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How did people buy Bitcoin before Coinbase?

8 points by highfrequency ↗ HN
Trying to understand the initial service that Coinbase provided. It seems like this was allowing people to buy Bitcoin from a USD bank account. (https://web.archive.org/web/20130424175129/http://blog.coinbase.com/post/34357253898/you-can-now-buy-and-sell-bitcoin-by-connecting-any-u-s)

What was the easiest way to buy Bitcoin before this? Why did Coinbase implement purchases from bank accounts before credit cards?

What regulatory licenses did Coinbase need to acquire to provide this service? Did they need money transmitter licenses in all states? Given that it only took a few months to launch this service, I'm guessing the regulatory reqs were minimal.

26 comments

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latchkey
Right before Mt. Gox collapsed, I was trying to figure out how to get $ into there and kept getting caught up mentally on that $25 wire transfer fee. Probably saved me a lot of money when I think back on it.
highfrequency
Interesting, so bank deposits (ACH) and credit cards were not accepted on Mt. Gox?

Separately, when you bought Bitcoin on Mt. Gox, were you buying directly from them at some fixed price they set, or trading in an exchange with many participants?

latchkey
I think they might have had some Japan bank support and some other sketchy things that kept moving around a lot as accounts were getting opened and shut down left and right for them.

I never bought any Bitcoin on Mt. Gox, sadly and later, thankfully.

bbatha
You had to use a PayPalesq 3rd party service but you could do ACH transactions through that
Spooky23
When I used mt gox, there was PayPal-like service called Dwolla that would do the ach transfer and you could transfer to Mt Gox.

It seemed like a shady or ill-advised business, and they shutdown the consumer part of it at some point.

derivagral
Coinbase served as a more-reputable entry point due to being certified by the SEC and similar agencies since they actually set up in the US.

Personally, I got crypto back then by renting nodes on cloud services and CPU mining. The alternatives generally involved either ACH/wires, meeting someone locally, or trusting a non-US credit card provider with your $ and payment information. At the time, I was happy to take a 5-10% haircut to skip most of the risk.

rmason
I knew people who were mining bitcoin and selling it as fast as they mined it. Running ads in Craig's List and meeting people in coffee houses. Sounded sketchy but don't know anyone in the early days that had a problem. I think a lot of university towns had someone doing something similar

Alternatively you could purchase it through Mt. Gox in Tokyo. But if you left it there you ended up losing it all.

highfrequency
Very interesting. Checking my understanding: In 2012 there was no reputable middleman you could buy or sell Bitcoin to at the current market price, so you had to hunt down a counterparty each time. Coinbase stepped in as a middleman who would always trade with you in either direction at a fair price. Does this sound right?
wmf
MtGox was reputable enough by Bitcoin standards although it certainly wasn't legal in the US.
rmason
If memory serves me correctly Mt. Gox didn't have the greatest UI. If you weren't a techie you would need the guidance of one.

I do remember it was quite a big deal when the first bitcoin machine arrived in Lansing. Eventually several arrived and left but the original one is still at the Fledge, at least before COVID arrived.

mcintyre1994
The first time I bought them in the UK it was by bank transfer, I don’t remember the site but apparently they held the coins in escrow and then when the bank payment was confirmed they release them to the buyer. They gave you a random code to enter as the payment reference, and said many many times not to put anything like “Bitcoin” in there. :) The release was pretty fast, so either the seller was really active or they used an API to monitor payments into the seller’s bank account.
knopkop_
Based on your description I'd guess you are referring to bittylicious.
mcintyre1994
It doesn't ring a bell, and nor do old versions of that site on archive.org - but it looks like the exact same idea.
wmf
Buying crypto with credit cards is not and was never a good idea due to chargebacks. Back in the early days there was an ACH-based intermediary called Dwolla that some exchanges used, but Dwolla also suffered turmoil due to ACH chargebacks.
jjmod
not bitcoin, but I have some similar experience and thought I could share.

I got into dogecoin literally right after it launched (late 2013). There were zero exchanges that sold it. Hell, there wasn't even a place you could view the price.

The only way was basically had to find random people to trade with on a megathread on r/dogemarket. People would comment something like "Selling 50k doge for 10$" and you would just have to trust them. the "price" of a dogecoin was essentially just what recent listings were offering. Usually, you'd pay them on paypal and they'd transfer you the coins. It was pretty similar to localbitcoins.com if you've used it

In hindsight it was pretty sketchy, but i never got scammed luckily. the community was pretty small, and scammers were quickly outed on reddit

kleer001
I did that too, but I used an escrow service. Sure it just kicks the trust down a step, but it's ostensibly not either interested party.
kleer001
I recall using localbitcoins and I heard you could do it through 2nd Life (the game), but didn't do that.
mikewarot
I went to Microcenter, bought the best $90 video card I could, with a copy of the current bitcoin mining estimate sheet in hand.... ran it for a year in a pool, got my 1 whole BitCoin, then I moved it to MtGox, and lost it in the swindle. 8(
quickthrower2
Out of interest why did you move it there? I guess you were trying to sell it?
mikewarot
I was trying to trade off the volatility, sell high, buy back low, etc. I had just started to figure out a working strategy, when it imploded.
quickthrower2
Yep. Been there done that got screwed too (but on BTC-e!)
quickthrower2
Back in the day mtgox and BTC-e now both defunct.
rboyd
dwolla was a popular usd on-ramp (to fund mtgox account)
asidiali
Circle was amazing, first instant BTC purchases w/ a debit card that I can remember
clintonwoo
I had a bitcoin wallet application on my PC. Then joined a mining guild to smooth out the BTC income. Then did the math and I was breaking even on it with the cost of electricity and it was equivalent to just stealing electricity from my parents.

So I left it and forgot about it. And later the mining guild ended up closing so I lost the BTC.

rfd4sgmk8u
Using sketchy service that mitm'd your internet banking, which credited you with sketchy russian us dollar pegged trading tokens which you could deposit into a further sketchy exchange to convert into satoshi's. Then hope to get your coins out before they vanish. Or wiring cash to japan via sketchy intermediate banks that your local banks will close your account if you mention their name. If you try to use any of the transfer services they close your account. It wasn't fun. Pretty sure I have been compromised several times over in the process, but in 2021, I can look back and say it was worth it!