Are you puzzled by cryptocurrency? Confused as to how to navigate the seemingly endless maze of greater and greater complexity? Well, worry no more! I have some insight for you, that will help you to navigate this vast landscape, and hopefully get you quickly onto the road to investment profits and financial freedom! No promises, there is no magic formula to success, but knowledge is indeed power, and you are in for a crash course that will get you up and running, sooner than later.
Cryptocurrency at its core, has historically been comprised of two main components: a cryptographic blockchain and a public ledger. There are many reasons for the rise in cryptocurrency. The most obvious is to make a quick buck, but the origins had an orientation towards privacy and the escape from money without trust such as fiat (government-issued) currency.
Getting started
Entry into the marketplace isn’t the most intuitive thing if you are going to own the cryptocurrency or coins. There are easy methods to buy into cryptocurrency today, such as applications like Robinhood or cash app. And there are some centralized exchanges like Binance and Coinbase. These platforms can be very easy to onboard with, but wait, there are alternatives you should consider as well.
Even PayPal has gotten into cryptocurrency by allowing you to buy bitcoin. However, some of these sites will not allow you to withdraw. If you want true ownership (non-custodial) of the cryptocurrencies, we suggest you do your due diligence and ensure that you can make a withdrawal. If you are buying with a credit card from an exchange, the odds are in your favor that withdrawals are possible.
Acquiring Cryptocurrency
There are a few methods of getting your hands on cryptocurrency.
- Cryptocurrency ATM
This is an easy option, however there will likely be higher fees. If you are inclined to privacy, consider having a pre-paid number ready to give to the machine for SMS verification. For this option, you will need to have a wallet created and an address ready for the coins. This will be explained in the wallet section.
- Buy directly from an Exchange
This is the easiest option out of the bunch due to convenience, however do not have any expectation of privacy. This can be as easy as using your credit/debit card similar to any other internet purchase. Chances are high that I.D. verification will be enforced. Also note that you may be restricted from withdrawing or your funds will be “frozen” for a certain amount of time. While this is a gross practice, be aware that it is common.
- Order by proxy (pay a friend in cash)
This option is our personal favorite. This eliminates the shady deals, ATMs, and the risk of data abuse. Pay a trusted friend in cash to enter the market.
- Mining
This is a whole different topic that we cover elsewhere on the site, here. Also, it is not recommended for newbies or less tech savvy people. It can be a real pain to set up and get into, and the rewards may not be great.
Storing Your Cryptocurrency
If you are going to invest into cryptocurrency, you are going to need a wallet. Your choice of wallet is mostly determined by the coin or coins you want to deal with. There are many to choose from, but some coins may only have dedicated wallets or limited choices.
Wallets
There are a few variants of cryptocurrency wallets. Hot wallets and cold wallets (also known as hardware or paper wallets) are the two main classifications of cryptocurrency wallets.
Some wallets are coin specific, some contain coins of a specific blockchain (i.e. Ethereum coins are ERC-20), and others are a hybrid containing multiple coins from various blockchains.
Hardware-based wallets and paper wallets are both considered cold wallets. Cold wallet implies that you are in full possession of the private keys (non-custodial) required to access and use your cryptocurrency.
Hot wallets are hybrid, desktop, and mobile wallets. Depending on the chosen wallet, this can be custodial or non-custodial. A general rule of thumb in the crypto-realm: if it’s not your keys, it’s not your coins.
If the priority lies in safety, cold wallets are the best solution. You will have a private key or seed phrase (string of words) to retain. We suggest purchasing a rugged USB, pasting the private key (generated from the wallet) inside an offline password database such as KeePass, encrypting the USB drive with Veracrypt, and transferring the KeePass database to the USB that was encrypted. This stands to be every bit as secure as a hardware wallet while being a fraction of the price!
If the priority falls under accessibility, consider a hybrid wallet for multiple coins such as TrustWallet or Exodus. This allows easy access, limited keys to backup for safe keeping, less software to verify [See next section], and often times offers a simple coin swap method (i.e. Exodus wallet has an integration with ShapeShift that allows quick exchange).
Overall Safety
It is not our intention to scare you, however the crypto-realm is a warzone. This involves sketchy exchanges performing exit scams (dropping off the face of the earth with your coins), various state-sponsored / private hacking groups wanting black-budget funds, get-rich-quick Ponzi schemes, forced I.D. verification with Know-Your-Customer policies, phishing sites, and malicious software disguised as legitimate.
- Many of these risks are mitigated off the bat by ensuring that your wallet is non-custodial and you truly own the currency.
- As more legislation has entered the cryptocurrency arena, exchanges pulling exit scams has slightly been reduced (i.e. places like Binance won’t fall off the face of the Earth). Avoid hole-in-the-wall exchanges that do not appear to have your interest’s heart. Even if you do use trusted centralized exchanges, best practice says to not store funds on them for any significant length of time. If you are not trading, store the funds in a non-custodial wallet.
- Avoid Ponzi schemes of High-Yield investment programs. These come back around to play on the new investors during every cryptocurrency bull market. The chance to be paid out is low compared to the chance that they run away with your money. This type of investing is nothing short of a gamble.
- Forced I.D. verification is an unpleasant reality with any reputable centralized cryptocurrency exchange (CEX). The only way around this is to use expensive swapping platforms such as ShapeShift, or resort to Decentralized Exchanges (DEX) for trading. DEXs historically have a smaller number of users, therefore there is no guarantee that an order will be hit when placed. Komodo Platform’s AtomicDex is a prime example of a DEX implementation.
- Safety often comes down to the cybersecurity basics. Avoid clicking any suspicious links, and validate the URLs before blindly clicking them and entering your credentials. Enable Two-Factor Authentication (2FA) whenever possible. Utilize an offline password manager such as KeePass to store various credentials, and do not use the same password across multiple exchanges.
Closing
To conclude, cryptocurrency is a maze for the beginner, and there are many dangers that one must have an awareness of, to safely trade and store. The environment, platforms, and terminology are constantly in a state of change, however most of what has been laid out above will remain consistent.
Remember, at the very least, to get started, you will need:
- A wallet
- A buy-in method
Think of it as simple as that, and take both steps carefully, and you will be well on your way to being a crypto enthusiast.
I hope this information aids you, as a simple quick start guide to entering the ever-changing realm of cryptocurrency!