Understanding Bitcoins



If just the mention of the word ‘Bitcoins’ fills you with fear and confusion then you are certainly not alone. Bitcoins to newbies can be a little intimidating, but fear not, we have dedicated this page to simplify your journey into the exciting and futuristic world of crypto currency!

Why are Bitcoins so difficult to understand?

The main reason Bitcoins are so confusing for most newcomers to the currency is that many people have no idea how to buy them. We are constantly asked for the name of the website where our customers have to register to make a payment in Bitcoins. So the first thing you need to get to grips with is that unlike the popular PayPal payment system there is not just one website that controls everything.

With Bitcoins you have a choice of which website you go to and register with to make your payment. Loads of websites will take you from start to finish through the steps necessary to make a Bitcoin payment. While it is often a really positive thing that customers have a wide selection of companies they can choose to use for making payments it does make it slightly harder when you’re just getting started on your journey with Bitcoins. Depending on which country you are from the choice of companies you can use to buy Bitcoins could increase or decrease, it might affect how many coins you can buy at one time and what age you have to be to buy them, and in some rare cases whether you are allowed to buy them at all!

The good news is that once you do understand Bitcoins then you will find that having the choice of which company you can use puts you back in control. The companies have to work hard to keep your business, it means they keep their costs competitive and also means they come up with all kinds of cool features and fun apps you can use just so you keep buying your Bitcoins from them.

You will also be glad to know that the process of buying Bitcoins from many of the companies out there is pretty much the same regardless of who you choose to use. By the time you have read this page you will be well on your way to becoming a pro with all things Bitcoin related.

The first thing you need to know.

Bitcoins are like any currency. So let’s imagine you’re going on holiday, you need to change the money you normally spend to the currency they use in the country you are visiting. What do you do? You will often go to a currency exchange (which could just be your bank) and swap your money for the correct currency. The currency exchange will give you a ‘rate’ which simply tells you how much of the new currency they will give you for the money you give them in your own currency.

So now let’s imagine there is a country called Bitcoin Land that you have decided to visit for a quick vacation. You’ll need some Bitcoins to spend while you are there as they don’t accept your currency. You need to find a currency exchange that will take your money and swap it for Bitcoins. Fortunately there are loads you can find by opening Google and typing in something like “Buy Bitcoins” or “Bitcoin exchange”. You’ll undoubtedly get a list of many companies who would love to be the one who swapped your money for Bitcoins. Much like currency exchanges these Bitcoin exchanges make a small amount of money every time someone like you uses them to exchange their money, so they work hard to get you to choose them instead of one of their competitors.

Money being exchanged into Bitcoins via a Currency Exchange

Is it easy to buy Bitcoins from an exchange?

Yes and no. As with all things that involve money there are rules set by the country you live in that must be followed to help prevent problems such as money laundering. The process regardless of which country you are from is pretty similar though. They might let you buy a small value in Bitcoins without you providing much information about yourself. Should you need more than just a small quantity of Bitcoins then you can expect to have to verify who you are with your Passport or Driving Licence and you may need your bank account verified, proof of address and possibly even have to wait few days before they are happy to sell you the coins you want. Thankfully the verification process is often a lot less painful than it sounds.

There are other ways to buy coins without verification, like using companies such as LocalBitcoins. These companies simply match up buyers and sellers and therefore you do not need to wait or provide personal information. However the process can be more confusing than simply using one of the big Bitcoin exchange websites and we would discourage you from using them unless you are starting to feel more comfortable with the whole Bitcoin process.

Do they send me actual Bitcoins I can put in my wallet?

Yes they do but not in the way you might think. Bitcoins are part of a broader group of currencies called cryptocurrencies. This for you and me simply means someone came up with a clever system based on mathematics which allows you to safely keep money in electronic format and pass it around to people or companies without ever having to physically hold the currency in your hands or weigh down your wallet with all those heavy coins!

