Hello everyone, my name is Ramakanth Welcome back to Crypto Kalasala In the last video we learnt about Bitcoin Mining Just in case if you didn't watch that video, please watch it
I shared the link in the below description Before entering in to our topic, as usual small disclaimer Nothing in these videos should be construed as financial advice These are all my own views coming out of whatever limited knowledge I have So please do not take any investment decisions based on these videos I am not liable for your profits or losses Ok Today's topic is Where can I buy Bitcoin Let's see what all options are available for buying Bitcoin After understanding fundamentals about Bitcoin, and its value and after deciding to buy bitcoin, the first doubt that you will get is "Where can I buy Bitcoin?" Do not just ignore this doubt This is a very important doubt
Why because, as Crypto industry is still emerging, There are lot of scams and there are lot of websites that cheat people So, you need to be very careful Anyway Now I will tell you various options of where you can buy Bitcoin and I will also tell you the advantages and disadvantages in those options The most important ways of buying Bitcoin are these: First one, Centralized Exchanges Second one, Decentralized or peer-to-peer exchanges Third one, Bitcoin ATMs Ok Now let's discuss each one of them First option, Centralized Exchanges Centralized exchanges mean a central authority organization or a company runs these exchanges That means to bring sellers and buyers at one place this company creates a software In that software, Buyers will mention at what price they want to buy Bitcoin, and sellers mention at what price they are ready to sell Bitcoin Whenever, Buyer price is equal to seller price, then a transaction happens Same as our vegetable market There, you go physically look at the seller ask the price and we buy if we like the price or else we won't In the same way, here digitally, on internet even though we don't know who exactly the seller is, that seller will mention at what price he is willing to sell and we would mention at what price we are willing to buy If both prices match, our money will be transferred to him and his Bitcoin will be deposited in to our account
That's the only difference Like this because they are providing a way for sellers and buyers to come to a place to transact, these centralized exchanges take a little bit of fees for it So now, let's see what are the advantages and disadvantages of using these centralized exchanges Advantages of Centralized Exchanges First one: High Liquidity Which means, whenever we want to buy or sell lot of sellers and buyers will be ready And there will be sufficient volume too
Which means, even if you want to buy lot of Bitcoin, you can do it here Second one, Fast and easy transactions Even though you do not have much idea about Crypto, in just 2 or 3 clicks you can make a transaction fast and easy You don't have to work a lot for it Third advantage – Good Reputation To maintain their brand image and reputation, companies generally provide good customer service and easy user interface Ok, so those are the advantages Now, let's see what are the disadvantages of Centralized exchanges
First disadvantage – No Privacy Almost all centralized exchanges ask for your identification information, which means, your passport, driving license, credit card number like this they ask for a lot of documents This is called KYC – Know Your Customer or AML – Anti Money Laundering rules So, you might have to give all your private information to those exchanges And, all the transactions that happen in these centralized exchanges are tracked And government has the authority to take that information anytime Second disadvantage Honeypot for Hackers Because millions and billions worth of transactions happen in these centralized exchanges every day, and lot of traders perform deposits and withdrawals continually, all the bitcoin related to those transactions need to be maintained in the hot wallets of those exchanges That is why, every day, a lot hackers keep trying to hack these centralized exchanges continuously
Because, if they can hack even just one exchange, they can get their hands on millions of worth of Bitcoin Otherwise, if they try to hack individual wallets of each investor what would they get Nothing but ashes 🙂 All their effort would go waste That is why Centralized exchanges are like honeypots Which means, they are like Honeypots Entire honey, which means assume it is Bitcoin here can be stolen if they can successfully hack Very very attractive for hackers You might have heard lot of times that Bitcoin got hacked All those hacks – that means, starting from Mt
Gox exchange hack in 2011, to the recent QuadrigaCx exchange debacle, all the hacks are because of these centralized exchanges getting hacked or it is because the owner fled away with depositors' money It is not because of Bitcoin network getting hacked Till now Bitcoin network never got hacked Not even once! Now, at this point of time, that is, when Bitcoin Network's security is super high, even to hack the network for just 10 min, one needs to spend Billions of dollars So, almost impossible
That is why even in the future if you find a news in either news paper or any website online that Bitcoin Network is hacked, don't believe it so easily Because, if you go and read the details 99% it will be a hack of some centralized exchange Bitcoin Network is very very secure And it is different from these centralized exchanges Because huge amounts of Bitcoin are stored in their wallets, those exchanges get hacked That is why you should never store your Bitcoin in a Centralized exchange
As soon as you buy Bitcoin on an exchange, you should withdraw it in to your personal wallet Otherwise, if that exchange gets hacked then all your Bitcoin will be lost And no one can get it back I repeat NO ONE! No one in the world can bring it back Once a transaction happens in Bitcoin network then no one can reverse it
