The most common issue new bitcoin users come across is where to purchase their first bitcoins, or at least where to buy and receive them quickly, such as on the same day.
It’s no wonder; there is a lot of confusion about what kind of service such people need, and a major difference between “Bitcoin Exchanges” like Mt.Gox, and the various services that will take your local currency and give your bitcoins for them. (Or send them to an exchange.) There are many of the latter services, no two alike, and many of them even refer to themselves as Bitcoin Exchanges too. It’s a total mess right now in fact… Such is the price of getting in something so big, so early.
So please allow me to coin the phrase “cash uploaders” to refer to this latter group of services that actually takes your cash, and looks nothing like a forex exchange. These various types of service all have one thing in common: They all take your local currency at the first point of the transaction, effectively moving money from your hand up to the internet somewhere.
To get your hands on Bitcoins, what you most likely need is a Cash Uploader, not an exchange. All of the exchanges I know of so far, including Mt.Gox, BTC-E, BitStamp and VirWox, cannot take your USDs nor Euros directly, instead relying on a small selection of Cash Uploading services to get your money into your Mt.Gox account. (And incurring a 2nd set of fees to do so.)
A wire transfer (SEPA transfer for the Europeans) from your bank would be the most direct example of a cash uploader that the exchanges will receive, (Your bank takes the additional fee in that case) but there are many alternatives and the list grows rapidly along with the popularity of Bitcoin.
Most of the newbie bitcoin documentation online tells us to use a bank ACH transfer through Dwolla, Coinbase, or some other day-or-more process of getting our hands on our first bitcoin… But the fact remains that humans are impatient, and usually wait until the day that they want to purchase something with those bitcoins to go out and actually try to acquire those bitcoins too.
ACH cash upload options:
If you happen to be in the 20% or so of people who don’t need your use your bitcoins right away, and you’re in the USA, I’d recommend using Coinbase, when it’s not slammed with traffic. Coinbase helps you get your cash converted into bitcoin for about a 1% fee, (Plus 15 cents) and it is the fastest service to allow a direct bank ACH transfer as the funding source… No need to leave your chair. With Coinbase you’ll get your money into bitcoins as fast as your bank can process the ACH payment, usually in 1 business day.
Unfortunately, they’ve recently shown that their system can’t handle the popularity of bitcoin, even though they are limited to a US customer base so far. One would think that the Cyprus crisis would be more localized to southern Europe customers, but apparently not… We are truly a global village now! At times the site has been down completely for hours, at other times people complain that their payment was stuck on hold for multiple days. Coinbase attributes this to ‘fantastic growth.’ Let’s hope they add enough servers in short order to keep up with demand.
The preferred Wire Transfer cash upload option:
Wire transfers require too much time (2 business days usually) and effort (actually going to your bank and waiting on them) for my needs, but there was a day in which this method was the only way to send money to people far away.
Add to this the fact that all the exchanges seem to take wire transfers directly from your bank, and you’re probably wondering why I bring up the whole category here… However, if you have the time to do a wire exchange at all, AurumXchange is a noteworthy, flexible alternative.
What makes AurumXchange better than simply wiring your money to an exchange all by yourself is the vast number of options you get on the receiving end. They’ll transfer your money directly into one of a few exchanges like Mt.Gox or convert it into Liberty Exchange dollars, CosmicPay, VouchX, C-gold, or Bitcoin directly… And they’ll take that wire transfer from anywhere on the planet. It is in fact the most well-integrated money uploader on Mt.Gox’s site.
Even faster cash upload options:
With a variety of funding destination options, Bitinstant offers a few interesting funding sources, too, including VouchX, and bunch of coupons from other exchanges, and most impressively (for US users) an assortment Moneygram instant money transfers that you can send from your local WalMart, CVS, Albertsons, or other chain store on a their but growing list.
