At BITRUST we regularly receive questions from the enthusiastic newcomers into crypto world about how the actual cryptocurrency and tokens purchase process happens. While we are a business and definitely do not intend to advise on any crypto investment decision here, we have learned a thing or two about exchanges, wallets, security and other issues and would like to share them here for everyone’s benefit.
Congrats, it happened — you have decided to join crypto community and you are a believer that blockchain technology is going to save the world. Well, almost all the team members at BITRUST were early adopters of the whole idea and had to face some storms making our first steps trying to make sense of bitcoin, altcoin and token buying. So, why don’t we recap those steps and answer to some of your most frequent questions?
The choice is yours — you can trade altcoins, invest in them or tokens, you can use cryptocurrency for transactions where it is accepted, or you can even try to mine coins, if this is something you’d like to try. Anyhow, just to see how dealing with altcoins and tokens work, you will need a wallet.
Waa… what?!
A digital cryptocurrency wallet is basically a software — a collection of private and public keys. This software knows how to interact with blockchain and enables you to receive and send altcoins or tokens and show you the actual balance.
So, this set of public and private keys is extremely important. If anyone will get access to that set of keys, and especially a private key, they will have access to everything which is stored in that wallet. Choosing a way to store your cryptocurrency or tokens will be basically be defined by a level of security of your keys.
When choosing a wallet, pay attention whether your wallet service use a centralized server/ a few distributed servers (considered to be less secure as you are dependent on these servers to be functional to interact with the network) or the connection to the network is taken care of by the client using simple payment verification (SPV) technology, communicating in a lightweight fashion with the network. In any case, don’t forget to back up your wallets from time to time and use maximum secure passwords.
And what about eeh… exchanges?!
Cryptocurrency exchange is an online marketplace, where you can buy or sell your cryptocurrencies against other altcoins, tokens or fiat currency. You can think of it like of a traditional currency exchange only for crypto assets. As a beginner you will need such an exchange (or better several) to be able to manage your altcoins and tokens, so start with a research.
Some of such exchanges (like Coinbase or Gemini, for example) do have an insurance and are quite heavily regulated. So, it is important that you understand if it is a case with an exchange you will decide to work with. And it goes quite intuitively easy from there — you link your bank card to your account and start buying, selling. Whenever you decide to extract your fiat assets, you can do that linking your PayPal or bank account to the service.
By the way, you can store all your crypto assets in a cryptocurrency exchange wallet too.
So, what is a better way to store the altcoins then?
Well, it is a question with many answers. It is mostly a tradeoff between convenience and security that you have to decide about. None will be able to give you a definite advice, so just consider these options:
- Exchanges — are considered to be least secure due to a simple fact of you not having access to your private keys. Add to that a wallet functionality itself being at a very basic level. So, whenever there is a hacker attack on an exchange, or your particular wallet is being targeted by an impostor, or a service just goes offline for any reason, you’re not in possession of your assets.
One might think it is extremely convenient to store your altcoins with a service you can buy or sell your cryptocurrency through. And it’s true, you can change between currencies or switch to a fiat currency in an instant. However, we have been there, done that and learnt our lesson a hard way years ago — so, we do not advice storing all your crypto assets there if you are serious about their safety.
- Wallets, which give you access to your private key and use of cryptography for information protection. We ourselves try choosing wallets using SPV technology (you will have to download headers of the blockchain for that to your desktop), as they are considered to be more functional and secure, as they cannot go offline during a transaction overload periods.
- A hardware wallet, which basically looks like a simple USB. It stores all of your private and public keys and everything related to your wallet and interacts with the network through your computer. But nothing is stored on your computer, as all the cryptographic work and signing of transactions happen on that USB itself, which is a good thing. It’s very safe and the data is not lost even if your computer is stolen or you lose your phone if you decide to trade cryptocurrencies using your mobile. Well, you will have to be really careful about not loosing that USB stick though!
- Heavy-weight wallets working with the complete blockchain download — a complete history of transactions of bitcoin (BitcoinCore) or ethereum (Ethereum Mist), for example. Those are gigabytes huge and tend to be super inconvenient for a regular user as you have to sync and verify those networks regularly. However, a big plus is that you’re interacting with a network directly and there is no one in between to make a transaction less secure.
Owning such a heavy-weight wallet also is a way for anyone to contribute to the whole crypto community though. As with your computer or server, where you store the whole history of all the records in the network you make blockchain more distributed and more secure. So, if you feel particularly geeky and want to embrace the whole blockchain philosophy, just go for it making sure you have that storage and CPU capacity.
– And last but not least — a paper wallet or cold storage. It basically allows you to generate a set of public and private keys yourself (using a service like bitaddress.org, for example), only instead of storing them, you will be able to print them out on a good old paper or put on a USB and keep it in a safe deposit box. This, probably, is the best for long-term intended crypto assets storages.
The best idea is probably to diversify and use a combination of these wallets for different purposes and different altcoins or tokens. You might choose to use a USB wallet for tokens, if for you it is a long-term investment and an online wallet using SPV for a cryptocurrency like bitcoin, for example.
Bitcoin is so expensive, how is it even possible to buy it?
Well, bitcoin is in its fabulous downfall stage at the moment, but if you still want to experiment with it, don’t worry, you can buy just a small share of it.
Is there a way to hedge my risks while trading altcoins?
Well, we have expanded quite a bit on this topic before, however in short — this is exactly what we’re working on at the moment! It’s been for some time now that we’ve seen that the market is craving for a service enabling to hedge risks while trading cryptocurrencies. And this is how we came up with an idea for BITRUST platform. Follow the news and join BITRUST movement!
To finance the development and launch of the BITRUST platform, a limited-supply sale of BITRUST tokens (BTFs) will be created by BTF Project Limited. The sale will start on 5th of March 2018 — see more information about the BITRUST ICO structure and the company here.
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