Exchanges

Here's a shortlist of what I think are the best exchanges for buying bitcoin online.

This isn't an extensive list of all the exchanges on the Internet; they're ones that I personally recommend:

If you're buying bitcoin for the first time and want to keep the process as simple and as secure as possible, use Kraken.

What should you look for in an exchange?

When buying bitcoins from an exchange, I look for the following (in this order):

1. Trust

The most important thing is to only ever use an exchange that you trust.

You're going to be trusting the exchange with your money, so you need to feel confident they're able to look after it and that you'll be able to withdraw it when you want to.

I like to find out who the owners are first. I think you can get a good feel for the trustworthiness of an exchange by looking at the people who run it. I usually head to the "about" page to see who's behind the curtain, and see if I can find a few video interviews to see what they're like.

It's not an exact science, but your intuition will take you a long way.

There are some exchanges that are run anonymously, and it's not clear who's behind them (e.g. TradeOgre). It seems ridiculous to trust an exchange like this, and the risk will always be greater, but I still think you can get a decent read from an exchange based on the design and function of the site.

I also consider "flashy" looking exchanges as a bit of a red flag. Ultimately an exchange is a fairly technical operation, so if it appears they're placing form over function with big flashing images and even bigger promises of security, be wary.

I've got a good amount of experience playing online poker, and I've sent money to and from many unscrupulous companies over the years, so I like to think I've got a good feel for what a trustworthy operation looks like.

Ultimately though, you have to accept that you'll never be 100% certain about any exchange. But if you dig below the surface and avoid judging based purely on face value, you should be able to edge closer to 100%, and you'll go a long way in protecting yourself from a nightmare down the road.

In other words, trust your gut.

2. Privacy

Your privacy may be an important factor when deciding which exchange to use.

In general, there's usually a tradeoff between convenience and anonymity when it comes to buying bitcoins online:

• Exchanges that require identification are usually lower risk. This means you lose your anonymity, but they're usually less risky and the buying process is straightforward.
• Exchanges that do not require identification are usually higher risk. This is great for anonymity, but they're naturally more risky and can be more difficult to use.

If you're buying bitcoin for the first time and/or have no problem with giving your ID to an exchange, I'd always recommend going for the biggest and most trustworthy exchange you can find (e.g. Kraken). It's just way easier this way.

However, if anonymity is your main concern, you'll need to search around to find smaller exchanges, and accept the risks that come with them. In this situation, you're going to want to do as much research as you can.

There's no single exchange that's perfect for everyone; you've just got to go for the one that's right for you.

You just need to be smart about it.

KYCnot.me is a good resource for finding exchanges that allow you to buy bitcoins anonymously.

Should you avoid exchanges that ask for ID?

Not necessarily.

However, if you buy bitcoins from a company that asks for your ID, then you can consider any bitcoins you buy from them as being "tagged" to your identity.

What does this mean for you?

Well, let's say you decide to send those bitcoins to a secret shop. That's cool, but if that secret shop ever got raided (for whatever reason) and their bitcoins/addresses were found, it would be possible to see all the transactions that the shop had received. As a result, seeing as the bitcoins you sent there were tagged to your ID, it would be possible to find out that you sent bitcoins to that shop.

I wouldn't dissuade anyone from buying bitcoins from companies that ask for your ID, but it's important to be aware of how they operate. Just remember that bitcoin transactions are connected together, and so the privacy of your coins depends on you not creating links from your identity to the addresses you use.

I do not believe requiring ID to buy bitcoin is in true spirit of Bitcoin, but these kinds of exchanges do make for a convenient and easy way to get your first bitcoins.

In short, Bitcoin can be used anonymously, but only if you are careful to not tie your identity to any addresses that you use. By buying bitcoins from a company that requires your ID, you are sacrificing your privacy for convenience.

And in the words of Benjamin Franklin:

Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety.

3. Fees

It's always a good to check out the fees an exchange charges beforehand.

Exchanges are offering a service, which means there are going to be fees involved when buying and selling. These fees are usually relatively small, but it's worth comparing the fees between the different exchanges you're looking at before pulling the trigger.

I personally wouldn't use fees as the primary factor when determining whether to use an exchange; I'd prefer pay more in fees to use an exchange I trust, rather than risk my money on an exchange that I don't trust just to save a little on fees.

But if it's a close call between a few different exchanges, I'd lean toward the one that has the lowest fees.

4. Ease

There's absolutely nothing wrong with sticking with an exchange that you find easy to use.

Buying bitcoin online can be a pretty intimidating experience, especially if you're doing it for the first time. So you shouldn't feel bad about using an exchange that makes the process straightforward.

Some exchanges can be quite technical and are designed for experienced traders, and it's not always clear what's going on if you haven't used them before. Whereas other exchanges are designed for beginners, and simplify the process as much as possible.

You're handling your own money here, and you shouldn't feel compelled to use an exchange that could lead to you making mistakes.

The best method is to start simple and work your way up.

FAQ

How do you buy bitcoin?

Fundamentally, the way you buy bitcoin is to buy them from someone who is selling them.

But of course, not everyone knows someone who has bitcoins to sell, so companies have popped up that sell bitcoin for a living. These are called exchanges, and they offer a convenient way to buy bitcoin online.

So this page lists what I think are the best exchanges for buying bitcoin online.

But of course, there's nothing wrong with buying from someone directly if you can (and want to). And if anything, that's what Bitcoin is all about.

Should you keep your bitcoins on an exchange?

You can if you want, but you need to be aware that the exchange will have complete control of your bitcoins.

It's like "buying" gold from a website, but only seeing the amount of gold in your account and not actually having the gold in your hands. So if the exchange's computers were to blow up, get hacked, or if the company just plain-old disappears, then your bitcoins are gone too.

So what's the alternative?

Well, if you want to have complete control over you bitcoins (which I recommend), then you need to withdraw the bitcoins to your own wallet. By withdrawing you are asking the company to create a transaction to lock up an amount of bitcoins to one of your addresses. This means you will have the keys that allow you to transfer the bitcoins, which means that nobody else has control of them except for you.

Having complete ownership and control of your money is one of the key principles of Bitcoin. This is why I recommend withdrawing bitcoins from an exchange to your wallet if you can, as this is what gives you the freedom that Bitcoin was designed for.

By withdrawing to your wallet, you are now also in control of the security of those bitcoins. It's perfectly manageable, but don't take it lightly.

What next?

After you've bought your first bitcoin, you should consider withdrawing them to your own wallet.

From here, you can start making transactions and sending bitcoins to other people and businesses.

This is where the fun begins.