Cryptocurrencies are types of digital assets that are secured entirely by cryptography and are based on blockchain technology. Cryptocurrencies are difficult to counterfeit and double-spend due to the consensus of this technology being de-centralized, not monitored by any banks or governmental institutions. Cryptocurrencies are relatively newly introduced, more precisely in 2009 with the famous Bitcoin cryptocurrency. More and more coins and tokens and the entire cryptocurrency technology is evolving at a rapid pace by implementation and design of different ideas.
When Bitcoin was firstly introduced, the only way to get it was through mining. Mining is a long process that consumes a lot of electricity therefore it is costly, and essentially it’s performed by computers sophisticated enough to solve complex math problems. However, in present times there are many ways for one to buy or earn Bitcoin and other coins.
Let’s find out how to safely buy a cryptocurrency and store your coins the right way in 4 basic steps.
1. Choose an Exchange
Cryptocurrency exchanges are in a sense forced for you to have as the most simple way to joining the crypto market. There are many types of cryptocurrency exchanges and all of these platforms allow you to buy, hold, sell, trade with other coins, trade with traditional money, etc. Exchanges can be Decentralized (DEX), Centralized (CEX), or a combination of both DEX and CEX, called Hybrid Exchanges.
The biggest cryptocurrency exchange is by far Binance. In April 2021, the Binance exchange dominated the global exchange space with a considerable amount of trading volume in the crypto market. There are several other trusted and widely used exchange platforms such as Kraken, Coinbase, Gemini, HotBit, Exodus, Uniswap, Bitfinex, etc,
For a detailed view of these exchanges and what might work best for your preferences and type of investments, check out the top 9 cryptocurrency exchanges for 2021 here.
2. Connect Your Exchange to a Payment Option
Usually, the exchange of your choice will include asking for personal documents to ensure your identity and legitimacy. This may be done with pictures of your ID, or driving license, social security number, employment documents, etc. Oftentimes, you can use your credit card to purchase cryptocurrency and you can connect that credit card directly to your exchange.
Some facts to consider when carrying out this step is that there are fees for bank accounts, debit or credit cards, and transaction fees. The prices for these fees vary on each exchange platform, Coinbase is recommended due to having a 1.49% fee for bank accounts and it is suggested for beginners in buying cryptocurrency.
Once you have linked your preferred exchange to either or bank account, credit card, or debit, you can buy Bitcoin and other types of cryptocurrencies.
3. Place an Order
After you have added the payment method to get money into your exchange platform, for example, Coinbase. After this step usually you will have to set up your two-step authenticator and on Coinbase that is done through Microsoft Authenticator, Google Authenticator, and several different ones.
Based on what exchange platform you have been registered to, you will most likely have a long list of cryptocurrencies you can buy. You will enter the amount of money you want to buy crypto with and you can either repeat the purchase every day or week or month or you can create a one-time purchase only.
4. Safe Storage
Be super careful about which websites you visit, there are several scam websites on the internet that try to trick people into thinking they are crypto exchanges and wallets. They profit off of your login information and gain access to your investments. Pay attention to URL endings and the site information icon on your browser.
Additionally, there have been numerous cases of hackers from the other side of the world hacking these exchange platforms and profiting off of your investments, this is why steps such as the ones listed below are extremely necessary for safe storage of your cryptocurrency purchases;
- using an encrypted email, such as Proton Email,
- using an Authenticator such as Google Authenticator,
- not using your SIM Card for confirmation codes,
- using paper to store your saved passwords,
- making sure your computer does not contain any viruses, and
- proof checking every URL of the crypto exchange platform of your preference,
- using a cryptocurrency wallet.
Due to cryptocurrency being an entirely decentralized technology, you cannot file a complaint to the government or security institutions for your stolen crypto! Companies such as Coinbase, Binance, and other exchange platforms do not have responsibility for your investments. If you are a victim of SIM swapping or you enter the wrong exchange URL, Coinbase or other platforms cannot help you out. You are your own bank.
The ultimate and final step to safely store your cryptocurrency purchases is choosing a cryptocurrency wallet. These wallets are online wallets or software, “hot” wallets, and paper or hardware, “cold” wallets where you can easily transfer your crypto from your exchange account such as Coinbase to your wallet.
Hot Wallets
Hot wallets are online wallets that run on your phone, computer, tablet, and basically any internet-connected device. Hot wallets are easy to use and extremely convenient at any time, however, they are susceptible to hacking due to storing your private keys on the internet. If you prefer to have a small amount of cryptocurrency and you are continuously trading that cryptocurrency, then a hot wallet will save you a lot of time.
Key factors to consider if your choice is using a hot wallet will be ensuring you have a strong password, you are using two-factor authentications (Google Authenticator, Microsoft Authenticator, etc) and you are safe browsing your internet for your devices to not contain viruses. It is suggested to also bookmark your exchange platform and hot wallet, so you will never enter scam websites.
Cold Wallets
Referred to as hardware wallets, cold wallets are not connected to the internet and have the least chance of being hacked and risking your so far investments. You will need internet with this wallet only when confirming a transaction. Cold wallets will primarily look similar to a USB Flash or similar to an OTP Token. They might cost ranging from $50 to $170 however, they are by far the safest way to store your crypto purchases. A cold wallet will be the most preferable to people who purchase their cryptocurrencies and plan on HODLING.
One of the first few ways of storing your Bitcoin when it was first introduces was through Paper wallets. These wallets are essentially a piece of paper that contains all the password keys and QR codes to make transactions possible and they are the most trusted form because they are not connected to the internet. This paper wallet is free of all cyber-attacks, however, it needs to be protected from physical damage as well. Once you have a paper wallet, you have to hide and protect it from people that might access it, have a copy on your safety deposit box if the paper is ripped or damaged.
It has been widely recommended that by buying cryptocurrencies you should possess 3 things; your exchange account to buy crypto, your hot wallet to store a small number of coins you wish to trade, and a cold wallet to store your long-term and large holdings of cryptocurrency.
Takeaways
- When purchasing cryptocurrency, it is critical to use appropriate security measures.
- Safe internet browsing, two-factor authentication, and encrypted emails are just a few of the security measures you may take.
- In cryptocurrency, you are your own bank; the system is decentralized, so if you are a victim of a cyber-attack, you are accountable for your damages.
- Owning a hot wallet and a cold wallet in addition to an exchange account (Coinbase, Binance, etc.), is recommended.
- A hot wallet is an online wallet that holds your cryptocurrency after they have been transferred from an exchange platform to your wallet.
- For day traders, hot wallets are advised.
- A cold wallet is an offline wallet that stores your cryptocurrencies from the exchange platform to your wallet and is not connected to the internet.
- HODLERS should are advised to keep cold wallets.