A demonstration of how a Bitcoin wallet is held on a computer or in the cloud

Think of it like this: How many people still buy music CD’s? We’re willing to bet not many anymore. Why carry around a clunky CD when all your music can either be downloaded or streamed electronically? Well Bitcoins are really just money you keep in electronic format, much like your music. It could be a file on your computer or information held in the cloud somewhere but it does not need to be printed on some special paper or melted into coins like other old-fashioned currencies, Bitcoins like all cryptocurrencies are the future!

“Wait a minute!” you might be shouting. “You said they do give me Bitcoins to put in my wallet but if Bitcoins are just electronic information much like music files then how can I squeeze them in my wallet?” The answer is simple. On your computer you will keep all your files in folders (sometimes called directories), just a handy place to stash all your files. For Bitcoins you can stuff all your coins in an electronic wallet which is effectively just a handy folder to keep all your Bitcoins in one place and some clever software to help you organise everything etc. If that seems confusing then just think of a Bitcoin Wallet as being a bank account for you to keep all your money in.

There are lots of Bitcoin wallets out there and by that it just means there are loads of software programs that we call “Wallets” that were designed so you can throw your coins inside them. Some are handy Wallet apps for use on your phone, some are just websites offering online wallets and others are programs you can download and run offline.

We HIGHLY recommend that when first starting out with Bitcoins you pick a Bitcoin exchange website to buy your coins from and then also use the wallet they provide you with to store and organise all your Bitcoins. Doing things that way means that you can buy, store and spend in just one place. Anything else would just complicate the whole thing unnecessarily and we don’t want to do that!

Which Bitcoin Exchanges do you recommend?

There are loads of exchanges and we encourage you to shop around. However, when you are just getting started, shopping around may actually add to the confusion so we will make a recommendation of the way most of our customers have found easiest. When you get used to the Bitcoin process you may want to have a deeper look around to see if there are other providers more suited to you and your needs.

Coinbase logo

Our customers come from over 70 different countries around the world so we decided to recommend Coinbase because it is a massive company that operates in many of those countries. Most of our past customers have used Coinbase and the feedback has been very positive. That said, we can’t stress enough that there are plenty of competitors out there who want your business, we simply can’t test and recommend them all.

Many of the common questions you might be asking about Coinbase are answered on their support page. If you have decided you are going to use them then the first step is to open an account on their website. After that you simply need to get some money into your new account to buy some Bitcoins with.

One way to buy some coins is to use their ‘Buy/Sell’ option. They will give you a bank account number you can use to top-up your account with. You transfer some money with your bank and then it arrives on your Coinbase account. Once you have some money in your account, regardless of which currency you topped up with, you can immediately swap it for Bitcoins.

They also offer other convenient ways to buy coins, such as using a credit or debit card and they even allow PayPal in some countries.

Direct from your Coinbase account you can transfer Bitcoins to another person or company in much the same way you can transfer your own currency to a friend's bank account through online banking.

Do you recommend any other Bitcoin providers?

If you can’t or don’t want to open a Coinbase account or equivalent account from another provider or if you just want to buy Bitcoins anonymously then you should consider going to LocalBitcoins.com. From there you can find someone selling Bitcoins in your local area and then meet them to make the swap. However that is just one way to pay for your coins with LocalBitcoins.com. Check out their website to see many other convenient ways to buy coins, from PayPal to bank transfers and plenty in between.

One possible drawback with using LocalBitcoins.com is that you often will have to pay slightly more for the convenience. The exchange rate you pay to buy Bitcoins is often higher than you would receive if you were to use a conventional Bitcoin exchange.

Bittylicious are a great company to use if you are from the UK and want to quickly buy some Bitcoins. This company even has a facility that lets you go down to a local shop to buy the Bitcoins from them!

The important point is that you have plenty of choice on how and where you buy your coins so you are bound to find a solution that works best for you.

