Buying bitcoins in person can be a great way to get started with this digital currency. If you decide to buy some coins in person, not only will you participate in a peer-to-peer transfer and become an owner of a certain amount of bitcoin currency, but you will also meet like-minded individuals that have an interest in cryptocurrencies. At the same time, you need to make sure that you are not attracting any unwanted attention. As the prices of bitcoin and other cryptocurrencies are going up, bitcoin is starting to attract more and more attention from criminals interested in getting to both your cash and digital currencies. This article will provide you with tips how to prepare for a transaction and how to stay safe during the transaction.
Preparing for a transaction: generate a new address
Before you engage in an in-person peer-to-peer transaction, you need to prepare. The most important aspect of your preparation is the creation of a wallet address for the transaction.
Any bitcoin wallet can have an infinite number of addresses. While it is possible to use one address for several transactions, you should create a new address for every new transaction. The reason for it is simple: bitcoin is a fully transparent currency and if someone knows an address, they’ll be able to monitor all the transactions for the address easily and for free using the website blockchain.info.
While you wallet addresses are linked to your wallet, having an address allows seeing only the transaction or transactions for this address and not for the wallet. This is why when you create a separate address for a new transaction it will be not possible to monitor any of your other activities or transactions.
Addresses for your bitcoin wallet are long strings that include lower-case letters, upper-case letters and numbers. It is not possible to remember such as string by heart, which was one of the intentions of the creators of the bitcoin currency when creating the system of wallet addresses.
The reason for it is very simple. Not being able to remember an address adds an extra level of security to the bitcoin network and bitcoin currency. If someone could remember addresses easily, they would also be able to monitor the activities for these addresses easily.
There is a number of ways to generate a new address for your wallet. For a peer-to-peer transaction, a mobile solution is one of the best ways to go because you can install an app on your mobile device and the app will take care of the process for you.
If you decide to use an app, you need to remember that you will most likely need to complete a registration process. The process may take a few days, which is why you should install the app and register beforehand. Try to do that a week before your in-person transaction. This will help to make sure that you have plenty of time for everything, including delays and hiccups in the registration process.
Once you install and register the software, it will automatically generate a wallet address for you.
Presenting your address during a transaction
When you buy bitcoins in person, you will need to present a seller with an address that he or she can send the money to. While you can write down the address on a piece of paper, this is not the most convenient way to go. One of the issues is that bitcoin addresses are long and complex, which is why it is easy to make a mistake writing an address down.
Bitcoin transactions are irreversible. If you make a mistake and the seller sends funds to a wrong address, there’s nothing either of you will be able to do about it. For this reason, it is better not to write an address down but to use a QR code instead. A QR code is a weird-looking matrix barcode that you have seen on physical products and on TV. It is also possible that you have used QR codes in the past to authenticate transactions and mobile payments. A QR code is a very convenient way to share a bitcoin wallet address with another bitcoin user. It also consumes less time compared to writing an address down and improves user experience overall.
To share a QR code, you can either print one or show one on your mobile device. The other party will need a phone with a camera that they will use to scan the code with their bitcoin wallet software. Once they complete the scan, the software on their mobile device will complete the process of transferring the funds automatically.
Another benefit of using a QR code during a transaction is that when someone sends you funds using a QR code, they will be able to show you a page with confirmation on their mobile device. By the time you check your bitcoin wallet on your device, the transaction will be there. Obviously, during your peer-to-peer transaction, you need to have enough charge in the battery of your device to perform all the necessary steps. For this reason, make sure to charge your device fully and remind the other party to come with a fully charged device, too.
Keep in mind that for a bitcoin transaction to be valid, it needs at least six confirmations from six different blocks on the blockchain. On average, it takes the bitcoin blockchain network about 10 minutes to generate a new block. This means that for you to be able to spend your newly obtained bitcoin funds, you will need to wait an hour on average.
You can see the speed of the creation of new blocks on the bitcoin network in the “age” column. Sometimes the network creates the blocks faster than 10 minutes per block and sometimes it takes it more time. The speed of block creation depends on the difficulty and the number of miners that are currently mining the blocks. For example, it took the blockchain network 4 minutes to create the block 495269. It took the network 16 minutes to create block 495268. You can see real-time information about block creation for free when you visit blockchain.info
Depending on your wallet and your history, you may be able to spend funds faster. While the standard is to get at least six confirmations, your wallet may make your funds accessible much quicker. Also, mobile device wallets typically make funds available faster than desktop wallets. Refer to your wallet instructions to find out when you’ll be able to spend the funds.
Meeting in person
When meeting in person with someone for the first time for your peer-to-peer bitcoin transaction, you need to follow the safe reasonable safety precautions you would take when meeting someone for the first time for any other reason.
Choose a public area with a lot of people that is easy to get to and that you and the other party know well. This will protect both parties from potential issues. Also, it is much easier for both parties to find a well-known public space.
