July 13, 2022
Getting Started With Cryptocurrency: A Beginner’s Guide to Investing
Why Decentralized Money Works
What is blockchain? We’ve answered that question, but if you haven’t checked out the article, now is your chance to do so! Now on to what this article is really about, that little thing that has been making quite a splash. What is cryptocurrency? According to Forbes, cryptocurrency is decentralized digital money that’s based on blockchain technology. And what does it mean for money to be decentralized? It means that instead of your money being controlled by one institution or entity, that responsibility is split up amongst thousands and thousands of computers. Decentralization is good, AWS claims, because it provides a trustless environment, improves data reconciliation, reduces points of weakness, and optimizes resource distribution.
The Steps You Need to Take
We know why it works, but how does it work? Follow along for a short guide on how to get started with cryptocurrency.
Choose a Crypto Broker or a Crypto ExchangeA broker and an exchange are two very different things. In the first instance, you are trusting a professional entity to invest in different cryptocurrencies for you, while in the second you are doing it yourself.A cryptocurrency broker is similar to a stock broker. When dealing with a crypto broker you work with someone that knows what they are doing already. This will be someone who facilitates the buying and selling of your crypto and is aware of when to do so. This will likely be a bit pricier, but if you are inexperienced and have the funds, it is likely worth it until you learn more.If you go directly to a cryptocurrency exchange yourself, it is much like trading stocks yourself. There may be a confusing user interface you have to navigate, but familiarity comes with time. Taking on a crypto exchange yourself will require a bit of research. Not only will you want to figure out where you are the most comfortable doing your buying and selling, but you will want to do some research into what is best for you to buy and sell also.In both instances there are pros and cons. When going with a broker you are coughing up more money but you get the trade off of working with someone with plenty of experience. On the other hand, you can save tons of money and learn the game of crypto trading yourself. In either scenario, it is essential to figure out whether or not the entity takes cash or not. After all, you are just starting out, so it’s unlikely that you already have cryptocurrency to pay with.
Create an Account and Verify itIn order to buy and sell crypto, you will need to hold an account, whether with your broker or on the crypto exchange of your choice, in which you will deposit money to be invested. Just like any account, you will be walked through the steps to set up said account, but this particular account requires that you verify it. Think of it this way, you wouldn’t just open a bank account without verifying your identity first. This is the same idea.
Deposit Your Investment MoneyIn order to get started, you’re going to need some funds available. After all, you will need something to buy your cryptocurrency with. Typically you can attach your account to a debit card, credit card, bank account, or you can wire money.
Place Your OrderAfter doing a nice amount of research or having your broker do it, it’s time to invest! Even though a broker should know the ins and outs of what the best investments will be, it doesn’t hurt to do your own research to stay informed. Once you have done some digging and feel confident in your decision, it’s time to buy some crypto. Once you’ve bought you can also sell, but you need to have cryptocurrency to do that in the first place.
How Will You Store Your Cryptocurrency?
You’re investing hard earned money into this new venture and the last thing you want is to see your hard work go to waste. Just as there are hackers that can break into your other online accounts, the same can happen here. It’s important to keep your information and assets safe, but you need to know your options. You are going to store your crypto in a wallet, similar to how you would keep your cash, debit card, or credit cards – only this is different. There are different kinds of wallets to choose from and they all have varying levels of security. Let’s go over the options:
An Online Wallet or a “Hot” Wallet
An Online Wallet or a “Hot” WalletThese are wallets that are stored on devices that are connected to the internet such as phones, tablets, computers, etc. Hot wallets are very convenient when it comes to accessing your crypto easily, but that ease of use comes with a price: security. When things are so accessible to you, they become more accessible to others as well.
Cold WalletCold wallets are more secure due to the fact that they are not connected to the internet. You can either store your private key on a piece of paper (known as a paper wallet) or on some sort of hardware (known as a hard wallet), such as a USB.
Hopefully, this article has been informative enough to demystify the big scary monster that is cryptocurrency. With this newfound knowledge, you are just about set to begin your journey, after a bit of research, that is.