Bitcoin is by far the largest cryptocurrency in the world. It’s the coin that created the industry. But how do you buy and invest in bitcoin?
It’s super simple, but can be confusing if you’re new to crypto and you use the wrong company, plus you could be paying over-the-odds for it.
Don’t worry, we’ve got you covered with where and how to buy bitcoin in the UK, plus everything you need to know about the basics of Bitcoin too.
Where to buy bitcoin
Let’s get right to it, there’s 2 types of platforms (websites and apps), where beginners can buy bitcoin.
The first type is a trading platform, that’s somewhere you can buy crypto alongside other assets such as stocks and shares (so you can see all your investments in one place). And the second option is a cryptocurrency exchange, that well, only offers crypto.
They’re built for everybody to use, from beginners, all the way to experienced traders.
Best trading platforms to buy bitcoin
How to buy bitcoin
Bitcoin can be purchased on pretty much every crypto exchange out there. It’s the most popular coin, although ethereum is catching it fast! (here’s how to buy ethereum in the UK).
We’ll explain what Bitcoin is, in terms of the network and the coin below. But first, how to buy it.
It’s simple really, first you need to choose an exchange. As a reminder, if you’re new the best options are:
- eToro¹: best trading platform to combine crypto with other assets like stocks. And for following, learning from and copying other investors.
- Kraken: lowest cost crypto exchange.
- Gemini¹: best for safety and security, and complying with local laws.
- Coinbase¹: easiest exchange to use.
Once you have decided which exchange you’d like to use, sign up, then deposit your cash – the cheapest method is to use the bank transfer option, it’s fast too. Once, you’re all set up, navigate to buy, select bitcoin, confirm the purchase and you’re done! You’ve just bought your first bit of bitcoin.
Note: by the way, they’re all free to download and get started, so you can sign up to all of them and give them a try if you like – see which one you prefer.
What is Bitcoin?
Bitcoin is a new currency, an evolution of current currencies, you can use it as the same way as British Pounds (GBP) or US Dollars (USD), except it’s only found online – it’s a digital currency. And, it’s not backed by any government – it’s a global currency, designed for everyone.
It was invented in 2008 by an anonymous person (or most likely a group of people), who used the name Satoshi Nakamoto.
However, it’s different to British Pounds, US Dollars and all local currencies, in almost every way. The key difference are:
- It has a fixed supply of coins – 21,000,000
- It is not managed by a central bank or government
- It can be sent directly from person-to-person with no middleman (like a bank)
These concepts make it the perfect form of money (more on this below), and is why it has gained huge popularity in recent years – particularly with those who believe central banks across the world are mismanaging their country’s finances (we won’t get into it here, but almost every country is significantly in debt, and inflation is at record levels).
Bitcoin’s supply cannot be altered by central banks (governments), such as to increase the money supply, which happens with local currencies, such as Pounds and Dollars.
With a fixed supply, there is no inflation, and your money retains its value forever (inflation causes your money to be worth less). However, it’s worth noting the price of bitcoin currently fluctuates while it’s still young and adoption is growing, so although it has trended upwards in value, the price can fall.
And as you can send payments instantly across the world, in seconds, for zero or almost-zero cost, directly to the person or business you want to send to. It removes the need for a middle-man who often charge high fees (often hidden fees), can take a long-time, and can effectively block and freeze your money and accounts if they choose.
Bitcoin gives the control of your money back to you, and makes fee-taking middlemen redundant, saving you money.
Now you might be thinking, well it’s just internet money that was easily created. Well, it’s actually an incredible feat of engineering and innovation, solving technical problems that were previously thought impossible (some parts that make it impossible to hack).
The innovation is something called a blockchain, which Bitcoin is built on.
What is a blockchain?
A blockchain is a system that stores information as a permanent record, such as money (bitcoin) transactions, in the order they happened. Using a method that makes it impossible to cheat, or hack.
It’s similar to your bank statement with all of your transactions, but instead of the bank producing the statement, and only viewable by you and the bank, a blockchain permanently records every transaction made, and is publically available for anyone to view. Almost immediately.
It seems a simple concept right? And how is that a breakthrough in technology? Well, the genius is the fact you cannot cheat the system, and that the system runs without any central control. It is decentralised…
Meaning it runs across the world, there’s no government control, so it’s available for everyone to use, whatever country they are in, and can never be shut down, and transactions can never be altered.
