How to buy Bitcoin UK
I chanced upon an article about Kristoffer Koch, a Norwegian man who invested £19.59 or 150 kroner to buy 5,000 bitcoins in 2009. He forgot about them until widespread media coverage in 2013 jogged his memory.
In 2013, the value of one bitcoin was £193 before it crashed to a low of £36. It continued to fluctuate in value following the seizure of Silk Road, an online drugs marketplace. Koch exchanged a fifth of his 5,000 bitcoins at the time and bought an apartment in Toyen. Today, the value of his 5,000 bitcoins would be £120,281,216.55.
After reading the article, I researched how to buy Bitcoins. I invested £50 then increased the amount to £100, and since then, I have been buying and selling Bitcoins. I recently discovered that most people were not aware of Bitcoin or how to buy it.
According to recent data, 19% of Brits have bought cryptocurrency before. This represents a fifth of the population. Since 2018, the number of people who bought cryptocurrencies increased by 558%. Many people in the UK are purchasing cryptocurrency because they think it will be influential in the future. Some are avoiding cryptocurrencies because they believe it’s too risky.
So, I decided to write a guide to help readers learn how to buy Bitcoin in the UK.
What Is Bitcoin?
Bitcoin is a type of virtual currency where new units are usually generated via a computational solution of math problems. Created in 2009 by Satoshi Nakamoto, Bitcoin uses peer-to-peer technology to facilitate payments. The identity of Satoshi remains a mystery, but thanks to his technology, people can transact across borders fast and securely.
Unlike traditional payment systems that require you to wait for 3 to 5 days for payments to complete. Bitcoin transfer takes a few minutes. Transaction fees are low, and it’s decentralised. As a virtual currency, there is no physical bitcoin.
Balances are usually kept on a public ledger called blockchain, which is transparent to access. Despite the cryptocurrency not being a legal tender, it’s trendy and has led to the launch of thousands of other cryptocurrencies.
What Is Cryptocurrency?
A cryptocurrency is a digital asset that users can use to purchase goods and services. Examples include:
As a medium of exchange, transactions are usually recorded and stored in a ledger. The ledger uses strong encryption to secure all transactions. Since cryptocurrencies are always secured by cryptography, it’s impossible to double-spend or counterfeit.
What Is Blockchain?
Blockchain is a type of database that stores data in blocks. As a system of recording information, blockchain makes it difficult for unauthorised persons to hack or cheat the system.
The digital lender is usually distributed across the entire network of computer systems called nodes. Each block contains a set of transactions. Every time a new transaction occurs, a record is usually added to the ledger.
Basically, the transaction is usually transmitted to a network of computers scattered worldwide. These computers then solve equations to confirm the transaction’s validity. Once confirmed the transaction is legitimate, they are then clustered into blocks. The blocks are then chained, creating a long history of transactions.
Is Blockchain Secure?
Yes, blockchain is secure. New blocks are always stored chronologically and linearly. The new blocks are usually added to the end of the blockchain. Each block has a position on the blockchain called a height. As of November 2020, the blockchain’s height reached 656,197 blocks.
After the addition of a block to the blockchain, it isn’t easy to alter its contents. This is because each block contains its own hash. It also includes the timestamp and hash of the block before it. The blockchain creates the hash codes via a math function. Using the math function, it turns digital information into letters and numbers.
Let’s say a hacker wants to steal bitcoin. He decides to alter the blockchain. If he were to alter a single block, it would be difficult for the blockchain to align his block with the rest. Since the hacker’s block will stand out, the blockchain will cast it away.
Due to the size of the blockchain and how fast it’s growing, hacking even a single block is challenging. First, it’s expensive and will likely be fruitless. Second, it won’t go unnoticed. This is because network members will detect the alterations. Immediately, the network members will fork off a new version.
Where Do Bitcoins Come From?
Bitcoins are usually mined before release into circulation. In Bitcoin mining, computers solve computationally difficult puzzles to discover a new block. This new block is then added to the blockchain. Bitcoin miners are usually rewarded with some bitcoin. Also called a block reward, they set the reward at 50 BTC after Bitcoin’s launch. But the reward halves every 210,000 new blocks or four years.
