How to start investing in crypto
By Rafał - 2018-10-29
With the craze around cryptocurrencies, many individuals have been looking for simple and easy-to-use solutions to acquire these crypto-assets. Digital platforms like Coinbase, Gdax (Coinbase Pro),Bitfinex or even more recently Binance have made the buying process significantly easier for people to invest in popular cryptocurrencies like Bitcoin.
Users of these platforms can directly purchase currencies like Bitcoin and Ethereum with, at least, a debit card. With most popular currencies, including Bitcoin with decimals, you don’t need to invest thousands of dollars to simply get in the game. However, the process is still slightly more complex than acquiring a more traditional currency like euros, dollars or other common fiduciary currencies. We will introduce a short guide with Coinbase as example in the next section.
Users can also choose another way to purchase crypto by using LocalBitcoins services. Localbitcoins provides users with an alternative way to obtain and trade Bitcoin easily. Started as a company in Finland, in 2012, the site aims to connect Bitcoin buyers and sellers via an open and peer-to-peer marketplace network.
By using the site users can create and list advertisements, communicate with prospective buyers and sellers and confirm all the transaction details before finalizing any definitive trade. Localbitcoins acts as gateway into the world of Bitcoin trading and allows new entrants to the world of cryptocurrency to quickly get accustomed to buying and selling Bitcoin. Localbitcoins has now developed a good reputation and established itself in a large number of countries all across the world.
If a user is interested in purchasing altcoins (different from top 10), he will need some Bitcoin or Ethereum to make that specific purchase. With the current state of the crypto currencies market, it is almost impossible to buy altcoins directly with fiat currencies as, in 2019, thousands of currencies are based on BTC and ETH market values. However, as a majority of altcoins, it is still possible to acquire some using exchanges where coins are listed.
Sites such as coinmarketcap, realcoincap, coingecko, opencoincap and more track coins statistics in order to centralize all the information including the different exchanges available to purchase a specific altcoin.
Finally, more than 70 countries have implemented a more prevalent solution known as Bitcoin ATM. Bitcoin can directly be bought through a card and ATM and be sent to the wallet for storage.
All the solutions to purchase mainly Bitcoin and Ethereum are fully trusted , secure , and reliable.
How to invest through Coinbase services
This guide introduces the Coinbase process but remain similar for a large majority of known brokers or exchanges with a fiat/crypto gateway:
- Create an account: enter in your name, email and password to sign up for the first time. Don’t forget to verify your email ( and check junk folder if mail not received) and setup double factor authentification to bring extra security for your account.
- Add a payment solution to your account: You can add a new account by tapping “trade” on the Coinbase website when visiting for the first time after creating an account . The system allows you to choose what you want to buy and how you’re going to pay, either with Bank account and/or debit card. A bank account gives you a higher buying limit than debit card but your purchases will be on hold for a few days. A debit card gives you instant access to your crypto purchases but also have a way lower buying limit.
- First acquisition: Once the payment solution is set on your account, you can directly purchase Bitcoin or top known altcoins directly from Coinbase Website or App. Just choose the amount of crypto you want to buy and confirm the trade.
- Finalization: Once the payment is done and confirmed by Coinbase ( Instant for debit card , up to few days for direct transfer) , the purchased amount will be shown directly on user’s dashboard. You can easily trade, buy and sell more crypto currencies directly from your Coinbase account without using the services from third party sites. You can also withdraw your Bitcoin or such in order to transfer to buy altcoins on several other crypto exchanges.
Invest in Altcoins
As previously introduced in this document, buying Altcoins isn’t an easy task for newcomers. The multitude of cryptocurrency exchanges and the growing number of digital currencies is a major problem for the accessibility and practicality of the market.
Today, with more than 8000 different currencies and 5000 existing markets, the crypto-currency market is a difficult field to take in hand. It is important to do thorough research in order to find a serious, reliable trading platform to buy the chosen altcoin. With trading pairs mainly based on BTC and ETH, it is imperative to understand the operation of transactions within the blockchain in order to easily acquire the currencies of your choice. Having good financial practices also mitigates all the risks related to account/wallet or funds security.
As the unwritten rule of crypto explains, if you have the private key of a defined crypto wallet, you’re the legitimate owner.
Another popular way to put it is: Not your keys, not your crypto
It is therefore important to focus time and effort on tools and wallets that are practical, reliable and have been pre-tested before release.