So, if your bitcoin in an exchange is hacked and sent to some other person's wallet, that's it! It means you lost your Bitcoin permanently So, BE CAREFUL! Third disadvantage – Wallets controlled by the company and not by the users In these centralized exchanges, your bitcoin will be stored in the wallets created by that company So, even though they are showing Bitcoin in your account, you won't have the actual private keys of that Bitcoin So, that Bitcoin actually belongs to that company
Same as Banks A bank shows that your account has money, but you don't posses that money actually right You stored the money in that bank believing that the banker will give it back to you whenever you ask for it That's it If he can't return your money, then you cannot do anything right? Same thing even here
Especially in crypto industry, we have a saying: "Not your keys, not your Bitcoin" Which means If you don't possess Bitcoin private keys, then that Bitcoin is not yours So, it is always better to keep your Bitcoin in your personal wallet Shouldn't keep it in centralized exchanges Ok now, Let's see which ones are top 10 centralized exchanges Depending on the country, all over the world, there are a lot of centralized exchanges
In those, these are the top 10 centralized exchanges Ok Now Let's see what is the second option for buying Bitcoin That is Decentralized Exchanges Or Peer to peer exchanges Decentralized or peer to peer exchanges means Nothing but they are opposite to the centralized exchanges that we discussed just now Which means The transactions happening in these exchanges are not controlled by any company, organization or an individual person Plus, in Centralized exchanges as buyers and sellers are needed to deposit and withdraw from an exchange, here in decentralized exchange it is not needed Which means, these decentralized exchanges do not store any Bitcoin Because these exchanges just provide software only To enable sellers and buyers to come to a place and transact These exchanges charge a small amount of fee for providing that facility But in these exchanges, buyer and seller interact with each other directly For example, if there is a seller who wants to sell two Bitcoins, he will mention at what price he wants to sell, what process a buyer has to follow, to buy that Bitcoin Like this a seller writes everything in detail in his profile Also, buyers who bought Bitcoin from that seller, will rate that seller
So, the sellers who have good rating genuinely transact with buyers to maintain that good rating So, that is why these exchanges are called Peer-to-peer exchanges Which means, without any broker or a middle man, directly buyer and seller themselves talk to each other and transact if they both believe each other, or else they won't transact So, let's see what are the advantages and disadvantages in these Decentralized or Peer to peer exchanges First advantage – Better privacy than centralized exchanges Because these exchanges are Decentralized, You don't have to submit your name, personal information, or any other kind of documents
In some countries, because of government restrictions, sellers might ask for this information But in some countries they won't ask you for this information So, depending on the country you live in, it differs But even if sellers ask, if you like, you can transact with him else you don't have to It is your wish There is no compulsion
If you want the transaction to happen completely in private Some times, some sellers agree to meet you in a public place and do the transaction So, in that case, you don't have to submit your documents to anyone Just like in vegetable market, as we buy vegetables and give seller cash directly, In the same way, if we give him the required cash he will send Bitcoin to your wallet So transaction will be completely private No body will know about that transaction except you and the seller Second advantage – There is no Honeypot to hack
In these decentralized exchanges transaction happens peer to peer which means, it happens directly between a buyer and a seller, and because no company in between stores the Bitcoin, hackers do not have any incentive to hack these exchanges Like centralized exchanges, this is not a honeypot for them So, it is very safe for buyers and sellers Third advantage – Private keys are controlled by you and not the exchange
Here, as you don't deposit any Bitcoin in the exchange, your Bitcoin private keys remain with you So, your Bitcoin is fully under your control So, even if any hacker hacks this decentralized exchange, because you have your Bitcoin's private keys, it is full safe So, you don't have to trust a company or some third party Fourth advantage – Escrow services Some decentralized exchanges provide escrow services also
Escrow means, like a broker in the middle So that escrow service might follow a simple multi-signature method or it can be like a normal broker For example, Seller first sends his Bitcoin to the escrow then buyer sends money to the seller and sends that receipt to the escrow Only then the escrow releases Bitcoin to the buyer For this transaction to happen safely, these decentralized exchanges take some security deposit from the sellers But if the transaction happens successfully, that deposit will be returned to the seller If multi-signature is used, the same process will be implemented using a software
Ok Now, let's see what are the disadvantages in decentralized exchanges First one – Slower transaction speed Because a transaction happens peer to peer here, especially, between fiat currency which means, US Dollar, Indian Rupee, UK Pound, like this, physical money is converted in to digital money – Bitcoin, that too, because it is happening without any third party in between, first seller and buyer both have to build trust between each other And until the buyer follows the entire process outlined by seller, he doesn't send any Bitcoin to the buyer So, it takes more time than a centralized exchange Second Disadvantage – Higher prices than centralized exchanges
