Investing in the Crypto Currency market space can be a little scary for the traditional investor, because investing directly in Crypto Currency (CC) requires using new tools and adopting some new rules. concept. So if you decide to dip your toes into this market, you want to have a very good idea of what to do and what to expect.
Buying and selling CC’s requires you to choose an Exchange that deals in the products you want to buy and sell, whether they are Bitcoin, Litecoin, or any of the over 1300 other tokens in play. In previous editions we briefly described the products and services available on some exchanges, to give you an idea of the different offerings. There are many Exchanges to choose from and they all do things in their own way. Find things that are important to you, for example:
– Deposit policies, methods, and costs for each method
– Withdrawal policies and costs
– What fiat currencies do they deal with for deposits and withdrawals
– Products they sell, such as crypto coins, gold, silver and more
– Costs for transactions
– where is this Exchange based? (USA / UK / South Korea / Japan…)
Be prepared for the Exchange setup process to be detailed and lengthy, as Exchanges generally want to know about you. This is similar to setting up a new bank account, because Exchanges are sellers of valuables, and they want to make sure that you are who you say you are, and that you are a reliable person to deal with. It seems that “trust” is gained over time, as Exchanges usually only allow small amounts of investment to start.
Your Exchange will keep your CC in storage for you. Many offer “cold storage” which means your coins are stored “offline” until you indicate you want to do something with them. There are several stories of Exchanges being hacked, and many coins being stolen. Think of your coins as being in something like an Exchange bank account, but remember that your coins are digital only, and that all transactions on the blockchain are irreversible. Unlike your bank, these Exchanges do not have deposit insurance, so remember that hackers are always out there trying everything they can to get your Crypto Coins and steal them. Exchanges generally offer password-protected accounts, and many offer 2-factor authentication schemes – something to seriously consider to protect your account from hackers.
Since hackers love to prey on Exchanges and your account, we always recommend that you use a digital wallet for your coins. It’s easy to transfer coins between your Exchange account and your wallet. Make sure to choose a wallet that handles all the coins you want to buy and sell. Your wallet is also the tool you use to “spend” your coins to merchants who accept CC’s for payment. The two types of wallets are “hot” and “cold”. Hot wallets are very easy to use but they leave your coins exposed on the internet, but only on your computer, not on the Exchange server. Cold wallets use offline storage mediums, such as special hardware memory sticks and simple hard copy printouts. Using a cold wallet makes transactions more complicated, but it is the most secure.
Your wallet contains the “private” key that authorizes all the transactions you want to initiate. You also have a “public” key shared across the network so that all users can identify your account when engaging in a transaction with you. If hackers get your private key, they can move your coins anywhere they want, and it’s irreversible.
Despite all the challenges and wild volatility, we are confident that the underlying blockchain technology is a game changer, and will change how transactions are made going forward.