Investing in the cryptocurrency market space can be a bit daunting for traditional investors, as investing directly in cryptocurrency (CC) requires using new tools and adopting some new ideas. So if you decide to dip your toes in this market, you need to have a very good idea of what you will do and what to expect.
To buy and sell CC you need to choose an exchange that sells the products you want to buy, be it Bitcoin, Lightcoin, or any of the more than 1300 other tokens. In previous editions we have briefly described the products and services available on a few exchanges, to give you an idea of the different offers. There are many exchanges to choose from and they all work in their own way. Find things that are important to you, for example:
– Deposit policy, procedure, and cost of each procedure
– Withdrawal policy and costs
– They trade in any Fiat currency for deposit and withdrawal
– The products they trade in, such as crypto coins, gold, silver, etc.
– Costs for transactions
– Where is this exchange based? (United States / United Kingdom / South Korea / Japan …)
Be prepared for the exchange setup process to be detailed and lengthy, as exchanges usually want to know a lot about you. This is similar to setting up a new bank account, because exchanges are brokers of valuables, and they want to make sure that you are who you say you are, and that you are a trustworthy person to deal with. The “trust” seems to have been acquired over time, as exchanges usually allow small investments to be made.
Your exchange will keep your CC in storage for you. Many offer “cold storage” which simply means that your coins will be kept “offline” until you indicate that you want to do something with them. There have been several reports of exchanges being hacked and many coins being stolen. Think about having your coins in exchange for something like a bank account, but remember that your coins are only digital, and all blockchain transactions are immutable. Unlike your bank, these exchanges do not have deposit insurance, so be aware that hackers are always trying to get your crypto coins and steal them. Exchanges typically offer password protected accounts and many other 2-factor authentication schemes – something to seriously consider in order to protect your account from hackers.
Given that hackers prefer to exchange and prey on your account, we always recommend that you use a digital wallet for your coins. Moving coins between your exchange account and your wallet is relatively easy. Be sure to choose a wallet that handles all the currencies you want to buy and sell. Your wallet is the device you use to “spend” your coins with merchants who accept CCs for payment. The two types of wallets are “hot” and “cold”. Hot wallets are easy to use but keep your coins in touch with the Internet, but only on your computer, not the Exchange server. Cold Wallet uses offline storage media, such as special hardware memory sticks and general hard copy printouts. Using cold wallets makes transactions more complicated, but they are the safest.
You have a “personal” key in your wallet that allows you to initiate all transactions You have a “public” key that is shared on the network so that all users can identify your account while you are involved in the transaction. When hackers get your private key, they can move your coins wherever they want and this is irreversible.
Despite all the challenges and wild instability, we are confident that the underlying blockchain technology is a game changer, and will revolutionize the way transactions are handled.