This week I bought bitcoin and it was a lot harder than I would have ever thought.
With bitcoin being the most popular and valuable fully virtual currency of all time, I expected the process of buying bitcoins to be straightforward. “After all, I can purchase anything from deodorant to diamonds on Amazon at the click of a button, a virtual currency doesn’t involve shipping or handling should even easier,” I thought.
Turns out I was completely wrong. My basic expectations were:
- The transaction should be quick, if not instantaneous, no more than a couple of hours.
- I should not have to leave my house.
Finding a service that fit these criteria was very difficult. I asked Reddit and I asked Google. When you ask Google how to buy bitcoin, the top result is an aptly named howtobuybitcoins.info. The site is a fairly simple database that lists the available options for your country.
I started looking through the options listed on the site and immediately discovered that the usual forms of instant online payment — credit cards, or paypal — seem to be out of the question. The bitcoin community is extremely concerned (and rightly so) about fraud. A bitcoin transaction is irreversible, so any form of reversible payment is not an accepted way to buy BTC. Sellers are afraid of fraudsters ordering large amounts of bitcoin, then disputing the credit card payment. When I asked Reddit a lot of the commenters seemed to imply that this problem was unique to BTC transactions. In reality, I’m not sure how it’s different than any other online purchase. If I order something from Amazon, I can always call up my CC company and claim I did not make the purchase. There was also quite a lot of implication that the banks are actively trying to suppress bitcoin, I’m not really sure if I buy that either. In any case, the bitcoin establishment is not willing to deal in credit card or paypal payments.
One simple solution to the problem of fraud would be to limit the size of the transactions. That way if a payment was lost, the seller would only be out a small amount of BTC.
I found QuickBT.com, a Canadian site that accept online Interac payments and only allows orders less than $50 (0.01 — 0.1BTC currently). It seemed like the perfect way to buy bitcoin. Unfortunately it turns out, the Canadian banks are moving away from processing online payments via Interac, my visa-debit card did not work.
Next I investigated buying bitcoin directly from one of the bitcoin exchanges. As far as I could tell all of the exchanges seem to have a similar two step process.
First, you send them proof of identity and residence — a scan of your drivers license, passport, etc and a scan of a utility bill — it can take up to 5 business days for an employee to manually verify this information.
Second, to actually get your money into there account you either have to do an electronic fund transfer (basically an online bill payment) or a wire transfer — this can take another 1 — 3 business days. That’s right you could be waiting up to 8 business days in order to buy a completely virtual currency! UNACCEPTABLE!
If you’re investing thousand of dollars in bitcoin, this is not completely unreasonable, for a large transaction a wire transfer may even be the preferred method of payment. But if you’re only looking to buy a small fraction of one bitcoin, this is quite cumbersome.
The only option that met my criteria was a site called localbitcoins.com. It’s a site that matches buyers and sellers one-to-one based on geographic location. Sellers can choose to accept any arbitrary form of payment they want, including paypal. Buyers and sellers have a rating and feedback score similar to sites like ebay. The weird thing about the listings though was that most sellers only accept cash, in the form of deposits to their personal bank account! I.e. driving over to their bank, talking to a teller and depositing the money. WTF? I can only imagine having a bunch of people depositing cash into your account raises all kind of red flags.
I was able to find a couple of sellers who accepted — the nearly instantaneous — Interac e-mail transfers. And that is how I was finally able to buy bitcoin from the comfort of my own home…
By sending a non-trivial amount of money to a stranger online and waiting.