When Buying Crypto, Make Sure You're Actually Buying Crypto

By R23 | Supportive Crypto Community | 29 Apr 2022



A Misunderstanding

One thing that seems to go right over a lot of people's heads (especially those new to the game) is that if you don't own the keys to your wallet, you actually don't own any cryptocurrency.

One of the things that bothers me the most is when someone will come up to me and say that they bought Bitcoin. I will be really happy to hear that this person is exploring the cryptocurrency ecosystem and I'll usually ask where they decided to buy it. So often... and I mean really often, I'll hear "Oh I got it on Robinhood because there's no fees for purchasing there".

When I hear this, I have to explain to them what they actually purchased, and it is actually a bit more difficult than I would like it to be to clear up.

What Are You Getting On Robinhood?

When you purchase cryptocurrency on Robinhood, there is a reason why there are no transaction or network fees: You are not actually getting any cryptocurrency from the transaction.

You are purchasing what is essentially a promissory note for that amount of cryptocurrency, but only payable in US Dollars. What this means is that you don't own any Bitcoin, but you rather own a few pixels on an interface that shows the equivalent dollar value to the amount of Bitcoin you theoretically purchased.

If there are any government mandates on cryptocurrency or banking in general, Robinhood reserves the right to freeze those funds just as if they were dollars in a checking account.

I will concede that Robinhood has been floating the idea of adding a deposit/withdrawal function and trying to gain the utility of a cryptocurrency exchange, but no changes have been made as of now.

If you do not have the ability to send cryptocurrency to a wallet that you control the keys to, you don't actually own anything. Sure, if you are a speculative investor just looking to get some exposure to the price of cryptocurrency without caring about actually holding the token, Robinhood is a fine solution for you. I personally feel it is too risky to keep money on an exchange of any kind, and when noting Robinhood's past (Gamestop, Amc) freezes of account assets, I wouldn't trust them with a single dime of my crypto.

The Same Goes For Exchanges

It's the same idea on an exchange like Coinbase or Binance although they have an option for you to take agency and withdraw funds to a wallet.

I prefer to keep my crypto on personal wallets (a mixture of hardware and software) in order to have the peace of mind that these assets are in my possession and safe from regulatory extremes if they ever came to be.

It is easy to say that someone with this kind of thinking is being dramatic or cynical about the government of their nation, but after seeing how easily Trudeau froze the assets of Canadian citizens (people who are living in one of the most powerful and "free" nations in the world), it is not worth taking any risks in my book.

Personal agency is the name of the game. Know what you are purchasing before you get yourself invested and make sure you take the proper steps to insure that your funds are in your possession and your possession only.

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My name is Rob and I am a prospective law student with interests in cryptocurrency and blockchain. I have enjoyed my time thus far engaging with Web 3.0 and am looking to continue learning more and sharing what I learn through my experience

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