Investing in a cryptocurrency space can be a bit daunting for a traditional investor, as investing directly in a cryptocurrency (CC) requires the use of new tools and the adoption of some new concepts. So if you decide to dip your toes in this market, you want to have a good idea of what to do and what to expect.
Buying and selling CC requires you to choose an exchange that trades the goods you want to buy and sell, be it Bitcoin, Litecoin or any of the more than 1300 other tokens in the game. In previous editions, we have briefly described the products and services available on multiple exchanges to give you an idea of the different offerings. There are many exchanges to choose from and they all do things their own way. Look for what is important to you, for example:
– Deposit policy, methods and costs in every way
– Withdrawal policy and costs
– What currencies do they use for deposits and withdrawals
– Goods they deal with, such as crypto coins, gold, silver, etc.
– Transaction costs
– where is this exchange based? (USA / UK / South Korea / Japan …)
Be prepared for the fact that the Exchange setup procedure will be detailed and lengthy, as exchanges usually want to know a lot about you. It’s like creating a new bank account because exchanges are value brokers and they want to be sure that you are who you call yourself and that you are a reliable person to deal with. “Trust” seems to be earned over time, as exchanges typically allow only small amounts of investment.
Your exchange will store CC for you. Many offer “cold storage,” which simply means that your coins are stored “offline” until you confirm that you want to do something with them. There is a lot of news about stock market hacking and lots of stolen coins. Think about the fact that your coins are in something like a bank account on the exchange, but remember that your coins are only digital and that all blockchain transactions are irreversible. Unlike your bank, these exchanges do not have deposit insurance, so keep in mind that hackers are always trying their best to get into your cryptocurrencies and steal them. Exchanges typically offer password-protected accounts, and many offer 2-factor authorization schemes – something to seriously consider to protect your account from hackers.
Given that hackers love to hunt on exchanges and your account, we always recommend that you use a digital wallet for coins. Moving coins between your Exchange account and wallet is relatively easy. Be sure to choose a wallet that contains all the coins you want to buy and sell. Your wallet is also a device with which you “spend” your coins with sellers who accept CC payments. There are two types of wallets – “hot” and “cold”. Hot wallets are very easy to use, but they leave your coins open to the Internet, but only on your computer, not on an Exchange server. Cold wallets use offline storage media, such as specialized hardware storage media and simple paper printouts. Using a cold wallet complicates transactions, but they are the safest.
Your wallet has a “private” key that allows you to authorize all the transactions you want to start. You also have a “public” key that is generalized online so that all users can identify your account when participating with you in the transaction. If hackers get your private key, they can move your coins anywhere, and it’s irreversible.
Despite all the challenges and wild variability, we are confident that core blockchain technology is changing games, and it will revolutionize the way transactions are conducted in the future.