If you would like to see a big list of providers in your own country then we suggest you go to this Bitcoin Exchange Search Website and you can quickly see a list of companies that want your business. The best part about this tool is that they let you specify a country and preferred payment method to filter the list down to only the options that are right for you. Pretty cool!

A handy tool to find a local Bitcoin provider

How do I know how many Bitcoins to buy?

You may be using your Bitcoins to buy things from the many shops out there that now accept Bitcoins but if you are only trying to pay for your ID card on our website then you need to read this next bit carefully so you don’t trip up at any point.

When you place an order on our website you will be charged in normal currencies such as UK Pounds or US Dollars. Assuming you already have some Bitcoins you can pay straight away from the final page of the order process. You can return to that page at any time by going to the Account page and clicking on the “Details” button next to your order. From this page, click on the "Payment Options" button or scroll the page down to the section entitled "Payment Options". Now you click on the "I am ready to pay" button. At this point we convert your invoice total into an equivalent amount of Bitcoins. The website displays the amount to pay and a wallet address to transfer the coins to that is unique to you and your order. A timer also displays with one hour to pay.

For your payment to be deemed successful you must send the exact amount of Bitcoins we specify. The price you pay is calculated at the fairest rate possible (called the mid-market rate) at the time you press the "I am ready to pay" button (you can come back and press the button again at any time for an up-to-date price).

When you buy Bitcoins from your Bitcoin exchange (such as Coinbase) we recommend you specify a large enough amount in Bitcoins to cover the fact they might give you a less favourable rate as a charge for making the exchange (this is normal practice for any currency exchange business). If you have to order your coins ahead of time then you might need more than you think to cover any unfavourable fluctuations in the exchange rate between the day you order them and the moment you finally transfer them to us.

When buying Bitcoins, order a high enough amount to cover exchange rate differences or you may not have enough coins to pay for your invoice!

If you were to ignore our advice and for example request $50 US Dollars in Bitcoins for a $50 US Dollars card then there is a chance you might not end up with the correct amount of Bitcoins to pay for your order due to fees added by your exchange website or fluctuations in the exchange rate. Therefore it is vital you make sure that you order a slightly higher amount than $50 to cover any difference. You can always press the "I am ready to pay" button (even if you're not ready) to give you an idea of how many Bitcoins we would be asking for if you paid immediately. Only use this as an estimate. If the exchange rate moves against you then you might not have enough to pay for your invoice and if you try to pay us less than you should then your order will be considered underpaid and will not be sent.


How do I transfer my Bitcoins to you?

Transferring Bitcoins is so easy and basic that if you are now at this stage you can look back at your Bitcoin journey and laugh at how easy it all seems to you now.

You only need two pieces of information to send Bitcoins from your wallet to someone else’s wallet. The first is a Bitcoin wallet address and the second is the amount in Bitcoins you want to send them.

Bitcoin wallet address example:

1K77D6DGo7wwXY9k3Ky6qQjSvLNDD3MTS9

Bitcoin amount example:

0.06699462

A Bitcoin wallet address is just a truck load of numbers and letters that are upper and lowercase. It might look like something you’d expect to see if a cat walked across your keyboard but it is actually a very special unique set of characters that works much like a bank account number works. A Bitcoin wallet address can be thought of like an account number that you want a payment to be transferred to.

The amount in Bitcoins you want to send can also look a little strange. For one reason or another, the explanation of which isn’t important, the Bitcoin amount is usually a long number with lots of digits after the decimal point. As one Bitcoin is worth quite a bit of money you will usually be dealing with amounts smaller than one Bitcoin.

So after you place an order on our website and chose to pay using Bitcoins you will have been presented with a Bitcoin Invoice from us. If you didn’t initially choose to pay using Bitcoins you can also change your chosen payment method on the Account page.

