In my last article I answered some of the questions I often hear from family or friends who want to buy Bitcoin for the first time. I also recommended what I think is the easiest way to get started, Coinbase.
Today let’s have a look at two of the most popular follow-up questions I receive, usually in the minutes immediately after the Bitcoin purchase goes through.
How can I buy some other coins?
While Bitcoin is by far the most well-known and desired cryptocurrency, there are many other coins, known as Altcoins, out there these days. Just look at CoinMarketCap and you will see there are 1651 different cryptocurrencies currently being traded — likely even more by the time you read this.
Some of these promise to be big players in the emerging blockchain industry, and it may make sense to purchase some Ethereum or NEO, Steem or Stellar, Litecoin or Loopring. We’ll definitely examine the pros and cons of these different coins in future articles. Some of them, in my opinion, are just as exciting as Bitcoin itself. So how can you buy some?
The quick answer? Exchanges. Some of the gateways might give you the option to buy 3 or 4 different coins, but some exchanges offer dozens or even hundreds. The number of cryptocurrency exchanges is increasing by the month. Each one offers different coins for trade.
My personal favorite by far is Binance. Its interface is simple and easy to use. It’s never been hacked (like several other exchanges have been). It offers an incredibly wide variety of coins. And its fee structure is more generous than any other exchange I’ve used (the standard fee is 0.1% of the trade value — but this can be reduced by half to 0.05% if you buy some of the exchange’s own cryptocurrency, BNB, and elect to use it to pay your fees). You can sign up for Binance here: https://www.binance.com/?ref=10023871
Other popular exchanges include Bittrex, HitBTC and Cryptopia, To use these exchanges, you’ll first need to make a deposit. As discussed above, most exchanges that offer a wide variety of coins don’t accept fiat deposits, so instead you’ll need to transfer the BTC (or ETH/LTC/etc.) that you already purchased to the exchange, and then use it to trade for other coins.
An upcoming article will have more details on this process.
Where do I store my Bitcoin? What’s a “wallet”?
After your Bitcoin purchase, the website you purchased them from will show you a balance. You can keep them there, on the website, or transfer them at will.
Most people recommend not keeping your coins on a website or exchange, because this is similar to keeping your money in the bank — while it is “your” money, what happens if the bank shuts down? Or closes your account? Or loses track of its records? There’s no transparency, no way for you to directly access the database, so if there’s a problem it could cost you dearly.
Bitcoin wallets are the electronic equivalent of keeping cash in your pocket (or under your mattress). The money is yours, and no one can touch it without your permission. Most people who are interested in cryptocurrencies see enormous value here. If you’ve ever had your account frozen by a bank, or had PayPal lock your funds, you’ll understand why. It takes the power to control your money away from centralized authorities like banks, and gives it directly to you.
The term ‘wallet’ is actually a bit of a misnomer for how the process works. You may have heard stories of people who lost an old computer hard drive, “with all of their Bitcoins on it.” That’s not actually true. Your Bitcoins themselves are never on your hard drive. They’re on the decentralized Bitcoin network, with thousands and thousands of copies existing all over the world, impossible to delete.
What you’re actually keeping in your wallet is the private key that is used to access (spend/transfer) your coins. Without this, while the coins are still technically “yours,” they do you no good. Just like you can’t go shopping at the grocery store with just a print out of your bank statement, you can’t spend your Bitcoin without your private key.
So when you move your coins out of an exchange, you’ll want to choose a good wallet, and make sure to follow security and backup instructions. Most wallets let you use a password to login, and keep a copy of your key encrypted. But you should also be able to access the key through the wallet in order to keep a backup copy save for yourself.
There’s no one-size-fits-all perfect wallet, but I usually recommend Exodus. It’s easy to use, has a beautiful interface, and supports many different coins (not only Bitcoin). When you set it up and create your wallet, make sure you follow the on-screen instructions and create backup copies of the data it gives you — preferably even writing down your private key or seed phrase on a piece of paper that you’ll keep somewhere secure… like under your mattress!
One of the challenges of getting involved in the world of cryptocurrency is how many new concepts you need to learn about. In my opinion, this is also what makes it so interesting. Every day you can read more about new developments, technology, ideas and possibilities in the crypto universe.
Check back soon for more articles further explaining some of the concepts you’ll want to learn about in order to get involved in crypto investing and trading.