What’s bitcoin mining?
Bitcoin stays online and processes transactions thanks to a large network of miners. A miner is someone who uses a computer, specifically for the Bitcoin network, and their computer simply connects to the internet and processes transactions. As there are over 1,000,000 miners spread across the world, it is impossible to shut the network down.
As a thank you for supporting the network, miners are rewarded with a portion of bitcoin every 10 minutes, when a batch of transactions is processed, called a block. However, they don’t all get the reward, it is effectively a lottery for who gets it. This reward incentivises the miners to keep the network running.
More about bitcoin mining
In order to process transactions on the Bitcoin network, miners are needed to verify and confirm that transactions did happen and in a specific order – then they are then permanently recorded on the blockchain.
Miners do this by using computers dedicated to mining that solve a complex maths problem each time a new ‘block’ is produced – a block stores a batch of transactions every 10 minutes, and is where the name blockchain comes from (a never-ending chain of blocks).
The first computer to solve the maths problem gets to ‘mine’ the block, which is confirming and adding the next block to the blockchain, and they’ll be rewarded a portion of bitcoin as a reward.
Miners are essential to the security of the network, and keeping the network decentralised, which means spread out across the world and therefore never able to be shutdown.
Is bitcoin bad for the environment?
Bitcoin itself is neither good nor bad for the environment, it is entirely digital and you could think of it as it ‘lives’ on the internet, just like everything else you use on the internet and your computer, along with your phone and things like that.
However, to process transactions (and protect the network), you have to mine bitcoin. And this can use a fair bit of energy. And it’s this where it gets bad press.
But the reality is that using energy in itself is not bad for the environment. Everything uses energy. It depends where the energy comes from that depends on if it harms the environment or not.
Bitcoin miners actually use lots of renewable and green energy (a huge majority). Because green energy is much cheaper than using coal or fossil fuels, and bitcoin miners are often mining for a profit – so it makes much more commercial sense to use green energy, such as solar and wind.
So, overall bitcoin is not bad for the environment, it just depends on the source of the power. Traditional systems, such as the current banking system and even things like gaming consume energy in much greater quantities, and the majority of energy used for those is fossil fuels.
Is Bitcoin for money laundering?
No, money laundering and Bitcoin is a myth. Transactions on the Bitcoin network are completely transparent (that’s actually one of the best things about it). So it’s near impossible to hide transactions.
Plus, in order to send bitcoin to a bank account it would require you to register and verify your identity with a crypto exchange, so the authorities would be able to find out who you are if you had bad intentions.
It is far simpler to use the traditional banking system to launder money, and happens far more than in crypto. In fact, almost all of the big banks have been found processing money-laundering transactions. HSBC were recently fined £64 million for facilitating Mexican drug cartel payments.
What’s the difference between Bitcoin, bitcoin and BTC?
- Bitcoin is the network, or technically the name of the blockchain or technology.
- bitcoin (with a lowercase b) is the token (or coin) of the Bitcoin network. This is the currency.
- BTC is the ‘ticker’ that’s used on crypto exchanges, just like companies on a stock exchange, for example Apple is AAPL.
Is Bitcoin legal in the UK?
Yes. Bitcoin is completely legal in the UK, both the technology and the coin (currency). You can spend it however you like, or trade it, or just hold on to it.
The UK has actually committed to becoming a global cryptoasset technology hub, in an attempt to become a world leader in crypto and blockchain technology.
If you make profit on your bitcoin, and want to cash in, you might be liable for Capital Gains Tax (CGT), which is 20% of your profits. However, you’ll only pay this if you make over £12,300 in profit each year, in total across all of your investment earnings.
Can I buy bitcoin with British Pounds (GBP)?
Yes. Almost every exchange (which is where you buy and sell bitcoin and crypto), will let you deposit and buy bitcoin with British Pounds. All you need to do is either send a bank transfer or use your bank card to purchase (although there’s often higher fees using cards).
And that’s the basics of Bitcoin
That was a quick intro to Bitcoin, covering pretty much everything you need to know before you buy your first bit of bitcoin. There’s lots more to it, and it’s being developed all the time. But the best way to learn more is to get involved, buy a little bit, and see where it takes you! You can also learn more on the official Bitcoin website too, and if you’re a bit more technical, the original Bitcoin whitepaper.
If you're completely new to investing, we've got a guide to investing for beginners (UK) too.