Crypto Wallets knowledge and management
To understand fund management within blockchain, it is necessary to have a good understanding of the difference with the current bank storage system. A cryptocurrency wallet is a software program that stores private and public keys and interacts with various blockchains to allow users to send and receive digital currency and monitor their balance. The public key is defined as the receiving address and the private key as the key of the "safe" to access the stored funds.
Today, millions of people use cryptocurrency portfolios, but unlike traditional portfolios, digital wallets do not store money directly. In reality, currencies are not stored in any single location or exist anywhere in any physical form. All that exists are the records of transactions stored on the blockchain in real time. From a purely technical point of view, there is no real exchange of coins.
The transaction is simply signified by a transaction record on the blockchain and a balance change on the crypto wallet of the recipient.
Any type of wallet is simply a combination of the private key and public key/address. Based on how and where you store them, you can choose the best solution which fit your daily need. We can divide the different wallets in several categories (offering distinct platforms and security).
There are many crypto portfolios for different services and purposes:
- Unique Currency Wallets : Allowing you to store one currency only (The wallet is linked to only one blockchain corresponding to the specific currency)
- Multi Currency Wallets : Allowing the storage of a large number of cryptocurrencies ( Coinomi , Exodus , Agama , Trust , Imtoken, O3 etc)
Warning: With the diversification of blockchains solutions, new protocols have been implemented to meet specific needs. It is important to differentiate "Tokens" and common cryptocurrencies.
Tokens are based on specific protocols and also require a storage solution compatible with the protocol used (non-exhaustive list):
- ERC20 / ERC720 / ERC721 protocols based on the Ethereum network: The Imtoken mobile wallet specializes in this type of protocol. You can also add MyEtherWallet, a secure web solution for sending funds in a simplified way using stand-alone contracts and the Ethereum blockchain.
- The NEP-5 protocol, based on the NEO blockchain, allows to store NEO / GAS currencies and NEO-related crypto-assets. Specialized portfolios include the O3 mobile wallet, which offers a large number of features such as gas claim.
- The BEP2 protocol, based on the Binance blockchain, which makes it possible to store the BEP2 tokens safely in order to have them on the Binance DEX for example. One of the most popular portfolios is the Trust mobile solution which was recently acquired by Binance itself.
Hardware Wallet (Most secure way as it require a physical access to steal the funds) such a Ledger Nano S or Trezor.
These equipments are USB-like device with an OLED screen and side buttons to navigate through the interface of the wallet and comes with its native desktop apps for different cryptocurrencies. It is a battery-less device which you can connect to a PC or mobile device via USB. The cost of these wallets is somewhere between 70$-150$ but offer a lot of possibilities for crypto storage and extra security.
Paper Wallet (Second most secure way as it also require a physical access to steal funds and store the funds offline)
Paper wallets are bit technical and require a high level of caution from the user. It is so because in a typical paper wallet you just print your private keys and public addresses on a piece of paper and start transferring your bitcoins or altcoins on it.
Desktop Wallet (Online wallet software directly installed) such as Exodus, Bitcoin Core, Electrum etc
Desktop wallets for Bitcoins and cryptocurrencies are installable software packs that are available for most of the desktop operating systems such as Mac, Windows, Linux and more recently raspberry PI.
The vast majority of altcoins on the market have their own independent crypto portfolios offering more or less the same services as those for bitcoin storage.
Mobile Wallet (Online wallet installed on Phone) such as Coinomi or Electrum.
Mobile wallets for Bitcoin and Altcoins are the most used wallets right now on the market. With the growth of ecommerce and mobile technologies, users prefer to have easy-to-use and accessible interfaces offered with mobile wallets.
Web Wallet (Online storage, least secured solution against DDOS and private keys are held online) such as MyEtherWallet or Metamask.
Web wallets are hot wallets that are always connected to the internet and can be accessed via different internet browsers such as Google Chrome, Firefox, and IE etc by going to URLs such as https://coinwebwallet.com. However, the private keys are held online in these kinds of wallets in your browser itself and can be sensitive to DDOS attack in some case of poor security associated. Although this solution is the least secured, it is still possible to configure 2FA to add an extra layer of security.
Thus, it is strongly recommended to use hardware wallets or any reliable mobile/desktop wallets to safely store your funds. Never share your private keys to anyone asking it . This is the only way to ensure the funds stay yours.