Investing in the cryptocurrency market space can be a bit daunting for a traditional investor, as investing directly in Crypto Currency (CC) requires using new tools and adopting some new concepts. So if you decide to dip your toes into this market, you will need to get a very good idea of what to do and what to expect.
Buying and selling CC requires choosing an exchange that deals in the products you want to buy and sell, whether it’s Bitcoin, Litecoin, or any of the more than 1,300 other tokens in play. In previous editions, we briefly described the products and services available on a few exchanges, to give you an idea of the different offerings. There are many exchanges to choose from and they all do things their own way. Find things that interest you, for example:
Deposit policies, methods, and costs for each method
Withdrawal policies and costs
What are the paper currencies that they deal with in deposits and withdrawals?
– The products they deal in, such as cryptocurrencies, gold, silver, etc.
Where is this exchange located? (US/UK/South Korea/Japan…)
Be prepared for the Exchange setup procedure to be detailed and lengthy, as exchanges generally want to know a lot about you. It’s akin to creating a new bank account, since exchanges are brokers for valuables, and they want to make sure you’re what you say, and that you’re a trustworthy person to deal with. It seems that “confidence” is gained over time, as exchanges usually allow small investment amounts just to start with.
Your Exchange will keep your CC in storage. Many offer “cold storage” which simply means that your coins remain “offline” until you indicate that you want to do something with them. There are quite a few news stories about exchanges being hacked and many coins stolen. Think of your coins in something like a bank account with an exchange, but remember that your coins are only digital, and all blockchain transactions are irreversible. Unlike your bank, these exchanges do not have deposit insurance, so be aware that hackers are always trying their best to get and steal your cryptocurrencies. Exchanges generally offer password-protected accounts, and many offer two-factor authorization systems – something that should be taken seriously in order to protect your account from hackers.
Since hackers love to take over exchanges and your account, we always recommend a digital wallet for your coins. It is relatively easy to transfer coins between your Exchange account and your wallet. Make sure to choose a wallet that handles all the currencies you want to buy and sell. Your wallet is also the device you use to “spend” your coins with merchants that accept CC payments. The two types of wallets are “hot” and “cold”. Hot wallets are very easy to use but leave your coins exposed online, but only on your computer, not on the Exchange server. Cold wallets use offline storage media, such as specialized hardware memory cards and simple printouts for hard copies. Using a cold wallet makes transactions more complicated, but it is the most secure.
Your wallet contains the “private” key that authorizes all transactions you want to initiate. You also have a “public” key that is shared on the network so that all users can recognize your account when they engage in a transaction with you. When hackers get your private key, they can move your coins anywhere they want, and there is no way back.
Despite all the challenges and extreme vicissitudes, we are confident that the underlying blockchain technology will be a game-changer, revolutionizing how transactions are conducted in the future.