You can access your Bitcoin invoice again at any time by going to the Account page and clicking on the “Details” button next to your order. In the "Payment Options" section click on the "I am ready to pay" button. You'll be presented with a "Bitcoin wallet address" and a "Bitcoin amount" just like the examples above. Simply paste the Bitcoin wallet address we give you into the appropriate text box in the wallet app you are using. Next you paste in the Bitcoin amount we specified into your wallet app. Now all you have to do is to instruct your wallet app to send the money. If you are using Coinbase all you now need to do is press the 'Send Funds' button. If you are using another app the button will be named similarly.

That is it, two pieces of information to enter and one button to press, did you ever think transferring Money could be that easy?

A demonstration on transferring Bitcoins using Coinbase

You may have noticed the strange barcode looking box on all invoices. This is called a QR code. If you are running your Bitcoin wallet app on your phone then you can choose to scan that code (by holding your phone's camera near the code) and it will automatically enter the Bitcoin wallet address and Bitcoin amount into your Bitcoin app saving you the bother and possible mistakes you could make if you typed it yourself.

Keep in mind though that the QR code is just a convenient way to do just one thing, which is to automatically fill in the Bitcoin wallet address and the Bitcoin amount so you don't have to bother. If it confuses you, even a tiny bit, then ignore it, our goal is to make things easier for you, not harder!

A example of a QR Code

How do I know you have received my payment?

Our automatic system will inform you that we have received your payment either via email, or if you are watching the countdown timer on the payment screen then you will see the invoice status change to "PAID". This will usually be within 5 to 20 minutes of you making a payment.

All Bitcoins payments are monitored on something called the Blockchain which is a ledger that watches and records all the Bitcoin transactions. You can take a look at the Blockchain here. In simple terms, it is a massive list that records all the payments. We pay you, it goes on the list. You pay us, it goes on the list. Anybody pays anybody, it goes on the list.

If it has been over an hour and we haven't sent you an email or your invoice doesn't show as "PAID" then it is likely that your payment has not been prioritised because your haven't specified a high enough setting in your wallet app for a Network Fee. Bitcoin wallet apps let you specify something often called a Network Fee. Usually you have the choice between a setting like "Urgent", Priority", "Normal", "Economy" etc. The names and number of options will be different depending on the app you are using but the basics are the same regardless. Essentially along with your payment your wallet app sends a small fee to prioritise your transaction. The higher the fee the quicker it takes for your money to get where you sent it. If you pay a low fee, or even worse, no fee, then expect our timer to finish and your invoice not to be paid. If your money arrives later than the expiry and the rate of exchange has changed then there is a chance your invoice will be "UNDERPAID". If this happens your order will not be made until you pay the amount outstanding on your invoice.

Pick the highest Network Fee option to avoid issues, or accept that you might be in for a long wait!

Be warned, if you choose to send the payment for free, your transaction might take a lot longer to process by the Bitcoin payment processing system (which we have no control over). We have seen free transactions taking over two days to be processed compared with the usual 10 minutes or so.

Bitcoin payments are generally considered trusted when they receive something known as a "Confirmation". After it gets one then it will get another confirmation every 10 minutes on average. The more confirmations a payment gets the more trusted it is. Some websites require three or more confirmations before they accept the payment as genuine.

For small transactions like the ones used to pay for our ID cards we only require one confirmation to trust the payment is legitimate. So you can expect us to confirm the receipt of your payment via email shortly after you make payment. It can take longer as we explained for your payment to get one confirmation but as a general rule expect a confirmation email from us quite soon after your payment was received (assuming you followed our advice regarding the Network Fee). If you don't want to wait then you can paste the Bitcoin address you sent your payment to in the search bar on the Blockchain.info website and track for yourself how many confirmations your payment has earned and other useful bits of information.

That is it. Now all you have to do is wait for your ID card order to arrive in the post. Please feel free to send us an email if you need any further help and we will do our best to simplify things more for you should you need us to. Enjoy the rest of your journey into the exciting world of Bitcoin payments!

A example of searching the Bitcoin Blockchain to watch the progress of a payment