So, you’ve found yourself in the world of crypto! Welcome. In this post, I’ll show and teach you the basics to get you setup and ready to dive in to the worlds “universial currency”!
So what is cryptocurrency?
If you’re picturing the jingling coins in your pocket, you can let that go. Technically cryptocurrency is not made of anything; it only exists digitally and there are no physical coins or notes. (Except for fun keepsakes that crypto fans have made along the way).
The ‘crypto’ part of the name comes from ‘cryptography’, which is a way of making information secret and serves as the backbone to all cryptocurrencies.
How do i obtain a cryptocurrency?
Well for starters, there are thousands of crypto ‘coins’ and chosing the right one can be hard! You can obtain cryptocurrencies on exchanges such as Binance, Kracken, Coinbase. These exchanges wont have ALL crypto coins, but they will have more than you know what to do with.
Exchanges work like a middle man. Exchanges have large amounts of crypto coins that anyone can buy using real money [ like buying something from Amazon]. So when you want to buy a currency, the exchange will take your money and ‘exchange’ it for the coin you chosen at a 1:1 price [before fee’s] ; so if you went onto binance and spent £200 on buying bitcoin, you would be given £200 worth of Bitcoin before fees. These fee’s are like a payment you give to all the miners of the blockchain for that crypto – when you buy that Bitcoin, it still has to be confirmed by the miners which costs a small fee. Fee’s are high and low for certain coins. Older coins like ETH and BTC have quite high fee’s, whereas newer coins such as Dash and ADA have lower fees. This can be down to many reasons but the main point is different coins have different fee’s, and these fees often reflect the coins use.
Where does my cryptocurrency get stored?
So when you go onto an exchange and buy crypto, the crypto is ‘assigned’ to your name on their wallet. These wallets contain hundreds of millions of dollars worth of coins – so think of it as fencing off your crypto from the rest of the batch. Any crypto expert will tell you to get your crypto out of an exchange ASAP, and its true. Exchanges can be much more easily hacked when compared to private wallets, and your funds may get stolen – you also dont have access to the private key or ‘backup phrase’ to recover the wallet. This means that your crypto technically isn’t yours. We often use dedicated wallets to store our crypto – these wallets are fully ours [in most cases] and are the safest option for storing crypto. If your crypto gets stolen, there is no getting it back. There are no laws or anything to protect you should it happen.
So what are the types of wallets?
Wallets are broken down into different catagories. Each catagory has its own pro’s and con’s – which we will go over.
Exchanges allow you to trade, exchange, convert, payout and store your assets. While Exchanges are often more secure than web wallets, they can still be problematic in case of a problem. Exchanges include: Binance, Kracken, Coinbase ext.
- Easy to add and sell crypto
- Lowers the fee’s because you dont need to send it from another wallet to the exchange
- Easy to exchange, convert and monitor your crypto
- Exchanges usually have P/L’s and other features built in to help you manage your assets.
- You don’t have access to the wallets private key.
- If the exchange goes under maintence, you can’t do anything with your assets until they are back online
- If the exchange gets hacked or exploited, you could loose your crypto.
- Anyone who gets access to your account gets access to your crypto
Web wallets are web-based apps that holds your cryptocurrency for you. Functionality of web-based wallets vary although they are typically the most user friendly.
- Easy to manage your assets
- Access the assets anywhere with an internet connection
- Easily send and recieve crypto – some allow you to exchange too!
- You often dont have full access to the wallet.
- Anyone with access to your accounts has full access to your crypto.
- If the web wallet gets hacked, your private key could be stolen.
- If the site goes down, you can’t access your crypto.
Software wallets are the best all-round option for most people – it is also the most common wallet. Software wallets are apps that rest locally on your computer – you have full access to it at all times as long as you have access to the computer. You also have access to the private key and/or backup phrase to recover your wallet should anything happen to the computer it is stored on.
- Easy to manage multiple assets from one device
- You have full access to the wallet – even its private key
- You don’t need an internet connection to see your assets – you only need an internet connection to sync your wallet with the blockchain
- They often have amazing UI’s and features built in, such as staking, P/L, portfolios ext
- If you loose access to the PC and dont have the recovery methods or private key, your funds can be lost
- Some malware can steal funds from your wallet if they are on the same computer
- Anyone with access to the computer and password can have full access of the wallet.
Hardware wallets are what they sound like; they’re wallets that are stored on hardware. They are a dedicated hard-drive or piece of equipment (like a Ledger or Trezor) that stores your currency offline. This is the safest option for any crypto and can often be refered to as ‘cold storage’.
- The safest way to store crypto
- You have full access to the wallet and its contents
- The best way to store crypto while it is not going to be used for a while
- Not very pratical for frequent use
- If the hardware gets damaged/ fails to work and you don’t have the private key/recovery method, then you can loose your assets [data recovery is an option for HDD’s depending on the damage]
How do I move my crypto into my wallet?
Once you’ve chosen what wallet you want, its time to send the crypto to the wallet. I’m going to show you how using Exodus [ The best software wallet imo ]!
So lets say i went and got some DASH and it’s now sitting in my exchange wallet, or another wallet. First off, you need to get your ‘receive address’ of the wallet you want to store it in:
Once the crypto is sent, you should recieve a ‘TXID’. This is what we use to identify the transaction on the blockchain.
Now your crypto has moved into your wallet – you can either send it to another wallet/ exchange, hold it, exchange it for other coins ext. The wallet used above is called Exodus and I will do a full, in-depth insight into it in the future.
I hope this little guide helps you, throw any questions or suggestions in the comments below this and other people can help you 🙂