Buying Crypto For the First Time
There’s no getting around the fact that both DeFi and crypto are highly intimidating for beginners, and much of that intimidation is felt in the initial phase of setting up a wallet and making your first crypto deposit.
If you followed our guide on creating a MetaMask wallet, you’ve already cleared the first major hurdle, but arguably the most difficult step is still to come.
If you happen to already own some crypto on a centralised exchange like Coinbase, then you can skip this step entirely, but the majority of DeFi newcomers will only have conventional money to work with (known as fiat).
Step 1: Create an Account on a Centralised Exchange
Unfortunately, in order to participate in decentralised finance, it’s hard to avoid first going through a centralised exchange. These are the so-called “on-ramps” where people convert their regular money for crypto.
The top exchanges include Coinbase, FTX, and Binance, among others. Assessing which of these is best is beyond the scope of this article, and for our purposes we’re not really interested in all the trading features they offer. All we really care about is depositing our money in the easiest way possible for the lowest fees, and once that’s complete, we will immediately transfer the crypto out and into the DeFi ecosystem.
For crypto beginners, Coinbase is probably the best choice for an on-ramp, but if you want to use FTX or Binance, the same steps will largely apply. We’ll use Coinbase as an example.
Open up Coinbase and select “Sign Up”.
Enter your name and email address, and pick “Create account”.
Step 2: Complete Identity Verification
Once your account is created, you’ll then have to verify your email, set up two-step verification by confirming your phone number, select your citizenship, and enter your personal details. The on-screen instructions are clear and the process should be straightforward, assuming you have a working phone number.
Things start to get a little more tricky at the “Verify Your Identity” stage. All centralised exchanges nowadays are required to do something called Know Your Customer (KYC), which involves providing documentation to prove your identity — for example a password or driver’s license. Follow the on-screen instructions and choose the method that is easiest for you.
Uploading the images via a phone camera or webcam is easiest, but note that sometimes the image is rejected for being too blurry (especially if your phone camera isn’t great). In this case, you’ll have to manually upload an image from your computer, and verification may take slightly longer. In a best-case scenario you’ll be verified in minutes, although it can sometimes take up to several days.
Step 3: Add a Payment Method and Purchase
Once all the bureaucracy is done, you’ll be asked to add a payment method. The available options will vary depending on where you live, but it’s strongly advised you avoid using a credit card to make deposits. Although this is the quickest and easiest method, the fees are prohibitively high. If you’re planning on earning stable interest in DeFi, it could take several months just to earn the fees back! It’s also worth noting that credit card companies regard crypto transactions as high risk, so there’s a good chance your payment would be rejected anyway.
Generally, it’s best to use a bank account to make deposits. Coinbase will guide you through the process, which will vary depending on where you live. Once the bank account is linked with your account, it should be easy to make crypto purchases whenever you want.
On the regular version of Coinbase, you purchase crypto directly rather than making a cash deposit into your account. The process is very easy and is well-suited to beginners. However, note that the fees can be significant.
If you switch to Coinbase Pro (which uses the same account), it’s possible to make a bank transfer deposit for no fee at all, (although there is still a small fee when you trade your fiat currency for crypto). To make a bank deposit in Coinbase Pro, go to Portfolios and select Deposit. Choose the currency you want to deposit, and you will be provided with bank details to send to. You can then go to your bank and make a payment to those details, remembering to include the reference number.
You then need to go to Trade, where you’ll be confronted by a very intimidating screen with all kinds of data. In the left panel choose the pair you want to trade, enter the amount you want to spend, and click Place Buy Order.
As for which exact crypto you purchase, and how to send it out of Coinbase, those are topics for another article!
You’re nearly ready to start investing in the DeFi ecosystem, there’s just a couple more steps to go!
