There are two ways of buying Bitcoin: off-blockchain and on-blockchain. Which of these methods is better for you? First, let’s answer the following question. What is your purpose of buying Bitcoin? If you just want to make money buying Bitcoin low and selling it at a higher price, then you should use off-blockchain method. If your primary goal is using Bitcoin to pay for goods and services, then you need to have your Bitcoin on-blockchain. In this short article, we will explain about buying Bitcoin and some tips and tricks you need to know regarding off-blockchain and on-blockchain methods.
In simple words, Bitcoin and most cryptocurrencies are a kind of digital currencies, which use a highly secure way (called cryptographical) of storing that currency’s transactions. You can buy a very small amount of Bitcoin, like 0.00000001, which is called a satoshi (buying one satoshi is not practical though). Blockchain is a chain of computers that store some blocks of data to keep a record (history) of all Bitcoin/cryptocurrency transactions. When you have a cryptocurrency on-blockchain, you have a dedicated address (cryptocurrency wallet) and a private key (password). Your address is a digital wallet that has some digital coins in it. But, it is important to understand that you do not need to have your cryptocurrency on-blockchain if your main intention is making money with Bitcoin’s price movements. Having an off-blockchain Bitcoin is better in any way, except one. Let’s dig into it.
When you buy Bitcoin off-blockchain, you have three significant advantages:
- you do not pay high fees for buying your Bitcoin (with real currency like US dollars, euros, Indian rupees, etc.);
- you do not need to spend time learning about the blockchain transactions;
- your Bitcoin has lower chance of being stolen or lost.
If you buy Bitcoin on-blockchain:
- you need to spend an extra few percent to cover the fees of converting your real money into on-blockchain Bitcoin;
- you need to take some risk each time when you make transfers between Bitcoin wallets (for example, when you send your Bitcoin into a cryptocurrency exchange and back to your wallet);
- your Bitcoin can be stolen by hackers, or you can lose your private key (in both ways, your Bitcoin can’t be recovered).
But, when you have your Bitcoin on-blockchain you can pay for some goods and services directly with Bitcoin while having an off-blockchain Bitcoin will require you to convert it into FIAT (real money) for shopping purposes. Whichever way you choose to buy Bitcoin, remember that it involves risks and you should not invest money that you can’t afford to lose.
Here are the best places to buy Bitcoin: