I spent last weekend learning all about Bitcoin and am excited to use them to purchase some web-based services. But alas I'm stumbling on the most fundamental part: how do I buy them?

I paid cash for a pre-paid VISA this morning, bound that card to a PayPal account, and was psych'd to start buying coins, but was bummed to discover that:

(1) PayPal wants to charge me a $14 fee to transfer $500 to a seller (rip off!)

(2) No seller wants to use PayPal because the buyer has the ability to nix the payment retroactively using a "charge back" (strange that they'd allow people to do this, but ok)

(3) This forum indicates that #1 and #2 are moot anyway because PayPal's terms of service don't allow for BTC purchases.

Yeah, I blew it. But what are my alternatives? I could use a bank account via an online exchange but that requires a lot of legal documentation and philosophically flies in the face of the whole "anonymity" feature of Bitcoin.

A lot of people are doing face to face transactions via a localized transaction match-making service. Is this really the way to go? Seems like that would make sense if you were transacting $50-$100 but what if you wanted to do $5k-$10k? I'm not Walter White. I don't have fat stacks of cash laying around. :)

What other alternatives do I have to purchase bitcoins?

  • 3
    So, you want to buy bitcoins, and you know there are sites that offer this service (eg. Coinbase), but you don't want to use those sites based on some philosophical objection. Have I captured your question accurately? – Greg Hewgill Apr 28 '14 at 23:20
  • Doesn't it seem odd to you that buying a digital currency, a currency whose advocates promote based upon it's transaction anonymity, would require one to provide SS#s, routing numbers, etc.? Because that's what many of these sites are asking for. – Chad Decker Apr 28 '14 at 23:51
  • Well the KYC (Know Your Customer) requirements are for dealing with the fiat currency side of the transaction. There are no such requirements for the cryptocurrency side. So, it is possible for example to mine Bitcoin (or other cryptocurrency) with no identification needed. Mining these days is pretty low-efficiency so if you want a lot of bitcoin quickly, you have to buy it with fiat money somehow. – Greg Hewgill Apr 28 '14 at 23:53
  • Edited your comment to leave in the constructive part. – Murch Apr 29 '14 at 21:44

For anyone else who's in the same situation...

I had some some fairly detailed discussions with some helpful folks on the #bitcoin-otc IRC channel and they gave me the scoop. To avoid getting hit with large transaction fees and/or revealing your name, SS#, routing numbers, etc., you really need to go over-the-counter.

In some cases that might mean doing the deal in person (localbitcoins.com) but a safer way is to use MoneyPak. It was described to me as follows: You buy a moneypack in whatever denomination you're interested in converting to BTC, and you provide the MP number to the seller. He, in turn, sends the coins. He can use that moneypack number to load his PayPal account and buy goods/services. The fee is $4.95 -- not unreasonable. And everything is anonymous.

The other point that was made crystal clear to me is that you can't just jump into the OTC community and start doing large volume transactions. The liquidity is there if you know where to look but the community has to trust you first. They even have a rating system.

I was walked through the initial steps of reserving a name, creating a GPG key, binding that to my identity, etc. etc. and will probably execute a few small-sized moneyPak-based transactions ($10, $50, etc.) and see how it goes.

Hope these comments will be of value to other new Bitcoin enthusiasts.

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