How to gift Bitcoin: 5 ways compared

What better gift to share with loved ones than the one that may keep on giving for years to come?

If you have a special event like Christmas or a birthday coming up for one of those hard-to-buy family members (especially children), friends or colleagues, Bitcoin (BTC) could be the perfect gift. BTC can be used as a store of wealth and medium of exchange and it's a great way to diversify your portfolio and hedge against inflation.

This article explores the various ways that you can gift Bitcoin, as well as step-by-step instructions for how to go about it.

The basics of gifting Bitcoin

Before we begin, it's essential that both you and the recipient of your satoshis know the basics of crypto wallet management, or you could lose everything. The most important is understanding how public and private keys work, which are used for some of the most popular gift methods including paper wallets, gift cards and hardware wallets.

Here's what you need to know:

• A public key or address is a shareable alphanumeric-string that acts a bit like an email address, but for crypto transactions. It is shared between senders and receivers of crypto to facilitate transactions, just like you would share your email address with a friend to receive emails.
• A private key is your personal key to access your Bitcoin wallet address and functions as a password to your account. You must never share it publicly, otherwise your funds could get stolen. Likewise if you lose it, you may lose access to your account forever – unless you have a recovery seed.
• A recovery seed is a mnemonic set of usually 12 to 24 words that are derived from the private key during wallet creation, ensuring an easy way and last resort method to unlock or restore access to your Bitcoin wallet. Don't try to memorise it, but write it down on a piece of paper (double check the order and accuracy) and keep it somewhere safe. If anyone gains access to your recovery seed phrase (or private key), they can steal your funds.

Gifting Bitcoin using a paper wallet

A very straightforward way to gift Bitcoin to someone is to give them a paper wallet where they can access already stored Bitcoin or wait to receive it from you.

So, what is a paper wallet and why use paper to store a digital asset? Well, in a super-connected digital society, sometimes low-tech (offline) solutions are the best. Bitcoin is not a physical asset, therefore wallets that are used to store Bitcoin are usually apps or software programs, which can be targeted by hackers or scammers.

A paper wallet is a method of cold storage to keep private cryptocurrency information safe by ensuring it is never connected to the Internet. It's simply a printed or written physical copy of your Bitcoin wallet's recovery seed and/or private key.

Paper wallets do not actually store your Bitcoin, but rather provide a method of access to the cryptocurrency, containing a hard copy of your public and private keys to funds, or QR codes that are used to enable cryptocurrency transactions.

Paper wallets are safer than hot wallets (Internet-connected digital wallets like an app, browser extension or computer program) but less secure than hardware wallets (dedicated offline crypto key storage devices).

Risks of using a paper wallet

For one, there is the risk of losing or damaging your piece of paper, thereby rendering the cryptocurrency associated with it irretrievable. Unless you keep your crypto with an exchange or custodian, your Bitcoin will be lost, as there will be no way to redeem your cryptographically generated private key or recovery seed.

Also, you'll need to interact with a digital wallet at some stage in order to use your funds. The receiver of the Bitcoin paper wallet gift needs to scan the QR code or enter the key into a wallet application in order to make transactions, which makes it vulnerable to hacking or phishing practices. A hardware wallet will securely connect your digital wallet offline with an app without the need to manually enter any private data, and authorise transactions following biometric verifications. It's not cheap though and could cost you between $50 and $300.

If you only want to gift a small amount of Bitcoin, a paper wallet should be okay.

How to create a paper wallet

To create your own paper wallet, the recommended way is simple: Generate an address, write it down and make sure no digital copy, image or file is created or retained. Always remember, your paper wallet is only as safe as its hiding place. Keep it away from any prying eyes to avoid future heartache.

• Using a Bitcoin ATM?

  Have a Bitcoin ATM near you? Simply follow the instructions and purchase it with a bank card. Your wallet information will be stored on the receipt that is issued. Please be advised it's better to purchase only small amounts of BTC with a Bitcoin ATM as you don't know who has access to your keys and fees are also high. If you do purchase a significant amount, it's best to access it in a timely fashion and move it to a more secure wallet.

Gifting Bitcoin using a gift card

Gift cards are another easy and fun way to gift Bitcoin. Here's how it works:

1. Visit a reputable crypto gift card provider and fill out your order form.
2. Once you've purchased a gift card, it will be emailed to the address you've provided.
3. It will come with a code that you'll need to enter on the company's website from which you purchased it.

From there, the dollar value of the gift card will be converted to Bitcoin at the market rate (minus fees and commission) and sent to the wallet address that you have provided.

If you decide to make use of this method, it's important to do your due diligence and make sure you choose a trustworthy provider.

Gift Bitcoin using a hardware wallet

A hardware wallet offers the most secure way to protect crypto assets. This dedicated crypto storage device keeps your private key offline at all times, and is required to authorise any transactions.

Leading hardware wallets like Ledger Nano, Trezor and CoolWallet connect offline over encrypted Bluetooth or USB to a custom app on your phone or computer and permanently protect your private key through a special hack-resistant chip called a secure element.

These cold wallets further use several biometric measures such as fingerprint scanning and physical button press to ensure the best possible security. Of course, your hardware wallet is only as good as your hiding spot for its recovery seed phrase. Expose it to the wrong person and they can simply use your seed words in a compatible application to gain access to your funds.

