Part 2 - Buying and Storing Crypto

Buying and storing your Bitcoin or other cryptocurrencies

Buying cryptocurrencies at the moment, is like using a video recorder in the 1980’s or using a mobile phone in the 1990’s. It’s all very confusing unless like me, you’re a bit of a tech nerd.

Like all technologies in their infancy, most people have no clue how to use them. Eventually the technology improves to the point where everyone uses whatever it is with ease. Cryptocurrencies will be the same, it’s just going to take time. Which is why I am buying now before everyone wants some when it becomes mainstream.

Even now, for most people, it is a very confusing process. When Bitcoin was first released on the world it was a nightmare, only for the tech savvy.

In those days there were no FIAT on-ramps ie a way of getting cash into a place where you could purchase cryptocurrencies. (FIAT - the overall term for traditional currencies worldwide - ‘fiat’ in Latin means ‘let it be done’ and in this sense means any money that governments deem to be legal tender).

Fortunately that part has changed dramatically. It has much improved even since I first bought Bitcoin.

However before you can get any cryptocurrency you will need somewhere to buy it from and store it securely.

There are several ways to buy cryptocurrency, some more secure than others.

In my last post I mentioned Binance which is a cryptocurrency exchange that I personally use but there are many others. https://www.binance.com/en

When you use an exchange please use 2 Factor Authentication (2FA). Download an authenticator app (Google has a good one but there are others). Having signed up to the exchange, go to Settings and choose 2FA. This will produce a QR code that you can scan to the authenticator app you have downloaded. Now when you sign into the account, not only will you have to enter a username and password but it will ask you to enter the 6 digit code from the authenticator app. The 6 digits change every 30 seconds making it impossible to guess. It's just an extra step that a hacker won't have access to, even if they have your username and password, access to the exchange will be denied.

Once you have an account, at the exchange of your choice, you can send funds directly from your bank so that you can start trading. By trading I just mean buying and selling later if you wish, not trading as in day trading where you will lose money unless you are very lucky.

When you have the funds available you will be able to see the current price of the cryptocurrency you are interested in. You simply place your order and wait for it to be filled. This means someone is willing to sell it to you at the price you selected. There are many buyers and sellers so getting the cryptocurrency you want is not difficult unless the market is particularly volatile at the time.

Once the trade is completed, you can see your funds and your cryptocurrency balance on the exchange itself. These funds are now held in the exchanges own crypto wallet. This is held digitally and the focus of many hackers. Again I remind you, if the cryptocurrency is hacked or stolen you cannot retrieve it. Binance has been hacked before but they reimbursed the losers. This is why I chose to use them. Most exchanges do not follow this policy. Be warned!

This is also a very important point. If the exchange is holding your cryptocurrency, then they have control of it, not you! It is highly recommended to move the cryptocurrency to your own secure wallet. I will discuss wallets later.

Alternatively, if you know someone who has Bitcoin or any cryptocurrency, they can send it directly to you in exchange for cash or a bank transfer. I wouldn’t recommend it unless you really trust the person sending it. Also bear in mind that Bitcoin transfers at the moment are not covered by any sort of insurance against incorrect transactions. So if that person sends it to the wrong Bitcoin address, it’s gone forever. You will need your own compatible wallet to receive the cryptocurrency being sent.

Wallets

This is where you need to be vigilant and serious about your crypto. This is also why it is so confusing for most people to understand. One way is to have a crypto wallet downloaded to your computer, tablet or phone that will accept the type of crypto you have bought. There isn't as yet a universal wallet you can download (to my knowledge but times move fast in cryptoland).

A wallet is a program, which during setup, creates 2 keys a Public key and a Private key. It also creates a set of up to 24 random words that must be remembered in the correct order. You will be asked to write them down and confirm that you have done so. This essential! Finally you will be asked to create a password which you need to store also.

The Public key. This is an alphanumeric phrase such as 1xcdf5rdft67yhgtgf65gfh787 (not real). This is the key you give to people to send you crypto. If the wallet is on your phone, most will produce a QR code that the receiver scans to get your Public key instead of having to type it out or copy and paste.

The other is a Private key, with different letters and numbers from the Public key, that lets you recover your funds should you lose access to the wallet. The Private key is used in combination with the random set of usually 24 words. To reset a wallet you will be asked to enter say word 5 word 8 word 9 and word 23. The wallet is also password protected with your own unique one that you set. This information should NEVER be stored on a computer because if anyone has access to it, then they can now remove all of your funds and you won’t get them back. Write them down and store safely.

The best alternative and the one I use is a hard wallet like Ledger Nano X or Trezor. These devices (around £100) connect by USB and use a PIN code. This type of wallet also generates the up to 24 word list as above, so that even if you lose the actual device, you can purchase a new one and recover all the data. You can see the Public keys but even you cannot access the Private key. This is crucial, as if you don’t know the Private key then no one else possibly can. You connect to your computer, send or receive the crypto and it’s stored on the device securely. It is now no longer on an exchange and you control the crypto. These devices can also stores different types of cryptocurrency. You need to install each type of wallet to the device but it's pretty straightforward and their websites guide you through the process.

The mantra here is - if they are not your keys, it’s not your crypto!

As you can see, this process is why mainstream adoption is some way away.

If my explanations are too vague please let me know but if you search for crypto wallets or buying on a crypto exchange you should find all you need.

Finally - For a long time now, scammers have fleeced people out of their crypto, promising all sorts of unlikely deals. Be vigilant and never give your Private key to anyone no matter how enticing the proposition may sound!!

The final post in this short blog will discuss use cases for cryptocurrencies, what they aim to achieve and the future for them.