Cryptocurrency has evolved from being a niche fad to something with real-world value in just a few short years.
While Bitcoin (and Ethereum, to a lesser extent) leads the charge in terms of renown and influence, there are several other alternative cryptocurrencies that a strategic investor can place their stake in in hopes of reaping a sizable profit.
In fact, it’s not uncommon to hear individuals strike gold with their cryptocurrency investment, buying high-value assets like homes, supercars, and properties with their newfound wealth.
If you want to score in on the action, it’s first crucial to understand the premise behind this revolutionary financial technology. Crypto distinguishes itself from fiat currency in the sense that it’s not owned or controlled by a single entity; instead, its value and wealth are dictated by the market itself.
If the whole concept of this new financial technology still flies over your head, then fret not. This article will walk you through the basics of crypto, how to own it, and how to ensure that it’s safe in your hands.
Let’s jump right into it with this beginner’s guide to crypto.
What is Cryptocurrency?
Cryptocurrency, for the uninitiated, is a store of value that runs on a technology called the blockchain.
This technology exists online, and it’s characterised as a digital ledger that anyone can access. This means a company or government does not control its value. Instead, it’s checked and balanced by computers around the world, as these computers work to verify each transaction and input it into a shared, decentralised database.
Due to this structure, crypto can function as a fully digital form of money. This makes it easy to use in transactions, allowing individuals or entities to send, receive, or hold it however they deem fit. Ownership is verified through cryptographic keys, giving users full control over their assets.
How to Buy Crypto Safely
Buying crypto was once a difficult and convoluted process, but now it’s been made easy through various accessible online platforms with few restrictions.
Regardless, it’s vital to familiarise yourself with these different methods to ensure you’re buying safely and not falling for scams or phishing attempts.
Here are some ways you can buy crypto safely as a beginner:
Method 1: Centralised Exchanges
By far the simplest and most beginner-friendly method to buy crypto is purchasing it through a centralised exchange, like bitcoin.com.au.
These crypto exchange platforms allow anyone interested in buying cryptocurrency to gain access to tokens, as long as they are specifically built to help eligible individuals buy coins in a straightforward and easy manner.
How it works: You would need to register an account on this crypto exchange platform. The website will ask for personal details like your name and birthday. They’ll also require you to undergo an identity verification procedure called KYC to ensure that you’re really the person that you claim to be.
Once you’ve submitted all your requirements, you can deposit your fiat currency through bank transfer, debit card, or other supported payment methods. You can also buy crypto through a credit card in some instances. Once your account has the funds, you can purchase crypto at the platform’s market at the going rate.
Method 2: P2P Marketplaces
Another way to purchase crypto is through a peer-to-peer marketplace. Unlike centralised exchanges, where you buy from the platform itself, this procedure lets you buy crypto from other users of a specific platform who are selling their coins.
This procedure is ideal for buyers and sellers in ways that are different from the aforementioned method. For one, sellers have the freedom to set the rates independently. They can also filter their preferred payment options based on their own choosing.
Buyers also have a lot of freedom, as they can choose among a sea of sellers and pick the one that provides the best value or convenience to them at any given time. P2P marketplaces are still registered platforms, and there may be cuts taken from the transaction and given to these platforms, but they’re usually negligible relative to bank fees.
How it works: You browse a list of verified sellers on the platform, check their prices and ratings, and place an order. Your payment may go through an escrow system for holding. Then, once the seller confirms the payment, the platform automatically releases the crypto to your P2P wallet.
Method 3: Crypto OTC Desk
If you’re dealing with large sums of money or don’t want to go through the entire buying process on your own, you can use a platform’s OTC (over-the-counter) desk to do the task for you.
These services are designed for high-volume transactions that would be difficult to execute on regular exchanges due to slippage or liquidity limits.
How it works: You first contact a platform’s OTC desk and get connected with an account manager who will walk you through the process. They will then walk you through the procedure, which usually involves connecting you with institutional sellers where you can both agree on a private price for your entire order.
This ensures that your rate is stable amidst fluctuating market conditions. Once both sides agree on the price, you’ll receive the broker’s bank details. They’ll then wait for you to settle the payment, then once that’s done, the crypto will be transferred directly to your designated wallet.
How to Store Crypto Safely
Once you’ve bought your coins, the next step is keeping them safe. The crypto space comes with a lot of freedom, and in this freedom, there are a lot of unscrupulous actors who want nothing more than to take advantage of unsuspecting victims and drain them of their coins.
Hence, it’s crucial to know and utilise wallets that can safeguard your crypto. Here are a couple of these wallets that can be safely considered to store your tokens:
1. Cold Wallets
The safest way to store cryptocurrency by a long shot is by storing it in a cold wallet. These wallets are a physical hardware device that allows users to completely store their crypto tokens and keys offline.
As these wallets don’t connect to the internet, this wallet is shielded against common online threats such as malware and exchange hacks. Even if the computer gets compromised, the tokens in a cold wallet will remain secure.
Of course, with the item being a physical object, the risk of losing it or the object being stolen is a true risk. It’s also essential to keep the seed phrase tightly secured and memorised to ensure it doesn’t get lost forever or fall into the wrong hands.
But when the cold wallet is stored properly, it can be a terrific way to keep your crypto protected for as long as you store it.
2. Hot Wallets
Hot wallets are mobile or desktop apps that can help keep your crypto safe. It’s a software-based application that works whenever it is connected to the internet.
Unlike cold wallets, which store keys offline in one hardware, hot wallets can be accessed across multiple computers, like phones, tablets, and laptops. They are a convenient and safe choice for traders on the go who don’t want to be overly reliant on one hardware to store all their tokens.
That said, hot wallets may be more vulnerable to hacking and other online threats due to their connected nature. It’s therefore essential to keep your wallet from being compromised by securing it against cyber criminals.
3. Platform Wallets
The most convenient and still fairly secure method of storing crypto is by keeping it in a crypto exchange platform’s built-in wallet. This is the default wallet where recently-bought crypto goes. Keeping crypto inside this wallet allows you to buy, sell, or hold crypto coins instantly without having to move it across different devices and wallets.
That said, the distinction here is that holding your crypto in this wallet means you don’t have full control over your private keys. If the platform gets hacked or pauses withdrawals, your funds may not be accessible.
As this is the case, putting your crypto in platform wallets in the long term may not be the most ideal storage solution, especially if the platform isn’t duly registered. That said, it can still be fairly convenient in the short term if you plan to sell off the funds in the near future.
We hope these tips can help you navigate the crypto space more easily. All the best in your crypto investing journey!
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