So you’ve decided to buy some cryptocurrency. And if you haven’t decided yet, check out our article on whether it’s a good time to buy Bitcoin. The next step, obviously, is to purchase it. We examine the most popular options to buy Bitcoin (or other cryptos) below.
Bitcoin ATMs function like the currency exchanges at the airport do. You exchange your currency for local currency (or in this case, cryptocurrency), minus a fee. You don’t have to worry about finding a buyer or seller–the ATM conducts the entire transaction for you. (For details on how to use a Coinsource ATM, check out our article breaking down Bitcoin ATM use.)
Bitcoin ATMs, also called BTMs, are relatively anonymous as well. There are no bank statements or credit cards with your name attached to them. And because you’re dealing with a physical kiosk instead of a solely digital space, you can insert actual cash not connected to a bank account into the ATM, which then converts it into Bitcoins. Bitcoin ATMs are also one of the speediest options for acquiring Bitcoin.
Centralized Cryptocurrency Exchanges
Centralized exchanges, such as Coinbase, are run by companies that facilitate cryptocurrency purchases. Think of them as middlemen between sellers and buyers (also known as “makers” and “takers”). These exchanges connect the two, provide a platform for the exchange, offer a degree of protection against failed exchanges, and charge a fee for that service.
However, part of the appeal of cryptocurrency is it’s decentralized, meaning it’s not regulated by a single entity. So, if exchanging a decentralized currency through a centralized exchange run by a business sounds counter to a key tenant of cryptocurrency, that’s because it is.
A peer-to-peer (or P2P) exchange, like LocalBitcoins, isn’t regulated by a single entity. P2P exchanges function like a Craigslist for cryptocurrency. Individuals post if they want to buy or sell cryptocurrency, and others contact them if they’re interested.
Connecting two people in this way means the exchange isn’t entirely anonymous, just like buying and selling on Craigslist isn’t entirely anonymous, but it is mostly anonymous. No third party protects your exchange, so you must stay vigilant to avoid fraud.
Decentralized Cryptocurrency Exchanges
Decentralized cryptocurrency exchanges (DEXs), such as Bisq, are a relatively new type of peer-to-peer exchange that also take cues from a centralized currency exchange setup. DEXs function as a marketplace that brings together sellers and buyers yet aren’t involved in the actual exchange of currency. Like cryptocurrency itself, decentralized cryptocurrency exchanges are anonymous, yet this lack of regulation can spawn “nefarious activities,” as Investopedia puts it.
A bigger issue with decentralized exchanges is that they haven’t yet garnered the widespread use of their centralized and P2P counterparts. The result is low liquidity and slower transaction times.
Don’t Forget Your Wallet!
To use most services, you must first have a wallet. Learn all about them in our article exploring wallet types!