Pick a place or an area where you will secure, yet at the same time don’t pick a place that you go to on a daily basis and that has a personal link to you, your work or your life. Also, don’t invite someone to your home or your workplace. While most bitcoin users are honest individuals that mean no harm, it is always better to be secure and safe than sorry.
Another reason why you want to meet in a public space is that to complete a transaction both you and the other party will need access to an Internet connection. To avoid potential issues, you want to meet in a place with an Internet connection such as a coffee shop or a mall so that you know that the chances of the other party hacking and altering the connection are very unlikely. In most such places in the United States, Europe, and Australia, the connection will be reliable and will have a decent speed, which means that you will be able to complete your transaction quickly and easily. Such an option is much better compared to meeting somewhere in a rural area that is hard to get to, can be potentially dangerous and where you will depend on a slow unstable cellular signal to complete your transaction.
Meeting with someone in person does come with a small risk of the other party trying to steal your device or force you to send your coins to a different address, but such scenarios are so rare that they are almost impossible. There are always risks involved when you are dealing with money, be it digital currency or regular currency. Meeting with someone in person in a public space carries much lesser risk compared to other options of exchanging funds. This being said, you always want to use common sense and be cautious.
When meeting with a person for the first time, you always want to think about personal safety. At the same time, one of the biggest risks of participating in a peer-to-peer transaction and meeting with someone in person has nothing to do with personal safety. This risk is the possibility of paying more for bitcoin than the current market rate or selling your coins at a rate that is significantly less than the current market value.
Not all people looking to trade bitcoin in-person follow the market fluctuations closely, which is why it is a good idea to develop a habit of check the current value before engaging in a peer-to-peer transaction. Not only will it allow you to trade bitcoin at better profit margins but it will also give you a better understanding and insight into how the markets work.
Bitcoin is about giving financial power to individuals, about transparency and free markets, which means that bitcoin rates work both ways and there are no laws or restrictions preventing you from selling or buying for more or less than the exact market rate in the moment. This is the beauty of operating in a truly free market where both buyers and sellers can set their own prices and freely choose the transactions that they feel are right for them. While buyers are typically looking to buy for as cheaply as possible, there are also other factors that come into play, such as convenience, safety, and peace of mind, for which many buyers will gladly pay a premium.
The size of the premium depends entirely on the specific circumstances and specific participants of the transaction. For example, many bitcoin ATMs charge a 5% premium on top of the current market rate.
Buying bitcoins in person using a bitcoin ATM
A bitcoin ATM is connected to the Internet and you can use your regular local currency to exchange it to bitcoins at the current market rate. Most machines will allow you to both buy bitcoins and sell bitcoins. When you sell bitcoins using a bitcoin ATM, the machine will usually give you cash on the spot. In some cases, you may need to register with the bitcoin ATM service provider in order to be able to complete transactions using the ATMs.
The abbreviation “ATM” in the “Bitcoin ATM” has nothing to do with how a bitcoin ATM really works.
A regular ATM connects to your bank account, checks how much funds you have in the accounts, and withdraws money from an existing account. Then, it sends a message to your bank that you have completed a transaction and the bank updates the status of your account.
This is not how bitcoin ATMs work. When you insert cash into a bitcoin ATM, the ATM connects directly to a bitcoin exchange, not to a bank account or a bitcoin wallet, and performs a buying transaction on a bitcoin exchange. The ATM then typically gives you a paper receipt for the transaction.
The first bitcoin ATMs appeared in 2013 in a coffee shop in Vancouver, Canada. The machine stayed in operation until January of 2016. The first bitcoin ATM in the United States went online in 2014. It was located in a cigar bar in the state of New Mexico. Today, there are over 800 bitcoin ATMs all over the United States.
Exchange rates and payment methods during in-person bitcoin transaction
When using a bitcoin ATM or dealing a bitcoin user in person, you can encounter rates that are very different from the market rates because that’s one of the features of a truly free market.
When you engage in peer-to-peer transactions, you have a wide selection of payment methods. If you are using a bitcoin ATM, it is a good idea to check how you can pay for bitcoins using the ATM and whether you need an account with the bitcoin ATM service provider. When dealing with a person, the obvious choice is cash in hand. While theoretically you could use PayPal, in most cases it is not a good choice because PayPal transactions are fully reversible while bitcoin transactions are not. If you use PayPal to sell or buy bitcoins, you are exposing yourself to risks of the other party filing a dispute with PayPal. If this happens, there will be nothing you can do about your bitcoin transaction because you can’t reverse it. The same applies to using a credit card or debit card during a peer-to-peer bitcoin transaction.
While some users would agree to use a bank transfer and many bank transfers are irreversible, there is no need to meet in person if you are buying or selling bitcoins and engaging in bank transfers. You can complete all the operations during such a transaction without meeting in person.