HOWTO Crypto Primer - Noah Altunian
This brief primer will be your guide into getting some experience in the cryptocurrency world. It will not be exhaustive, but it will serve to get you familiar enough to feel comfortable and enabled to go learn and do more.
I was asked to give an introduction to investing in crypto (cryptocurrency) at work as a segment of our monthly meeting. This is the document that I will be providing to my colleagues to supplement the presentation, and it is open for the community at large.
Let's get started!
We will start with a bit of history.
To be frank, no one really knows who created the original cryptocurrency, Bitcoin. The facts tell us that the creator(s) used a false identity: this creator, Satoshi Nakamoto, had an email registered in Germany, typed in British English, and used time stamps for the Pacific Time Zone (the Western-most continental US timezone).
Satoshi Nakamoto released version 0.1.0 of Bitcoin on 9 January 2009. As of 1:25pm 14 February 2018, the market statistics are:
Total Market Cap: $455,896,497,820
Bitcoin Dominance: 34.7%
Total Active Currencies: 897
Statistics provided by Coinmarketcap.com via Financier (github.com/naltun/financier)
This means that Satoshi Nakamoto, in less than 10 years, was the sole catalyst for a market that is now worth almost half a billion dollars (USD). The cryptocurrency market value was resting near ~$900billion at the end of 2017.
Before you do anything, you should really understand the basics of
- what Bitcoin is, and how it works
- What cryptocurrencies are and how they are different
- what a cryptocurrency wallet is
- how to use your wallet to send/receive funds
If you go to Coindesk.com, you can find a great resource for learning all of these things (the section is Blockhain 101). Likewise, this is the premiere website for getting the latest in Cryptocurrency news.
Before you invest, you should have a familiarity with what this market is about, and how it is possible to be used as an investment. DO NOT invest what you cannot afford to lose, and DO NOT blame anyone for your investments that develop no return. Investing in cryptocurrencies is a gamble, and a very, very, very risky one. There are no guarantees that this investment will return anything. Invest wisely; in December, it was reported that an individual took out a $79k mortgage and invested in cryptocurrencies while Bitcoin was trading at ~$19k per coin. Shortly after the New Year, the market lost half of its value within days; don't put yourself in this position by investing unwisely.
First thing's first, if you do not have a wallet, then you will need to get one. Each cryptocurrency uses its own wallet; this means that if you invest in 5 separate currencies, you will be needing 5 separate wallets. In an example, if you invest in Bitcoin, then you will need a Bitcoin wallet before you can actually invest. This part is easy - continue reading to learn more.
Buying cryptocurrencies can be done in a few ways; you can:
- use a Bitcoin ATM
- trade directly with another individual
- use an exchange
Using a cryptocurrency exchange is, for me, the easiest route to take. Exchanges exist in varying forms, across many countries, so it is probably a good idea to use an exchange that is registered in your country. On these exchanges, you can buy and sell cryptocurrencies, so you can think of this like using an online stock trading platform, like TD Ameritrade and E-Trade. These exchanges allow you to connect your standard banking account to your exchange account, allowing you to add or withdraw your exchange funds.
When you use an exchange to purchase cryptocurrencies, you will be provided with a wallet; likewise, you can obtain a wallet elsewhere. Wallet types are usually presented as:
- online wallets (eg. Gatehub)
- offline wallets (eg. Ledger Nano)
- mobile wallets (eg. Coinomi)
Each type of wallet has its own merits; offline wallets are typically used for individuals looking to hold onto their coins with lower risk. Offline wallets are lower in risk because these wallets are not connected to the internet, allowing the risk of hackers stealing your funds. This does not mean that because you use an online wallet that your funds are inherently incredibly at risk, although your funds will always remain at risk of hacking if kept on an online wallet. Mobile wallets pose the same threats of being both online and on your phone. Don't worry, if your phone is stolen, your funds are not lost!
If you use an offline wallet, please make sure that you store your wallet in a very, very, VERY secure manner. If your offline wallet is stolen, then your funds are likely to be lost.
