“Bitcoin will do to banks what email did to the postal industry”
– Rick Falkvinge, Founder of the Swedish pirate party
Regardless of your view of cryptocurrency, if you want to understand blockchain you have to understand crypto. And to understand crypto, you have to own some. The good news – you can learn all you need for no more than $40.
You need to buy Crypto so that you can understand the fun part about it, and the pain of using it. You will understand the costs and the benefits. And you will see why you don’t want to use Bitcoin to buy your cup of coffee quite yet!
Here is a simple approach to getting started:
Keep it simple.
First, buy some crypto. Since it is the granddaddy of them all, start with Bitcoin. The easiest way to do this is to create a Coinbase account. You will have to link a bank account and/or a credit card in order to do this. Coinbase gives you the opportunity to buy the big 3 coins: Bitcoin, Ethereum, or Litecoin. Each coin has a different purpose. Bitcoin is the original and the most widely discussed. Think of it as digital gold. Litecoin is like Bitcoin, but much faster. Ethereum is a bit different, and is used to power the very powerful Ethereum network, which enables a lot of business processes through smart contracts.
If you buy your Bitcoin with your bank account, the good news is, you won’t have to pay a transaction fee to your credit card company. The bad news – it takes a shocking 8 days for the coin to appear in your Coinbase account. You lock in the price at the moment you buy it but you can’t touch your coin until it shows up in Coinbase. If you use your credit card though you get the coin immediately. As I have the patience of Dug from Up, I bought through my credit card. A big spender I am not – as I was only spending $20, my transaction fees were minimal.
Now that you have your coins, try to move them around. The easiest way to do this is to create an account on GDAX.com. GDAX is owned by Coinbase so it is easy to move the coins between them. GDAX is a trading platform. It has lots of pretty charts and graphs. You will choose how much of this you want to understand. At a minimum though, try to move your coins from Coinbase into GDAX, and then move your coins from one type to another. There is a minimal transaction fee for this.
All that is pretty easy. Now let’s get more involved. Your next mission is to buy a coin that is not one of the big 3. There are lots of reasons you would want to do this. There are some very useful coins to understand such as Monero, Zcash, and Ripple. This gets complicated and after going through this you will see how far purchasing cryptos has to go. First thing you have to do is decide which crypto you want. Let’s say you want to buy Ripple. Then you have to figure out where to buy it. I use Bittrex though by no means am I recommending it. More just, admitting to use it. Bittrex is really confusing to learn how to use. Just take your time, watch a few youtube videos, and read the support guide. You can’t buy coins with dollars in Bittrex. Instead you have to fund Bittrex with Bitcoin and that is why you want to try this out. It requires you to send Bitcoin from one location to another. Just use a very small amount and don’t worry about the transaction fee – you are doing this to learn, and not to make money. To get this to work you have to copy the address of your Bittrex Bitcoin wallet, and then from Coinbase, send the bitcoin to the right wallet. Please note, if you send Bitcoin to an Ethereum wallet, you could lose your Bitcoin forever! Clerical errors are on you – there is no ‘bank’ to come in and help you. The pros and cons of decentralization.
At this point you have funded an account from your bank or credit card, moved it to a trading platform, and then send coin to an exchange where you purchased another coin. Now your coins are all over the place. The final step here is to get your coins off the internet and into a hardware wallet. If you read anything about cryptos you have learned that cryptos are secure, but there is no security if you store them on the internet. Crypto wallets get hacked all the time. Even though at this point you likely have lost most of your investment in transaction fees, it is worth understanding how hardware wallets work. This means you store the codes for your investment on something similar to a USB drive. This drive though is secure and protected. Once you get your coins onto the wallet you will be given a key of random words that you will use to recover your coins. It is that key that you need to protect, even more than the wallet. Print out multiple copies. Store one in your safety deposit box. Hide the rest wherever you hide your valuables. As long as only you have those codes your investment will be secure.
Backup to a wallet and then restore your coins. Once you have done this, you are no longer a Crypto Beginner.
This will show you the power and the challenge of crypto. The most daunting thing for me was finding out that for better or worse, I was responsible for the security of my money. You need to stay organized and secure. If you do this you have the benefits of the digital money and an ability to send money anywhere for relatively low fees. And that understanding will be very important to understanding how blockchains work, especially as you look carefully at how the process works.
Final word – caveat emptor. I am not recommending any of these services so do your research. And be careful, staring with an amount of money you don’t care about losing.