buy from a Platform
Buying Bitcoin from one of these platforms starts with making a deposit. Each platform will have a minimum deposit. For some it will be £200, others it will be £0. The initial investment you are willing to make might seriously impact which platform you choose, so have that in mind when you choose one.
Once you have your deposit, you can use their marketplace to buy Bitcoin. Except that it is not necessarily so simple as that. Bitcoin is not tied to one platform. It can be taken between platforms.
So, how is your Bitcoin stored independently from the platform you used to buy it?
Storing Your Bitcoin
Bitcoin storage involves the use of a “wallet”. But this wallet is not like the kind you put in your back pocket. Instead of containing cash and credit cards, it contains information.
This information is the data that is reflected on the blockchain, indicating how much Bitcoin you own and where you got it from.
You can (and should) backup these files in multiple locations. When you download these wallet files, they will usually include other files associated with them. The most important one will always be a file called “wallet.dat”. This is the actual data that represents whatever Bitcoin holdings you purchased.
Do not ever let anyone access this file. It contains information that, if accessed, can allow someone to reassign ownership of those holdings to themselves. Do not lose this file either. Back it up both online (through a service like Google Drives) and offline (through a physical hard drive or flash drive).
Consider a Wallet Service 👛️
While they are not critical, you should also consider a wallet service. These are online services that help you backup your cryptocurrency holdings. While it is possible to back such things up yourself, many wallet services help keep them secure while at the same time copying them to prevent fraud.
Some of these wallet services will even send you physical backup methods.
Conclusion 💡️
To recap what we talked about: Bitcoins get their value from the blockchain. In order to buy Bitcoins, you need ownership of the Bitcoins to transfer to you on the blockchain. The most secure way of doing this is by using a trade platform that has a trading infrastructure set up already.
This will make sure that no matter what happens, there will be a record of the trade you made. After that, be sure to store your Bitcoins securely to prevent them from being stolen or fraudulently traded.
That’s about all you need to know. Good luck out there, and trade responsibly.
