How to buy Bitcoin in 7 steps

Disclaimer: This is an educational tutorial to understand Bitcoin, not investment advice.

Bitcoin and cryptocurrencies

We're increasingly being asked about how to make money from Bitcoin (and other cryptocurrencies). This isn't surprising given the ever-growing hype and stories of kids making millions.

Please don't rush into buying Bitcoin to make money. It's really important to know what you're getting involved with. Read our new how to buy Bitcoin tutorial which explains everything you need to know.

In 2013 I set out to buy one whole Bitcoin for £200. But it never actually happened.

The closer I got to buying, the more confused and worried about the whole thing I got. So I gave up.

I wasn't to know, but if I'd persevered, that Bitcoin would now be worth over £6,000.

With the ongoing surge in interest and media coverage, the conversation gets louder and louder, and so much harder to ignore.

Bitcoin could have huge implications for everyone's future. I felt it was time to try again. Not to make money, but to understand what the hell all the fuss was about.

The itch led me down a rabbit hole of research, fueled by fascination and excitement. I finally 'got it'. It also became obvious that today it's far easier to buy Bitcoin than it was 4 years ago.

Today I'm the proud owner of 0.01603666 BTC, which I exchanged for £100.

In this guide, I take you through the exact steps I followed to buy Bitcoin. The process itself took about 15 minutes.

But before we get to the tutorial steps, it's really important to know what we're getting into. Increasingly I hear from students making mistakes due to rushing into Bitcoin because of all the hype. There's so much fragmented or misleading information out there. My aim here is to strip it to total basics without putting you off for another 4 years (hopefully).

What is Bitcoin?

To many people Bitcoin represents the future of paying for something, as a new digital global 'cryptocurrency'. Rather than using a £1 coin or $1 bill, something could be 1 Bitcoin (1 BTC).

But Bitcoin is much more than a currency, and this is why people often get confused. It's also the entire network (known as a Blockchain) that securely oversees the entire process of someone sending money to someone else.

Say you spend £20 at a restaurant on a Visa debit card. That transaction must be processed through a card machine, Visa, your bank and the merchant bank. At each step, communication and verification takes place.

Bitcoin's promise is removing all of this friction involved in the verification, whilst also making payments much more secure. You could use your mobile phone to send £20 worth of Bitcoin to the restaurant directly.

By cutting out the middlemen, transactions become much cheaper too, especially when it comes to international payments.

Bitcoin also takes on the role of government central banks (eg. The Bank of England). Governments traditionally have control over the supply of currency which is open to manipulation and corruption.

The Bitcoin Blockchain is completely open. It isn't owned or controlled by anyone, it's run by a network of many computers around the world.

Of course the young cryptocurrency is not without its critics. Mainstream media, traditional banks and financial commentators all warn against a 'bubble' set to burst, and the opportunity for Bitcoin to be used by criminals.

12 key things to know about Bitcoin

As a total novice, I spent days researching the ins and outs of Bitcoin, its benefits and risks. Here's my distilled list of the key points.

1. Trust - Fills the 'trust gap' between two parties (currently the role of banks)
2. Secure - Transactions encrypted within a Blockchain which is impossible to hack
3. Decentralised - With no one body in control, it can't be taken down, hacked or manipulated
4. Unregulated - There's no guarantee of protection if a payment is made in error
5. Transparent - Both code and all transactions (imagine knowing where every tax penny went)
6. Low cost - Removes institutions and friction, especially for international payments
7. Speed - Complete digital network (and no more loose change!)
8. Limited supply - Capped at 21 million Bitcoins
9. Truly global - Doesn't geographically exclude people
10. Privacy - Institutions don't hold your data
11. Virtual - Despite its name, Bitcoin has no physical coins. All 1s and 0s
12. Volatile - Bitcoin value fluctuates wildly as it's still relatively new.

Ultimately Bitcoin promises to democratise money, whilst removing almost all of the friction and cost in making a secure payment.

You don't need to understand everything.

Under the bonnet Bitcoin is an incredibly complex technology, which makes it so secure. Most people don't really know how card machines or even the internet works but still use them everyday.

We'll dig deeper into the background and implications of Bitcoin later if you're keen to learn more 

Should you buy Bitcoin?

Firstly, you don't need to buy a full Bitcoin. That would be preeetty expensive now! A Bitcoin can be divided all the way down to a one hundred millionth. You can buy as little as £5 if you wish.

If you can't spare £5 or are in debt please don't buy Bitcoin as you could lose money.

There are 3 types of people buying Bitcoin:

1. Speculators - the value has risen massively, but it's still very volatile making Bitcoin a risky investment
2. Actual users - what it's all for! Spending and even earning in Bitcoin is slowly gaining traction
3. The curious - Bitcoin's an exciting new technology, and many want to just understand the future of money and be part of the conversation.

Everyone has their own motivations, but the purpose of this guide is for the third type. I bought a small amount of Bitcoin myself to understand and appreciate this new technology and the opportunities it brings.

Once you actually give it a go by buying and sending some Bitcoin, it becomes a whole lot simpler to understand!

So yes, I believe everyone would benefit by buying a tiny bit of Bitcoin just to educate themselves on what could quickly become part of our future.

I do think Bitcoin is the first cryptocurrency that has the potential to do something like change the world - Peter Thiel, Co-Founder of PayPal

How to buy Bitcoin tutorial

I'm going to walk you through the exact steps I took to buy my own Bitcoin. I bought some for the sole purpose of going through the motions.

There are plenty of other (potentially questionable) methods and websites you could use - which could be slightly cheaper - but this was all about minimising risk and complication for myself as a total newbie.

You need just 5 things before buying Bitcoin:

1. Bitcoin address - A string of numbers unique to you, that allows you to receive Bitcoin (acts like a bank account number). Also known as a 'public key'.
2. Bitcoin wallet - A secure place to store your Bitcoin (acts like a bank account).
3. Bitcoin exchange - A website to convert old-school cash into Bitcoin (acts like a bureau de change).
4. Payment method - A debit or credit card to buy Bitcoin.
5. Form of identity - You'll need your passport or driver's license to hand.