Investing in the cryptocurrency market space can be a bit daunting for the traditional investor, as investing directly in cryptocurrency (CC) requires the use of new tools and the adoption of some new concepts. So, if you decide to dip your fingers in this market, you will want to have a very good idea of what to do and what to expect.
Buying and selling CC requires you to choose an exchange that trades in the products you want to buy and sell, be it bitcoin, lightcoin or one of over 1300 other tokens in the game. In previous editions we have briefly described the products and services offered on several exchanges to give you an idea of the various offers. There are many exchanges to choose from and they all do things their own way. Look for the things that are important to you, for example:
– Deposit policies, methods and costs for each method
– Withdrawal policies and costs
– With which fiat currencies do they work for deposits and withdrawals
– Products they deal with, such as crypto coins, gold, silver, etc.
– Transaction costs
– Where is this exchange? (USA / United Kingdom / South Korea / Japan …)
Be prepared for the Exchange setup procedure to be detailed and lengthy, as exchanges usually want to know a lot about you. This is similar to creating a new bank account, as exchanges are value brokers and they want to make sure that you are who you pretend to be and that you are a reliable person to work with. It seems that “trust” is gained over time, as exchanges usually only allow small amounts of investment to start with.
Your Exchange will keep your CC in storage for you. Many offer “cold storage”, which simply means that your coins are stored “offline” until you indicate that you want to do something with them. There is a lot of news about hacking Exchanges and a lot of stolen coins. Think about the fact that your coins are in something like a bank account on the stock 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 to your cryptocurrencies and steal them. Exchanges usually offer password-protected accounts, and many offer two-factor authorization schemes – something you should seriously consider to protect your account from hackers.
Given that hackers like to rob exchanges and your account, we always recommend that you use a digital wallet for your coins. It is relatively easy to move coins between your Exchange account and your wallet. Remember to 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 who accept CC for payment. Both types of wallets are “hot” and “cold”. Hot wallets are very easy to use, but leave your coins on the Internet, but only on your computer and not on the Exchange server. Cold wallets use offline storage media, such as dedicated hardware memories and simple paper printouts. Using a cold wallet makes transactions more complicated, but they are the safest.
Your wallet contains a “private” key that allows all the transactions you want 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. When hackers get your private key, they can move your coins wherever they want, and that’s irreversible.
Despite all the challenges and wild instability, we are confident that core blockchain technology is changing the game and revolutionizing the way transactions are done in the future.