Investing in the Crypto Currency market space can be a little overwhelming for the traditional investor, as investing directly in Crypto Currency (CC) requires using new tools and embracing some new concepts. So if you decide to dip your toes into this market, you want to have a very good idea of what to do and what to expect.
To buy and sell CCs, you need to choose an Exchange that deals in the products you want to buy and sell, be it Bitcoin, Litecoin or the 1300+ other tokens in the game. In previous editions we have briefly described the products and services available in some exchanges, to give you an idea of the different offers. There are many exchanges to choose from and everyone does things their own way. Find things that are important to you, such as:
– Deposit policies, methods and costs of each method
– Withdrawal policies and costs
– Which fiat currency they use for deposits and withdrawals
– The products they sell, such as crypto coins, gold, silver, etc
– Costs of operations
– Where is this Exchange? (USA / UK / South Korea / Japan…)
Be prepared for a detailed and lengthy Exchange setup procedure, as Exchanges generally want to know a lot about you. It’s similar to setting up a new bank account, as Exchanges are brokers of value, and they want to make sure you’re who you say you are and a trustworthy person to deal with. “Trust” seems to be earned over time, as Exchanges usually only accept small investment amounts to begin with.
Your Exchange will store your CCs for you. Many offer “cold storage”, which means your coins are kept “offline” until you indicate you want to do something with them. There are many news that exchanges have been hacked and many coins have been stolen. Think of your coins as sitting in an Exchange bank account, but remember that your coins are digital only and all blockchain transactions are irreversible. Unlike your bank, these Exchanges do not have deposit insurance, so be aware that hackers are always out there trying their best to get hold of your Crypto Coins and steal them. Exchanges generally offer password-protected accounts, and many offer two-factor authentication schemes – something to seriously consider to protect your account from hackers.
Considering that hackers love to capture Exchanges and your account, we always recommend using a digital wallet for your coins. It is quite easy to move coins between your Exchange account and wallet. Make sure you choose a wallet that handles all the coins you want to buy and sell. Your wallet is also the device you use to “spend” your coins with merchants that accept CC for payment. The two types of wallets are “hot” and “cold”. Hot wallets are very easy to use, but they expose your coins to the Internet, but only on your computer, not on the Exchange server. Cold wallets use offline storage media such as specialized hardware memory sticks and simple paper printing. Using a cold wallet makes transactions more difficult, but they are the most secure.
Your wallet contains a “private” key that authorizes all transactions you wish to initiate. You also have a “public” key that is shared online so that all users can identify your account when they engage in a transaction with you. Once hackers get hold of your private key, they can take your coins wherever they want, and it’s irreversible.
Despite all the challenges and wild volatility, we are confident that the underlying blockchain technology is a game-changer that will revolutionize how transactions are done going forward.