When you create a wallet, you will be prompted with a set of passwords that are your key to unlocking access to your funds. DO NOT lose these credentials! If lost, you will forever lose access to your funds.
One of the benefits of cryptocurrencies is that they put the individual in charge of their own finances; to me, this is a good thing. Likewise, this brings the responsibility of ownership of your own finances; if you mishandle or lose access to your funds, there are no backers to reimburse your losses. This fact is a must to know and understand.
There's no way to make sense of all of this unless you actually get started! After you have earned some experience, you can choose how you want to alter how you maintain your cryptocurrency investments.
My recommended 'Getting Started' wallet would be to use Coinomi, a mobile wallet. Currently Coinomi is only supported for Android, although the iOS version is currently in beta; it should be released soonish. Coinomi is special because it's free/open source software AND it is a multi-coin wallet, which means you can use Coinomi for storing multiple currencies! Thanks, Coinomi.
My recommended exchange is to use ShapeShift. ShapeShift is cool because it is a coin-to-coin exchange, which means you can't sell your cryptocurrencies, but you can exchange them for other coins. This is cool, because it allows you to easily adapt to the market and your growing investment plans by diversifying the crypto that you own. Also, ShapeShift facilitates the exchange for you, taking a small percentage of the target coin you are trading for; this is good because it means you do not have to find your own buyer!
NOTE: Due to recent regulations that demand identity disclosure of cryptocurrency buyers in the U.S., ShapeShift is not currently available to Americans. ShapeShift is, however, available from within the Coinomi wallet, so you can use it there instead of at shapeshift.io.
If you are looking to purchase cryptocurrencies online (and not trade for a coin) you can use Changelly.com. I have used them in the past a few select times. It gets the job done.
If you are looking to use a more 'traditional' exchange, then I recommend:
- Coinbase
- Kraken
- Poloniex
- Bitstamp
- Bisq (formerly Bitsquare)
NOTE: I've never used any of these exchanges. With that said, I do like Bisq because it is Free/Open Source Software, which means the source code is verifiable, and the Bisq network is peer-to-peer based. This last bit is important because it means that the exchange is moderated and maintained by the community that uses it; I'll trust a decentralized community over a closed, proprietary model any day!
Likewise, you can purchase crypto through Bitcoin ATMs. Atlanta currently has over 100. These ATMs usually allow the purchaser to purchase Bitcoin and Litecoin.
Okay, so now you have a vague idea of what to expect, and you may be wondering how your identity comes into all of this. Well, if you're American, I can tell you that by participating in crypto you will most likely disclose your identity. This is because, due to regulation, your identity must be disclosed if you want to participate on proprietary exchanges or use a Bitcoin ATM. When I first got into crypto, I was living in Scotland, where Bitcoin ATMs use cash and respect the anonymity of the purchaser; as of 2017, this was still the case.
You must be honest with yourself to know whether you are comfortable with disclosing your identity. This guide is not a howto on how to invest in crypto anonymously -- although I do respect that goal -- this is a guide on how to get started in crypto at large.
This is not a guide on how to choose which cryptocurrencies to buy, and when; this is a guide on how to get started in investing in cryptocurrencies. Remaining in this market requires vigilance and study, reading the news, and understanding ever-changing regulation. If you're up for this challenge, then this can be an enlightening, educational experience.
I have tried to keep my opinions to a minimum in this primer, although I do have them. If you are ever interested in what I believe, all you have to do is ask.
Have Fun Investing!
This guide is licensed proudly under the GNU Free Documentation License version 1.3. For more information on Free/Libre, Open Source Software (and documentation!), please visit Wikipedia. I allow for this document to be printed without the license as long as THIS disclaimer is present, and unaltered. The license can be obtained at gnu.org.
Authored by Noah Altunian (github.com/naltun), cryptocurrency enthusiast since 2015.
For staying up-to-date on the latest cryptocurrency market statistics, feel free to use Financier.