Buying a product with bitcoin safely involves several considerations:
- You must choose a reputable provider, the same way you might choose an online retailer.
- The platform you purchase your cryptocurrency from must also be secure.
- Depending on the purchase, there might be a title transfer or other dependencies that may impact your purchase.
So, what should you do?
Many have found that the use of a bitcoin escrow service can be helpful for large purchases. But, this is only one of many precautions you can take as a consumer.
Selecting a trustworthy storefront
Many like to start with a website that they have purchased from before or know somebody who has. The majority of well-known retailers will have online storefronts, so these are a safe place to start. Unfortunately, this only works for some purchases. In other cases, a consumer might want to purchase one-off items. To enter this kind of purchase successfully, it is important to read online reviews on trusted websites. Ensure reviews are genuine since phony websites can fake reviews just as easily.
Another thing to be mindful of is website misspellings. Many scammers will take a well-known website and change the endings from .com to .net or otherwise. Alternatively, they may sneak an extra letter in to catch those who aren’t careful. A trusted website will likely have a secure sockets layer (SSL) encryption installed and will start with HTTPS.
A final consideration that online shoppers should make is if the website has easy-to-find policies. After a quick scan of the website, you will most likely find the customer service info at the bottom of the home page. These policies will contain information about the platform’s shipping, warranty, and return information. If the website doesn’t have an easy-to-locate policy, this may be a red flag in itself.
Use a cryptocurrency exchange with a good reputation
Likely, the number one consideration when searching for digital currency exchange is its security. Several scams and frauds such as Mt.Gox have brought to light the devastating effects on investors who were anonymous and unprotected.
Many have purposely selected cryptocurrency exchanges for their anonymity, similar to the process of using cash in the real world. The intent was for consumers to buy and sell products on digital platforms without using their personal information. However, to protect consumers, many exchanges have centralized the process and included Know-Your-Customer (KYC) compliance procedures as part of the account setup. KYC requires users to provide their email, name, and sometimes proof of their identity to verify they are who they say they are.
Now, KYC compliance can be a beneficial feature and can help the exchange prevent losses and hacks, which now amount to billions of dollars. Cryptocurrency exchanges have tightened their restrictions to protect users. But the fact of the matter is the larger the volume of trades, the more enticing the cryptocurrency pot becomes.
A secure cryptocurrency exchange will often use some form of two-factor authentication (2FA), such as Google Authenticator or requiring a second device. With this security feature, the exchange can protect your account from a malicious hacking attempt.
Keep your cryptocurrency safe
After selecting an exchange, you will need to purchase some cryptocurrency. Like any other purchase, it is important to protect your payment information. Similar to how you wouldn’t give out your credit card information, most exchanges will give you a private key that is the ticket to your digital assets after purchasing crypto. This information should not be shared with anyone and must be stored in a safe place until you are ready to make a purchase.
You also should ensure that the personal device you are using to make the purchase is secure. For investors, this means staying up to date with the latest anti-virus protection and firewall software. Improving your device’s security can help you avoid hackers looking for weaknesses to take advantage of.
For online accounts, you must use a secure password that is changed regularly. If you plan to make a big purchase and hold a large balance, you may choose to hold several wallets, each with a different password.
Use a bitcoin escrow service
As bitcoin increases in price, many have found that shopping around for luxury items is becoming more desirable. However, when making large purchases such as a home, an Astronomia watch, or a luxury vehicle, transactions are a little more complex due to bitcoin’s immutability. One example is if the seller doesn’t transfer the asset’s title over properly or the quality of the product is not as described, the buyer will be out of luck. Even worse, the seller might not have the product they claimed to be selling, and the buyer might just be out of money.
To facilitate these transactions, frequent buyers will recommend using an escrow service. Escrow defines the legal arrangement in which a mediator holds assets until a buyer and seller meet a predetermined set of conditions.
In practice, the process will require the user to create an account similar to the one they created to buy their digital currency. As a bonus tip, some escrow services also double as an exchange, meaning you will only need to create a single account.
After the buyer or seller sets up an account, the buyer will transfer the cost of the product to the escrow service provider. The escrow will verify the funds exist and will request that the seller send the product. Once the buyer receives the product, they will have a brief inspection period to determine if the item is of the quality stated by the seller. If they agree to accept the product, the escrow provider will release the funds to the seller, and the transaction will conclude.
Although there is typically a small fee for using these services, the benefits largely outweigh the cost, which the exchange will often charge in proportion to the cost of the item.
Bonus tip: protect cryptocurrency that is not in use
In addition to choosing a cryptocurrency exchange, many suggest going the extra mile and purchasing a hardware wallet. These wallets are an extra security measure to protect their cryptocurrency. Although there is no set rule, some suggest that after you’ve accumulated more than a month’s salary in crypto, it is time to move your assets into cold storage. A hardware wallet is just one of the cold storage methods. Another more inexpensive option is a paper wallet. A paper wallet is simply a piece of paper with a QR code that users can scan when they wish to make a transaction.
Following these steps will help to ensure you can safely buy a product with bitcoin.