This blog is a conclusion based on my initial experience at starting my journey to own crypto coins. It briefly outlines what you need to set up in order to start owning cryptocurrencies as well.
I’m embarking on a journey to own cryptocurrency, invest it, and hopefully, make a lot of returns in the future. My background in investing is non-existent, so you’ll be reading about a lot of firsts throughout this journal. I’m hoping to cover topics such as how to invest in crypto, what are the best crypto investing apps out there, and eventually be able to develop the experience to determine the best crypto to invest in. The entries are intended for all the crypto newbies out there who are looking to do the same and don’t know where to start. I hope to add to your knowledge and make mistakes so you don’t!
My first experience with buying crypto can be summarized as follows:
- Be forced by my best friend to create an exchange account
- Go through a verification process
- Attempt first buy with about $30
- Realize that the Jordanian government doesn’t allow for any financial transaction to go through if it’s related to cryptocurrencies (my bank is in Jordan)
Following this failure I realized that in order to begin a successful journey into owning cryptocurrencies, three main foundation pieces have to be set up or understood:
- The wallet
- The Trading Platform
- The legislation in the country you intend to trade-in/ receive or make payments in
1- The Wallet
The wallet is an essential part of trading. Unlike the commonly defined wallet which holds money in it, a crypto wallet doesn’t hold your cryptocurrencies; it contains the private keys to your cryptocurrencies. Once you buy a cryptocurrency information is added onto that blockchain as per the new ownership which is your address on the blockchain. To be able to get access to that address and transaction history on the blockchain you will need the private and public keys.
As inferred by its name, a public key is a series of numbers, letters, and symbols that identifies a receiver or sender, it is similar to an ID number used to identify someone. Similarly, a private key is an encryption that should remain private because they allow for the decryption of a message or transaction to take place; they allow for the receiver to access the information sent or allow for the sender to send information securely; think of it as the password to your bank account.
Since the keys are what grant you access to maneuver your crypto assets, a wallet and its security are important. There are four types of wallets, nevertheless, we can categorize them into two main ones: hot and cold wallets. Hot wallets are digital wallets and they can either be online or software wallets; whereas cold wallets are physical wallets that are either paper or hardware wallets.
- Wallets created by third parties, such as cryptocurrency exchanges
- They have access to your private and public keys and you are trusting them not to mishandle your assets
- Highly accessible since they are online
- High risk of breach/ hack/ theft since these parties are most likely not security companies
Digital/ software wallets
- Highly accessible and online
- You are the sole owner of the private and public keys
- Ability to retrieve the private key with recovery phrase or seed
- Risk of breach/ hack/ theft since they are online
- Private and public keys printed on a piece of paper
- You are the sole owner of said paper
- Highly secure
- Difficult to handle during transactions
- Should anything happen to the paper, your cryptocurrencies will be inaccessible
- Similar to hard drivers, physical storage devices used for crypto storage
- Highly secure with two steps verification processes for transactions
- If hardware is damaged, cryptocurrencies are most likely inaccessible, so backup is definitely a necessity.
It is widely advised to use hardware wallets in lieu of anything else given how secure they are, especially for those who want to store large amounts of cryptocurrency. The least secure option would be the online wallets operated by exchanges, especially since they are the biggest targets for crypto theft and hackers.
2- The trading platform or exchange
A number of trading or exchange platforms are out there and they provide multiple options when it comes to starting out. There are several things to consider when you want to start out:
Are you paying via debit or credit card?
The reason this question is important is that some exchange platforms charge higher fees for credit cards than debit card payments, so be careful when making the choice. Also, your bank could charge you extra for credit card or debit card payments in different currencies.
Do you want to pay a minimum fee to start buying cryptocurrencies or not?
There are exchanges that allow you to pay as low as $5 for your first transaction, while others demand a minimum deposit before you start trading. Consider these options and whether or not you are willing to pay a minimum deposit.
Exchanges charge fees for every transaction and while some don’t charge much, others can be quite expensive. Look into your options and compare these charges, then consider why charges can be higher for some platforms in relation to others.
How many cryptocurrencies are exchanged on the platform?
Not all cryptocurrency exchanges hold all cryptocurrencies and tokens. Some enable transactions for a handful of currencies only, whereas others might hold metaverse tokens and wide selections of altcoins. Relate this to your investment strategies and goals and act accordingly.
Do you want to start trading with other assets such as stocks or is it only limited to crypto digital assets?
Are you planning or do you foresee yourself investing in cryptocurrencies alone or do you expect to expand your portfolio with stocks as well? There are exchanges that allow for this kind of flexibility, whereas others are devoted solely to either. So make sure to outline your goals and take action accordingly.
Exchange currency need
Exchanges require that you trade with specific currencies such as Euro or USD dollar, while some allow for a multitude of currencies.
Check if the exchange operates in your country
It can happen that an exchange doesn’t operate in your country and you realize this only after you’ve gone through most of the verification process, like yours truly over here. So make sure you read everything there is about whether you are able to use the exchange in your resident country.
3- The Legislations
So after I’ve gone through the process of creating an account and was getting excited about doing my first online trading/investment transaction, I was hit by a rejection message from my bank. Reason: my bank isn’t allowed to allow any transfer of funds if the transaction is involved with cryptocurrencies, and this is by order from the Central Bank. Moral of the story: know where your resident country, or country with your bank account, stands in regards to cryptocurrencies.
While many countries embrace cryptocurrencies like El Salvadore, others are fighting the change and making it hard or illegal to get involved with cryptocurrencies. Also, because cryptocurrencies are still in their infancy, many legislations are materializing parallel to the growth of the market. While some countries have no legislation relating to these digital assets taxes, others require their citizens to account for them and pay taxes on these assets. No government jokes around with taxes, so know your obligations and rights well before you buy crypto.
This blog can be the best thing you’ve read so far about setting up the foundations for your cryptocurrency journey, but it wouldn’t amount to anything if you don’t give it an actual try and take action. So give it a try and let me know how it’s going so far either by commenting below, emailing me at firstname.lastname@example.org, or connecting with the FLAN community on discord. Stay updated for more on LinkedIn, Facebook, or Instagram!