Generally, prices in these decentralized exhanges, are 3-5% higher than prices in centralized exchanges Because, seller is taking a bit higher risk here right? He is selling you Bitcoin without knowing who you are or without taking any of your documents right That is why, generally sellers quote higher prices here But, even buyers who are transacting here don't step back on paying higher prices Because, transaction remains private
Third Disadvantage – Higher chance of falling for scammers Because, there are are no brokers here, sometimes there is a chance that either buyers or sellers might cheat For example, some sellers ask buyers to send money to their bank accounts, and that they will send Bitcoin once they receive the amount in their bank But after sending money, the seller may not send Bitcoin to the buyer So, then a buyer can't do anything Because, that seller doesn't mention any of his personal details If you want to meet the seller directly to do a transaction in person, If that seller is not a good person, he might hurt you physically and run away with your money
So, when you are doing transactions in a decentralized exchange, you have to be careful You have to look at his rating, how many buyers rated him, how long has the seller been on that platform, are there any loopholes in the process he mentioned, like this you have to think and do some research before transacting There is every chance of getting cheated if you are even a bit careless Fourth disadvantage – Lower Liquidity Generally liquidity is not much in decentralized exchanges Which means, If you want to buy or sell Bitcoin in large numbers, many sellers and buyers might not exist here like centralized exchanges
So, Decentralized exchanges might not be useful in this scenario Last disadvantage – Not a great user experience Because these exchanges, like centralized exchanges, are not maintained by big companies, software user interface could be average selling and buying process is time consuming to understand, slow transaction speed, because of these kind of difficulties, overall user experience may not be as smooth as it is on centralized exchanges Only recently, this decentralized exchange concept is entering public sphere But, it might take a long time before it goes mainstream
Ok, now, let's see some examples of decentralized exchanges If you already have Bitcoin or Ethereum, to convert them in to other tokens there are quite a few decentralized exchanges I will talk about them when we discuss Ethereum But, if you don't have Bitcoin already, That means, if you are buying Bitcoin for the first time, and if you want to buy it using the fiat currency that you have, there are only a few decentralized exchanges In those, the following are the important ones Ok Last but not least Third method for buying Bitcoin, the most safe, easy, and private option is
Bitcoin ATMs These Bitcoin ATMs are currently found only in a few countries For example, in developed countries such as US, UK, Canada, that too only in a few main cities you can find them But even in other countries these Bitcoin ATMs are cropping up slowly these days To explain how a Bitcoin ATM works – You press the amount of Bitcoin you want to buy then you scan the QR code in your mobile Bitcoin wallet, the amount of fiat currency displayed on the Bitcoin ATM screen, such as US dollar or Canadian dollar, you need to insert in to that ATM
That's it Your Bitcoin will be received in your mobile Bitcoin wallet Let's see what are the advantages and disadvantages in Bitcoin ATMs Bitcoin ATM Advantages First one – Ease of use As you use normal ATMs, in the same way using Bitcoin ATMs is also very easy Based on the company that manufactured the ATM, between one ATM and the other ATM, there might be a few steps more or less, but most of the steps are similar Second one – Secure Because there is no dealing with humans, it is very secure to use
Third one – Privacy Because most of the Bitcoin ATMs do not ask for your personal information, it is pretty private Directly you can put the cash in and buy Bitcoin These days, some of the ATMs are taking buyer fingerprints, telephone number etc, but based on the Bitcoin ATM manufacturing company policies, and based on the country regulations in which that ATM exists, buyer information collected by a Bitcoin ATM might change Fourth one – Speed Transaction happens pretty fast, within a few minutes
So, great user experience! Now coming to disadvantages, First one – Technical issues and downtime Because Bitcoin ATM is hardware, it has to be maintained properly from time to time So, sometimes to clean it, and to test whether it is working well or not, because company personnel take some time, it might not be available 24×7, 365 days A bit of downtime will be there Second disadvantage – Higher price than centralized exchanges Generally, price quoted in these Bitcoin ATMs is 5-10% higher than the price quoted in centralized exchanges
Because, To maintain that machine and to pay employees, that company needs the money right That's why Third disadvantage – Hard to locate These Bitcoin ATMs are not present in all countries And even in the countries that they are existing now, only in main cities and main centers these are found Which means, you won't find these everywhere like Bank ATMs
So, it is hard to find them Ok The following are the most common models of Bitcoin ATMs that you can find in some countries So, there you go If you want to buy Bitcoin, those are the various options available to you, and advantages and disadvantages of each option So, now you know theoretically where you can buy Bitcoin But, think if you know answers to these questions or not
What is the procedure for buying Bitcoin in Centralized Exchanges? Can I buy Bitcoin using a credit card? Can I buy using Bank transfer? What is Limit Order? What is Market Order? When I buy Bitcoin where will it be stored? To know answers to these questions, please watch the next video Hope this is helpful Bye!