The third halving of BTC occurred on May 11th 2020. This brought the reward of each newly discovered block down to 6.25 Bitcoins. Bitcoin miners use a variety of hardware to mine Bitcoins. Graphic processing units are usually used to achieve more rewards.
A single bitcoin is divisible to eight decimal places or 100 millionths of one bitcoin, where the smallest unit is called Satoshi.
Bitcoin UK Trading
Before buying Bitcoin in the UK, there are a couple of things you need. The first thing you need is a Bitcoin wallet. A Bitcoin wallet is a software where you can store your Bitcoins. You cannot store Bitcoins anywhere.
Bitcoin UK Wallet
With a Bitcoin wallet, you can send and receive Bitcoins as well as check the balance. There are four types of Bitcoin wallets: Each Bitcoin wallet has a private key corresponding to your Bitcoin address.
In this post, we recommend using the web version such as Blockchain.com. Next, choose a Bitcoin exchange. The following are the most reliable exchanges:
To purchase Bitcoins via exchanges, you need fiat money. You can use a debit card, credit card or bank account. Lastly, you’ll need your driver’s license and passport. The majority of cryptocurrency changes are using a Know Your Customer platform. It’s essential that you’ve your personal identification documents on hand.
There are plenty of Bitcoin exchanges, but in our example of buying Bitcoins in the UK, we will use Coinbase and LocalBitcoins.
Coinbase is a San Francisco based cryptocurrency exchange. Founded in 2012, it supports more than 100 countries and has a $335 billion quarterly volume traded. Over 56 million verified users trust Coinbase to use, spend, invest and earn cryptocurrencies securely.
Here are steps to buying Bitcoin
1. Create an Account
Creating an account is easy. Head to Coinbase and fill out the form with the following details:
- First Name
- Last Name
Coinbase will send an email with a verification link. Open your inbox and click the verification link, and it will take you back to Coinbase.com. To complete the verification process, sign back using your email and password. If the email is not in your inbox, check your spam folder and whitelist the Coinbase email.
Once you open your account, Coinbase will create a Bitcoin wallet with a unique Bitcoin address. To check your digital wallet, click “Portfolio” in the side menu and against Bitcoin, you should see your wallet address.
As a business, you can open a Coinbase Prime account.
Coinbase Prime is an all in one solution that provides secure custody of your crypto assets. As an advanced trading platform, you have access to the broader crypto marketplace. Coinbase uses offline cold storage to store your crypto assets. This provides maximum security. For more than 8 years, Coinbase has protected the crypto assets of its clients without fail.
2. Verify Your Phone Number
Now that you’re signed in, Coinbase will prompt you to add a phone number. Select country, then enter your mobile number. Click “Send Code” if using the Coinbase web version or tap “Continue” if using Coinbase app.
Coinbase will send a text containing a seven-digit code. Enter the code that Coinbase texted to your smartphone on file. Tap “Continue” or click “Submit.” Now, you can set up Two Factor Authentication. If you do not receive the seven-digit code, select “Resend SMS.”
3. Add Your Personal Information
Coinbase will prompt you to enter your personal information as shown on your valid government-issued ID. This includes:
- First Name
- Last Name
- Date of Birth
Once you enter the information, you need to answer the following questions:
- What is your current occupation?
- Who is your employer?
- What is your source of funds?
- What are the last digits of your SSN?
- What do you use Coinbase for?
Select “Continue” to save your profile. Coinbase will send further instructions via email.
4. Verify Your Identity
Before you buy cryptocurrencies, verify your identity. If you signed out, sign in to your Coinbase account to complete ID verification. This is to ensure that no unauthorised users access your account or change your payment details.
As a trusted cryptocurrency, it collects your data to comply with anti-money laundering laws. As a UK resident, Coinbase requires you to upload the following documents:
- Government-issued photo ID
- National Identity Card
Coinbase does not accept email copies of your personal documents. They also don’t accept the following documents:
- School IDs
- Medical IDs
- Residence Permit
- Military IDs
- Public Service Card
- Temporary IDs
Remember, you need to upload the front and back of your personal identification documents.
5. Setup Two-factor Authentication
Two Factor Authentication is a security process designed to protect users better when accessing web apps. Also called two-step verification, it provides a higher level of security than single-factor.
