By Jim Duffy
March 1, 2021
Are you new to the crypto space? Then congratulations on overcoming the Fear of Getting In [FOGI] and the Fear of Missing Out [FOMO]
Now that you have crossed the cognitive (crypto) Rubicon, it’s time to deal with some pragmatics. And that’s where we can help.
There are two things you need to get started — a crypto wallet and a crypto exchange.
First, let’s discuss the latter: Cryptocurrency exchanges are multiplying at a rapid rate. As the digital asset space grows and scales, more and more access points are needed to allow amateur and professional investors to get their money into the market. So think of a crypto exchange as an on-ramp. — a place where you can deposit your Dollars, Pounds, Euros and Yen and then buy crypto. Navigating this world is not easy, but with a little thought and patience, it becomes second nature.
First up, when you choose an exchange it has to be secure. In effect, all cryptocurrency exchanges live or die by their security arrangements. So, while it is a factor, I wouldn’t get too worried about it at first.
The big exchanges like Coinbase, Binance, Kraken and Kucoin have had a decade to sort out security and have full teams working day and night to ensure that all your data, transactions and cash are safe within their vaults. Let me give you an example:
Kraken is one of the top exchanges globally and it’s while not as easy as Coinbase to use, it has terrific security features built into it. When you sign up, it requires you to provide a government issued identification document. Then there’s the usual security password and username dance. All of this is fairly standard these days as exchanges have to comply with “Know Your Customer” [KYC] and Anti Money Laundering [AML] regulations.
In fact, in my experience it is easier to open a digital bank account than it is to open an exchange account, as the checks are more rigorous which is a good thing. But, security with the likes of Kraken doesn’t simply end there. Having opened your Kraken account, you can set up passwords for funding and trading on your account. They also allow you to set a master password in the event something goes wrong.
Having signed up for an exchange, you can transfer cash from your bank or debit card into your account.
These steps make buying and selling your cryptocurrency even more secure. Many of the exchanges are set up this way including an exchange called gate.io which has a reputation for being super secure. In order to log into this exchange, you will need the code they send to your email, the code they send to your mobile phone and the Google Authenticator App code generated – all at the same time. While this probably feels rather onerous, it’s an indication that accessing your account would be super difficult for any malicious hacker or thief.
As technology advances, security will become easier to deal with. In fact, Coinbase, once you have set up your account, simply uses a passcode or your biometric fingerprint.
But, here is my prediction — I believe that within the next 12-24 months, your smartphone will give you the ability to scan your retina. This accompanied by the use of your fingerprint will allow you to unlock your exchange account.believe me, the technology is there – it just needs to be implemented.
I’m genuinely excited about all of this as it will make life so much easier. I do, however, have to admit that I’ve lost a few passwords in my time.
In terms of what crypto to buy, that’s your choice. Bitcoin is now being classed as an institutional asset recognised by big corporations and banks as just that – an asset. Recently the oldest trust bank in the U.S., BNY Mellon, announced that it will treat Bitcoin like gold or equities allowing customers to set up a custody account for it. This is a massive endorsement of Bitcoin. But, there are other cryptos you may prefer. Just keep in mind the importance of doing your homework before making the leap.
Having bought some cryptocurrency, your next step is to move it into a wallet. The good news here is that many exchanges provide wallets free of charge. Think of this as akin to storing cash in a wallet or purse in your pocket or handbag. In other words, instead of having cash in your leather wallet, you now have cryptocurrency in a digital wallet.
In essence, using a wallet like Coinbase, Zumo or Exodus means your cash is off the exchange and deposited in your own specific account and identifiable storage place. Think of it this way — when selling or buying a house, sometimes there is a timing overlap and you have to put furniture in storage lockers and locks. These are physical spaces provided by companies such as U-haul or Cubesmart to provide a space where you can take your stuff and lock it up. You have the keys to the padlock and your stuff is secure in that locker.
This is exactly how a cryptocurrency wallet operates. Your wallet will have an address and anyone you provide your address to can deposit cryptocurrency in it. But they cannot access or take your cash out as you have the keys – your login and password — which you set up when you created your wallet. Your crypto can sit in this wallet for months and years, just as the sofa can sit in the storage lockup. And wallets are generally free of charge.
What’s cool is that innovation in this space is just beginning.
The time will come when big exchanges like Gemini and smaller operations like Zumo, will not just offer you the opportunity to buy crypto and store it securely on your wallet but will provide debit cards and payment systems where you can pay for goods and services. You’ll also be able to schedule payments at some point.
All of this is happening so quickly and that’s why Visa and Mastercard are entering cryptocurrency big time! It also reinforces for me, that while there is much negativity in the media regarding cryptocurrency, big global companies including PayPal are building new 21st Century payment systems for crypto, further building its repute.
So, there you go…. Buy and sell your crypto on an exchange, store it in your wallet and soon do all your banking from here.
Our world is changing. So have you made the jump?