The recipient of a hardware wallet gift should always generate their own unique Bitcoin wallet on it during set-up, and record the private key or recovery seed by writing this information on a paper wallet and keeping it somewhere safe.

Therefore, it will be poor form for you to first set up a hardware wallet before you gift it, as it may rightly end up in the trash can. Rather, send it to them in its unopened packaging, with an unbroken seal to prove that no tampering took place.

Let them follow instructions to set up their own wallet, and ask them to send you their public address in either a QR code or alphanumeric format. Usually it'll be easy to find the public address; simply ask them to click on the "Deposit Funds" button in-app and copy the address displayed.

Check the address format to ensure they've provided you with the correct cryptocurrency's details. For example, if you want to gift Ethereum (ETH) or any ERC20 token, the address should always start with 0x, while Bitcoin addresses usually start with 1 or 3.

Gift Bitcoin using physical coins

Bitcoin can also be gifted on "physical coins", like Denarium. These aesthetically pleasing collectables add that extra presentation factor when gifting Bitcoin.

Denarium is a Bitcoin wallet but in physical coin form. The private key is stored underneath a security seal but multisignature coins are also available. The coins, which are produced in Finland, are available in brass, bronze, silver and gold. There is a hologram on each coin, which adds an extra layer of security for the protection of the private key. The hologram is an anti-fraud mechanism which makes it extremely difficult to counterfeit.

Gift Bitcoin using a cryptocurrency exchange

A simpler and more mainstream way of gifting Bitcoin could be to help the receiver of the gift, especially beginners, to simply set up an account on a trusted cryptocurrency exchange, like Binance or Coinbase, which will manage their accounts and don't require them to keep private keys or recovery seeds. Please note that exchanges are vulnerable to hacking and scamming due to their centralised nature, therefore it's best to only deal with regulated and reputable ones.

Exchanges can also help gift recipients to effortlessly sell Bitcoin back to local currency or trade it for altcoins or stablecoins.

Once they're signed up, ask them for their public address, which they will normally find by locating the "Deposit" button in their exchange profile's Wallet or Assets section. Transfer Bitcoin from your wallet, which you would need to already have set up and have a positive balance in your account. If you don't have any Bitcoin to gift, check out our article on how to buy Bitcoin.

Instructions for gifting someone Bitcoin

As you've probably seen above, there are several great ways to gift Bitcoin with ease. However, if you need to know how to buy Bitcoin before gifting it, have a look at our article on how to buy Bitcoin, which includes options for buying Bitcoin with a credit card, using cash or via PayPal.

The pros and cons of giving Bitcoin as a gift

Pros

• Bitcoin is a deflationary asset with a fixed total supply that may go up in value over time as fiat currency devalues and mainstream adoption of digital currencies increases.
• The pseudonymous nature of Bitcoin means that it's a great option for people who value their online privacy.
• Many no-coiners are simply too intimidated by the technical challenges of buying and owning Bitcoin to do it themselves. By doing the heavy lifting for them, you're giving them access to a new world of finance and also recruiting a new crypto holder.
• Bitcoin is a global asset that can be moved across any geographical border in minutes. This makes it ideal for users for remitting to and from countries with difficult financial systems.
• Bitcoin is the asset of the future and will be handed over to future generations. What can be a better gift then for your children, who might be too young to purchase it for themselves?

Cons

• Bitcoin can be difficult to manage for beginners. It is a decentralised virtual currency, which means that if you send it to the wrong address or your giftee loses their keys or gets hacked, you can kiss your investment goodbye.
• Bitcoin's price is much more volatile than that of traditional finance assets like shares, which can be stressful for recipients if they're given a substantial amount.
• Owning and selling Bitcoin comes with tax requirements. Make sure you understand your jurisdiction's requirements.
• It might be difficult to convert your Bitcoin to fiat currency if you're in a financial squeeze; however, this is now a lot easier than a few years ago.

Frequently asked questions

• How can you gift Bitcoin and other cryptos safely?

  If you decide to give Bitcoin to someone as a gift, it's your responsibility to ensure that the recipient understands security basics and never reveals their private key or seed phrase to anyone. They should keep it in a safe place, stored on a hardware wallet or paper wallet.

• What are the tax implications of gifting Bitcoin?

  One of the benefits of sharing Bitcoin as a small gift is that it's tax free in many countries. The recipient will not need to report the Bitcoin in any tax form and they will only need to pay tax if they sell the Bitcoin for a substantial profit that exceeds a country-specific tax threshold. If this is the case, they will have to file a gift tax return.

• Can you gift Bitcoin to someone under 18?

  Most cryptocurrency exchange platforms and wallets require you to be over 18 years old to open an account. You will need to go through a KYC (know your customer/client) process, which includes verifying your identity with a copy of your identification card and a selfie. However, if you send funds to a hardware wallet, soft wallet (like MetaMask) or paper wallet, you could bypass this restriction.

Written by

Werner Vermaak

Writer

Werner Vermaak is a technical writer and blockchain consultant with an extensive 20-year marketing resume across Taiwan, the UK and South Africa. He came across Bitcoin and cryptocurrency in Taiwan during mid-2017 and has worked with several companies and projects in the areas of crypto security, regulations, custody and new fields such as DeFi, NFTs and Web 3.0 since. Werner has a business degree from Stellenbosch University and postgraduate qualifications in strategic marketing from the AAA School of Advertising. Werner enjoys geeking out on new technology and pondering the mass adoption of digital assets. See full bio