Everyone is still asking me how to buy cryptocurrencies so I wrote a guide for newbies!
I thought it’s about time I distilled the basics into an article!
Step 0: Learn about blockchain before you invest anything
- Read this
- Print out and learn this glossary of terms
- Read this introduction on what Blockchain is
- Read this article on differences between BTC and ETH
- Meet the founder of Ethereum and listen to their description of it
- You can also listen to the following Ted.talk
- Read about the practical sides of paying with Bitcoin, both from a user and a merchant’s perspective (Don’t get lost in details and the many solutions, just understand the broad problem and solution strategies):
Step 1: Create a wallet (and get a hardware wallet)
- You can create an account on Coinbase here or just download the app which is very simple to use. Full disclosure: If you click the coinbase link above and buy/sell $100 (£74) of digital currency or more, you and I will both get $10 (£7) of free bitcoin 🙌🏻 . You can purchase cryptocurrency on coinbase using a credit or debit card.
- IMPORTANT: NEVER forget your password and definitely set up 2 Factor Authentication.
- It is considered unsafe to store larger amounts (e.g. above 500$) on 3rd party wallets like Coinbase. I use a hardware wallet (Nano Ledger) for large sums. It’s super simple to use and very secure — if you lose it, you can still get back your cryptocurrency using the recovery password phrase.
Once you’ve unboxed your Nano Ledger, connect it via USB cable (you will find it in the box) to your computer:
Follow instructions on your Nano Ledger display and instruction card included in the box
- Set up a pin code
- Complete the nano ledger configuration
- Write down all recovery phrases on the card included in the box
- Your device is now ready
For linux (tested on Ubuntu) you need to create a set of udev rules to allow access to the device through USB http://support.ledgerwallet.com/knowledge_base/topics/ledger-wallet-is-not-recognized-on-linux
- Open Chrome browser on your pc/mac and download Ledger Manager: https://www.ledgerwallet.com/apps/manager
- Launch the ledger manager and check if your firmware is updated
- Open Chrome browser on your pc/mac and download Ledger Wallet Bitcoin: https://www.ledgerwallet.com/apps/bitcoin
- Open Chrome browser on your pc/mac and download Ledger Wallet Ethereum: https://www.ledgerwallet.com/apps/ethereum
- After you added all apps, launch your bitcoin or ethereum app
- Choose the app on the Nano Ledger
- It logs in automatically on your pc/mac
- Go to “receive” to generate a your public key
- Unplug your device and keep it safe
IMPORTANT: Keep the recovery card away from your Nano Ledger in a safe place.
- NEVER store your recovery phrases on your phone or laptop
- Do not make photos of them
- Anyone that has your recovery phrases can steal your money even without nano!
Step 2: Buy some cryptocurrency
As of yesterday, you can buy the following on Coinbase (Bitcoin cash was just added):
- Bitcoin Cash
Step 3: If you want to buy any other cryptocurrency, sign up to an exchange
I personally use Bittrex but there are plenty of other options.
When you sign in to Bittrex, the wallet screen looks like this:
You can easily find the available cryptocurrencies using the search bar. To buy a currency, find the one you’re interested in,.. say ETH and click on it — you’ll see a chart of the price of the currency over time, and scrolling down the page you’ll see something like this:
In this case, I’m trading in the Bitcoin markets (you can also trade in USD markets but you’ll need to deposit dollars to trade in these markets). Your available bitcoin balance will show on the left hand side of the screen (next to “BUY ETHEREUM”) and the amount of the ETH you have to sell appears on the right hand side (next to “SELL ETHEREUM”)
You can select the price you want to buy or sell at. In the screenshot below, it shows that i’d need 0.96101655 BTC to buy the 20 ETH at 0.04793100 BTC per ETH:
To make the purchase, all you have to do is click “Buy Ethereum” (or whatever currency it is you are purchasing).
Note: If I were to sell some of my ETH, it’d get converted back into Bitcoin in this case as i’m trading ETH against BTC.
Step 4: Withdrawing funds
If you decide you want to withdraw funds from coinbase or another exchange, it gets a bit trickier. p.s. These guys are making it a bit cheaper to withdraw bitcoin.
Withdraw from Coinbase
For coinbase, they only allow you to withdraw via SEPA transfer (The Single Euro Payments Area is a payment-integration initiative of the European Union for simplification of bank transfers denominated in Euro.) If you are a UK resident, you can’t withdraw in GBP as yet meaning you’re going to get shafted a little on the exchange rate today due to the current value of the pound 🙁.
To set up the SEPA transfer, I had to go into my local bank branch and complete a successful SEPA deposit to my Coinbase EUR wallet.
To withdraw euros from your Coinbase account, you’ll need to:
- Select Accounts on the left side of the page
- Select EUR Wallet
- Select the Withdraw button at the top-right
- Provide the requested information for your bank account if requested
- Confirm the withdrawal
Withdrawals typically take 1–2 business days to complete.
Withdraw from an exchange like bittrex
You can withdraw by simply providing the address of a corresponding wallet that you own e.g. I could withdraw to my coinbase ETH wallet.
- IMPORTANT: Only withdraw to a wallet that you own
Now, should you actually buy cryptocurrency??
I just posted this to my friends on Facebook:
I really mean what I’ve said above — I think blockchain tcchnology and cryptocurrencies are going to be HUUUUGE for the future.
Guys like meinhard here 👇🏻 are doing amazing things on the blockchain and building practical real world use cases for cryptocurrencies like Stellar Lumens.
In this case, meinhard and the rest of the team at SatoshiPay are building an amazing micropayment solution for the web. Last week, I watched him demo a micropayment for a piece of online content over the Stellar network in less than a second with a transaction fee of less than $0.000001. Even better, the payment was in the content creators account immediately! It’s these kind of blockchain based solutions that make me excited for the future and these are the kinds of real-world blockchain tech we’ll all be using in a couple of years. So when I hear people say there are no real world uses for crypto or the blockchain, I know for sure they are wrong.
I’m not so sure about the future of Bitcoin however. Some people i’ve met recently (e.g. like the incredibly interesting Marian Muller) can point to ways that Bitcoin has literally saved them in difficult situations but that was then and today transferring bitcoin from one wallet to another can take hours (as it often does for me) and cost a small fortune.
In the next year or so, I’m betting we’re going to hear a lot more about XLM (Lumen), ETH, NEO and Ripple (XRP) in particular.
Note: Only buy cryptocurrencies that you know about. i.e. you wouldn’t buy a physical product if you didn’t know what it was, so don’t do the same thing with crypto!
If you do invest, make sure you know the basics of how investment funds work
- Here’s a primer on how crypto investments work: https://medium.com/@flexthought/trick-or-treat-investment-in-blockchain-cryptoassets-b1ad47ef58c#.y6tnsqkca
- If you are a complete novice in the finance world, start by watching this short video on stock basics
- Learn the 25 basic trading terms listed here: http://www.timothysykes.com/2013/06/trading-terms-you-need-to-know/ Note: It defines ‘Spread’ in terms of ‘Bid’ and ‘Ask’, but those two are not listed. (Remco)
- IF you want to learn more visit this page: http://www.assetmanagement.hsbc.com/in/mutual-funds/learning-centre/investment-basic
- Take time and go through the first chapter “Put and call options” — If you don’t understand a term, Investopedia is a great resource: http://www.investopedia.com/terms/a/