In Two Factor Authentication, the method relies on a user providing a password and a unique code or biometric factor such as a facial scan. We recommend using the following apps:
- Google Authenticator
- Microsoft Authenticator
Once you download these apps, go to “Security Settings” on Coinbase, click “Enable Authenticator.” Follow the instructions.
6. Link a Payment Method
Coinbase supports SEPA Transfer and UK bank accounts. To link your bank account, go to “Settings > Payment Methods.” Once you link your bank account, follow these steps to initiate your first deposit.
Select “Portfolio” from the menu at the top of the age. Click the “Deposit” button and use the displayed information to complete the transfer.
To ensure Coinbase completes the deposit, make sure the name on your bank account matches that on your Coinbase account. To link your 3D secure card, follow these steps:
- Go to Settings > Payment Methods
- Select Link a New Account
- Choose Debit/Credit card
- Fill in your billing address
- Enter your card Information
- Select “Add card”
A pop-up window will appear saying “Credit Card Added.” You can now buy your first Bitcoin using the Buy/Sell page.
7. Buy Bitcoin
Go to Coinbase Buy/Sell Digital Current page and enter the desired amount. You can start with as little as £25, but we recommend starting with £100. Select the card on the drop-down menu, then confirm your order is correct.
Select “Complete Buy,” and Coinbase will direct you to your bank’s website to confirm your purchase. If the transaction is successful, Coinbase will add Bitcoins to your wallet. For instructions on how to make a purchase using your 3D secure card on the Coinbase mobile app, click here
Now that you bought your first Bitcoin, you can hold onto them, hoping Bitcoin increases in value. You can choose to store your bitcoin in your Coinbase wallet or a private wallet. Several stores now accept Bitcoin. Also, spend them by buying gift cards, eating at restaurants or travelling.
Alternatively, you can send them to family or friends or sell them. To transfer Bitcoins to your family or friends, follow these steps:
- Sign in to your Coinbase account
- Click the “Send/Receive” button
- Enter the amount you wish to transfer
- Enter the Bitcoin address of the receiving person’s wallet
- Click “Continue” to send the bitcoins
Coinbase has an app compatible with Android and iOS devices. This app allows you to access your account and manage your cryptocurrencies even on the go.
LocalBitcoins is a peer to peer cryptocurrency exchange that allows you to trade directly with other people. Based in Helsinki, LocalBitcoins makes the process of trading cryptocurrencies lean and fast. There is no corporate overhead, and you can get your bitcoins instantly.
For every trade made on Localbitcoins, the peer to peer exchange offers escrow protection. This ensures that you and your bitcoins are safe. Here is how to buy bitcoins on Localbitcoins.
1. Register an Account
Head to the Localbitcoins site and register an account. It’s easy and takes less than 5 minutes. Simply click “Sign Up Free” and enter the following details:
Verify that you’re a human, then click “Register.” Localbitcoins recommends that your password:
- Must contain at least 8 characters
- Must not have more than 128 characters
- Must not be similar to your personal information
- Must not be entirely numeric
Localbitcoins will send an email with a verification link. Click the link, and it will redirect you back to Localbitcoins.com. Now that you’ve verified your account, Localbitcoins has already created your free and secure bitcoin wallet. You don’t need to download an app.
2. Update Your Profile
To make a transaction on Localbitcoins, your profile must be complete. You need to update your real name and verify your phone number. Localbitcoins may request that you provide an address. To update your profile, sign in, then click on the person icon. It’s located on the right-hand side of the top toolbar. Scroll down to “Edit Profile.”
Go to Verification, enter your real name, address and country of residence. Localbitcoins will send you an SMS code. Enter the unique code to verify your phone number and to complete the registration process. You can always configure your profile and account settings.
Like Coinbase, Localbitcoin also supports two-factor authentication. The use of two-factor authentication protects your account and bitcoins from unauthorised users. After you open your account, you should see a red notification at the top of the page about a weak level of protection.
If you click on the message, it will redirect you to the “Account Security” section. You can choose to set up two-factor authentication with a mobile app such as Google Authenticator. Or, you can print the codes as a pdf document and save them on your device. Localbitcoins will generate up to 90 codes. Every time you sign up, Localbitcoins will require you to enter a code. After using all 90 codes, you can print a new set.