I got the chance to use BitInstant’s service with a moneygram sent from WalMart last time I was stateside, and it was all over in 20 minutes flat. Bitcoins were in my Mt.Gox account pretty much as fast as I could drive back from the nearest CVS corner pharmacy. When I got home I logged on and saw the bitcoins waiting for me in my wallet. If you’re in a real hurry, this is indeed the fastest way I know… But the fees do tend to pile up.
BitInstant charges 3.99% of the total amount for it’s fee, and then Moneygram charged $3.95 USD on top of that. If you choose to send your cash to a trading account like Mt.Gox, then at some point that exchange fee will be added to the pile too. Ouch.
However, if you just want to get some bitcoin in your wallet, you can choose to skip that last fee by not using an exchange. BitInstant’s best feature is the choice of where to send your cash… You don’t get a “bitinstant account,” It just facilitates moving your money from your hands to your choice of exchange, such as MtGox, VirWox, Bitstamp, VouchX, and the ever-popular “bitcoin address.”
If your goal is to exchange the money into bitcoin when the timing is right, then you’d send it to an exchange like Mt.Gox as your local currency, to trade over there on your own time. However, if you just want to buy bitcoin at current exchange rate, all you have to do is choose the last option, and put your own wallet’s bitcoin address in to receive coins directly.
CoinMama does something similar to BitInstant, but you can stay sitting in your chair and use your credit(!) or debit card on the Moneygram or Western Union websites to fund coinmama with… The catch? It takes a whole day for the funds to clear.
Being a brand new service, and taking a huge risk accepting credit cards with their service to some degree, things could go very wrong for these guys at some point so proceed with caution.
If you want to pay in cash, you can go to a local WU or Moneygram branch in person instead. All in all, there is some promise here. I wish them luck.
BTCQuick is easily the most innovative solution here. It operates more like a Sam’s Club or Costco membership club than any other bitcoin business models, mainly for the safety of it’s customers.
Although they have 4 levels of membership right now, only the Bronze (lowest) membership is for sale at the moment for a whopping $0.99 cents USD. This fee and all purchases are payable through Google Wallet, which is the only funding choice for now. (Google wallet takes credit and debit cards, so this is actually pretty impressive technology!)
There is a product review system inside, exactly like you’d see on the website of any membership club. So far all reviews sound very positive, and everyone is more than happy with the speed of their transaction.
The bad news (as if handing google your money as an intermediate step isn’t bad enough for you) is that btcQuick requires some ID from it’s members. They’ll take a picture of your Driver’s license or of your utility bill for now, but they are insisting on getting ID for all of their members, in order to protect themselves and other members from scammers.
Since an unscrupulous buyer could charge back his credit card purchase to google wallet and hang on to his bitcoins, btcQ!uick has obviously structured their whole system around minimizing this risk including the reviews, the ID collection, and the membership system itself. (Which is much more interesting than just an entry fee… Basically the more bitcoins you buy through them, the higher your limit on how many you can purchase becomes.)
Now for the good news: In btcQuick you have a wide variety of Instant purchase options waiting for you once you’ve jumped through these hoops… All with a low $0.30 cent USD fee per transaction!
Just want to buy $5 worth of bitcents? That’s extremely easy to do on the product page that lets you buy bitcoin in multiples of the dollar. Or would you rather buy large amounts of bitcoin instantly with private-key protection? You can do that too from their “Private Key” product selection.
You can even Sell them your bitcoins at pretty competitive rates easily from the Sell your bitcoins tab. (You’d get about the same exchange rate as you would to sell them to Mt.Gox, but the fee here is only $0.30 cents again.)
This is certainly an interesting option that I plan on trying myself next time I have a chance.
Local Bitcoins, along with a myriad of less-popular clone sites, is the best option for getting your bitcoin anonymously. This website lets you put in your zip code (or geo-targets your phone if you want) and tells you on a map where the bitcoins being bought and sold near your location are in real time, and for how much. LocalBitcoins, along with a myriad of less-popular clone sites, is the best option for getting your bitcoin anonymously. This website lets you put in your zip code (or geo-targets your phone if you want) and tells you on a map where the bitcoins being bought and sold near your location are in real time, and for how much.
