Buying Bitcoins the Fun and Futuristic Way
As stated earlier, the fun and futuristic way to buy bitcoins is person to person. Today, it is relatively easy to find other bitcoiners online who live in your vicinity and meet them to buy bitcoins for cash. It can be fun to meet other people with whom you share an interest in bitcoins. Of course, some risk is always a possibility when performing financial transactions with strangers, so person-to-person transactions aren't for everyone. But we're currently seeing a major renaissance in person-to-person transactions in many fields.
Recently created businesses—such as Airbnb (a service that helps people privately rent out rooms), RelayRides (a service that lets you rent out your car), and Moxie Jean (a site for reselling children's clothes)—have proven that in our modern world most people are actually rather trustworthy. Additionally, if a good online rating system is available to mitigate cheating, you can perform financial transactions with strangers with relative safety.
These facts drive home one of the central lessons of the Bitcoin revolution: Technology can help society become more decentralized and less reliant on traditional, top-down companies and governments to perform many useful tasks. For this reason, person-to-person Bitcoin transactions are likely the future and might one day be faster, safer, and more cost-effective than any other Bitcoin-buying method.
Step 1: Finding Someone to Buy From
Your first step when finding a Bitcoin seller might be to simply ask your friends and family if they want to exchange bitcoins with you. Perhaps your uncle, niece, or cousin's best friend has a large amount of bitcoins. Also, by searching local Bitcoin listings, such as the listings maintained by LocalBitcoins.com, you can find people in your area who might be willing to meet up to exchange bitcoins. Other popular local listing sites, like Craigslist, sometimes list people who want to exchange bitcoins for dollars or vice versa.
When you're dealing with strangers, it's always best to find out whether they've previously engaged in successful Bitcoin transactions. LocalBitcoins.com also has a rating system that can help you determine this information. If no information about the sellers is available, purchase only a small amount from them the first time.
Step 2: Deciding on a Meeting Place
Any public place should be fine for a Bitcoin transaction; the most popular choice is usually a coffee shop. Keep in mind that you'll be carrying cash, so make sure you park your car in a public area if you're driving.
If you are performing a large transaction and want more safety, several additional options may be available to you. Some banks are more than happy to lend you a conference room for a business transaction, so be sure to ask. (They might charge a fee for this.)
For very large Bitcoin transactions, you can't rely on an informal process. Instead, you'd be smart to get legal representation, write up a formal contract describing the transaction, and perform the trade in a law firm's office.
Step 3: Handing Over the Money and Getting Your Bitcoins
You are at the coffee shop and are face-to-face with the seller. What happens next? Well, it depends on whether you want to use a Bitcoin escrow service as part of the transaction. We'll explain how escrow works shortly, but let's assume you're not using an escrow service for this transaction (most person-to-person transactions are done without escrow).
A Face-to-Face Bitcoin Purchase Without Escrow
By convention, the person who posted the online ad is paid first. Because most Bitcoin ads are for selling bitcoins, you (the buyer) will hand an envelope containing your dollars (or other fiat money) to the seller first. (Typically, people who place ads have established a long transaction history on LocalBitcoins.com, so it's only fair they get their payment first.)
The Bitcoin seller should then send the agreed-upon number of bit-coins to the public Bitcoin address in your Bitcoin wallet. Be sure to ask the seller to include a reasonable transaction fee in the transaction (currently, 0.0001btc is a reasonable fee). Within a few seconds, you should receive notification on your smartphone or laptop (connected to the Internet) that the money has been sent to your wallet.
For small transactions, you can now consider the exchange complete! However, for larger transactions, ask the seller to wait for additional confirmations in the blockchain. The first transaction confirmation should arrive in approximately 10 minutes and reliably guarantee that the money was transferred correctly. However, for very large transactions, you may want to wait for up to six confirmations just to be safe.
Some wallet apps on your computer may not show the number of confirmations by default. In this case, try hovering your mouse over the transaction in question. Likely a pop-up hint will appear that will give you this information.