3. Search for Advertisements
Now that you’ve set up your account, it’s time to buy your first bitcoins. Go to the Localbitcoin main page, and in the search box, fill in the form. Enter the amount you wish to buy, select a currency from the drop-down menu and choose a country (UK). Next, select if you want Localbitcoins to list all online offers or select a specific payment method such as SEPA Bank transfer or Payoneer. The cryptocurrency exchange also allows you to find sellers who accept altcoins, such as:
- Bitcoin Cash altcoin
- Cardano altcoin, etc.
Click “Search,” and Localbitcoins will list all traders matching your search query. From the results, you should see the:
- Trader’s username
- Number of trades
- Price per bitcoin
- Minimum and Maximum buy amount
- Payment method accepted
Scroll through the list of traders and find a trader who meets your requirements. You should also see a response time indicator just above the number of trades. If it’s grey, the trader is offline; brown means the trader is inactive and green is active.
We recommend trading with a trader who has a 100% positive rating and over 100 trades. Also, make sure that the seller accepts your preferred payment method, is active and has the right limits for you. Click “Buy” to view the information about the ad. You should see the terms of the trade. Before submitting a trade request, read through the terms.
If you disagree with the terms, cancel the trade and choose another advertisement.
4. Pay the Seller
If the trader’s terms are acceptable to you, make a trade request. To start a trade, type in the blue box the amount of bitcoins you want to buy. Enter a message for the seller and click “Accept terms and send a trade request.”
Once you send the trade request, make the payment. You must complete the payment within the payment window allowed. Otherwise, the system will automatically cancel the trade. Localbitcoin has a chat function that allows you to communicate with the trader. Immediately you send payment, click the “I have paid” button and send a message to the seller.
Localbitcoins will release the bitcoins from escrow to your wallet when the seller confirms having received payment. And that’s all there is to it. You’ve successfully bought your first Bitcoin. Once the bitcoins appear in your digital wallet, you can send them to family and friends, spend at your favourite store or sell them.
To send bitcoins from your Local bitcoins digital wallet, go to the wallet section and select “Send Bitcoins.” Enter the amount you wish to send and the receiving address. Click “Continue”, and Localbitcoins will ask you to enter the 2FA code to complete the transaction.
Key Things to Know About Bitcoin
Since you’re getting started with Bitcoin, there are a few things you should know.
Securing Your Wallet
Your digital wallet makes it possible for you to send and receive bitcoins. Like in real life, you need to secure your digital wallet. Bitcoin exchanges such as Coinbase and Localbitcoins support two-factor authentication. This level of security protects your account and digital wallet. Always remember, it’s your responsibility to protect your money.
The number of bitcoins that can exist in the market is 21 million. As of this moment, 80% or 17 million bitcoins are in circulation. The good news is miners will still mine bitcoin until 2140. This is because, after every four years, the reward given to miners reduces by half. The last halving was in 2020, and the reward reduced to 6.25 bitcoins.
Unlike fiat money, Bitcoin payments are irreversible. If you send bitcoins to the wrong address, there is no way to reverse the transaction. The only way to receive your bitcoins back is when the person receiving the funds sends them to you.
Yes, Bitcoin does detect typos and will not allow you to send bitcoins to an invalid address. But while this measure is in place, you should take care when transacting bitcoins. Always confirm the receiving address before sending any bitcoins.
All bitcoin transactions are usually stored on a public ledger. This means anyone with your address can see your balance and transactions. However, they will not know your identity. Your identity is only revealed when you buy or sell Bitcoins. Remember, it’s your responsibility to protect your privacy.
Not Legal Tender
Many coffee chains and restaurants in the UK now accept Bitcoin and other cryptocurrencies as a way of buying gift cards. Such establishments include Pizza Express, Wagamama and others. Despite this, Bitcoin is not an official currency.
That said, different countries now require you to pay capital gains and income tax on Bitcoin and other cryptocurrencies. You must adhere to tax and regulatory mandates issued by the government.
Congratulations, now you know how to buy Bitcoin. We hope you’ve enjoyed discovering new information about Bitcoin, blockchain, cryptocurrencies and exchanges. If you want your cryptocurrency investment to the next level, research and consult experts.