Sure, it’s a bit cloak-and-dagger-ish meeting strangers nearby with your laptop and doing currency trades in random parking lots or in the lobby of a starbucks, but it can be the very fastest method of all to score some bitcoin, (if the seller is nearby) and there are very good deals to be found this way as well. In one of my few visits, I’ve witnessed someone selling 100 bitcoin there at just 80% of their Mt.Gox value… Just days before the Cyprus news broke, too. D’oh! (No, I haven’t stopped kicking myself for failing to grab it.)
Keeping in mind that just about all of the professional options mentioned above will need some kind of identification so your bitcoins aren’t totally anonymous, this option and the ones below are the most attractive ways for liberty-minded buyers to get their hands on some coin.
Recently, LocalBitcoins has even added an “online” option to their listings for people to place online trades through random 3rd-party services like paypal or even cash-through-the-mail. This latest addition makes LocalBitcoins a type of manual exchange all of its’ own, competing with the examples below.
Manual-exchange (OTC) cash upload & exchange options:
Bitcoin-OTC was the first manual exchange, and it takes place completely within IRC channels. It has a nice, fancy domain name now for the non-geekeratti to interface with it too, but it’s still an Over-The-Counter, manual exchange where someone lists his or her desired trade and someone else can choose to accept or haggle with the first person… All in the most efficient way possible, and using a simple user review/ratings system to minimize scams.
It may be an ugly site, but it has true beauty is in it’s flexibility. Wanna trade your old starbucks gift cards for someone else’s bitcoins? Done. How about your old VanHalen CD collection? No problem. I even see some people posting their services up on the board for trade, kinda like Fiverr gigs… Simple, fast, and free… That’s right, there are no fees in any way! Just post what you want to trade through their system and if it’s a fair trade you’ll likely find a taker.
As I write this there are over 250 orders on the #bitcoin-otc trade board and very few of them look similar to each other… Making Bitcoin-OTC a fun place to browse through as well.
Bitcoinary is the other, more-polished, Over-The-Counter bitcoin trade platform. It does not have the flexibility to offer physical items or services in exchange for bitcoins, but what it does is integrate all of the various currencies very well making trades between different currencies a breeze.
It’s user review system is very good too, with direct links to each member’s facebook, twitter, linkedin, and other social profiles for your further investigation. (Only visible to members.) If you’re goal is to trade most any kind of currency for bitcoin then Bitcoinary may have some great deals waiting for you.
What Bitcoin truly needs:
With it’s incredible current rate of growth, bitcoin is already experiencing a limitation on how many new people can buy their first bitcoins because they either have to wait in long lines for exchanges to process their money (e.g. coinbase) or they simply don’t have the information on this page.
They wouldn’t need the information here, however, if only a service provider came along with a full solution; a business and website that is both the money uploader and the exchange… One that can change their local currency all the way into bitcoin in one simple step within minutes. (And without running to a nearby moneygram or starbucks.)
The trick however, is the funding source. Credit cards, debit cards, and paypal have always been impossible for instant bitcoin exchange because they can be charged back, and bitcoin cannot. So the real killer feature would be a new way to get money out of a bank account or from a credit card that CANNOT be charged back, or at least done through a very strong & fast escrow service for the classic options.
BtcQuick is the only service I have seen to even attempt this, but I’m sure many people will find the membership club format and their ID requirements a turnoff. So the need is real, and I don’t know exactly how they can go about doing this, but I am sure that it’s possible, and it just takes the right bitcoin entrepreneur to make it happen.
Meanwhile, I’ll keep adding new services to this page as they impress me. Feel free to point to any I should see in the comments below.
UPDATE: The DHS has shut down bitcoin-using accounts from Dwolla as of May 14th, 2013. Dwolla has been removed from this page as it’s no longer of any use to us.