The Layman’s Guide to the Blockchain Chapter 1: The Basics of Buying Bitcoin (or any other coin)

If you’ve landed here, that means you’re finally ready to board the rocket ship. The blockchain is a bull, and you want to ride it, seize the financial revolution by the proverbial horns, and with it the day.

Great! But hold on there cowpoke you, don’t go wrangling cattle when you don’t know how to ride first. It’s the wild west out there and if you don’t know what it is you’re getting into you’ll get trampled. I guarantee it. It’s for that reason precisely I’d like to talk about what you should consider before investing, basically the every person’s guide to the blockchain. This article is the first chapter in a series of posts and is intended as a longer read so if you find yourself challenged attention wise go ahead and scroll to the bottom for the TL:DR.

This is no way meant to be a technical document, but instead, a plainly written how-to that will equip you with the basics you need to get started in the space. It’s simple and easy to navigate. It’s supposed to be that way.

So If you’re a seasoned veteran of the Crypto-sphere, then this isn’t your article. But, if you’re just starting out and are looking for a guide through the herd, then congratulations, you’ve just found your lasso.

You don’t have to buy the whole thing

I have way too many friends missing the boat on cryptocurrency. Too often this is due to a simple misconception that you have to purchase an entire coin to participate. You don’t. This fact is one of the ways crypto varies from stocks and bonds — you can buy as much or as little of a coin as possible.

It’s all about the % from your point of entry. If you buy 100 dollars worth of BTC, and then the price of BTC goes up 50%, then congratulations, you’ve just made $50!

It’s not too late to get started, in fact, less than 1% of the global market has invested at this point. If you want to take a more in-depth look at why 2018 is going to be the most significant year yet you can take a look at one of my older articles.

Making your first purchase

There are plenty of exchanges to buy crypto. Most popular of which is easily Coinbase. While Coinbase only allows you to buy the three big coins (Bitcoin, Ethereum, Litecoin) The reason for its popularity is that Coinbase is insured so in the event of a hack your money is safe for up to 200K.

Their sign up process is easy, just follow the steps to verify yourself and connect your card of choice (they even take debit visa). Once that is complete, it’s as easy as entering the dollar amount you’d like to buy and congratulations, you’ve just purchased your first cryptocurrency!

Your wallet

A wallet is exactly what it sounds like — it’s where you keep your sweet, sweet digital gold locked up. Now when you open a wallet on an exchange like Coinbase, it may seem straightforward, but there are a few different kind of wallets and trust me, having at least one of each is the safest way to protect yourself against hacks.

Blockchains themselves may be safe but the exchanges and places they exist on are still vulnerable. Since 2011 over 10 billion dollars worth of Bitcoin has been scammed and hacked, which I cannot stress enough this is why you need to purchase a hardware wallet like “trezor,” or “Ledger,” they exist to give your funds that added level of protection. Alright — now that we’ve got that covered let’s dive in:

• Address:
  The Address of a wallet is how you can transfer funds from one location to another. In most circumstances, your “Address” will appear as a cryptographic key that appears like a random string of numbers and letters. But whatever you do, do not lose it. Copy it, back it up and make sure it is correct otherwise you stand at risk of LOSING YOUR MONEY, with 0% chance of recovery. I repeat — If you screw up or lose this address — you’re going to have a bad time.
• Software Wallet:
  A software wallet is a purely digital wallet; these can exist in the form of phone or computer apps or, can merely be a destination like an exchange. These are the most vulnerable of all wallets because if it touches the internet, it can be hacked. Beyond that always check and verify that these potential wallets are what they say they are and aren’t just a scam.
• Hardware Wallets:
  If your wallet is where you keep your digital assets, then a hardware wallet is the safety deposit box. It is the number 1 way to keep your crypto locked and secure until you’re ready to withdraw. That said, you may want to additionally throw it in an actual safety deposit box because the one significant vulnerability of a hardware wallet is that it can be subject to physical theft. The Ledger or Trezor are considered best in class for the moment so if you’re in this for the long haul I 100% recommend picking one of these up.
• Paper Wallet:
  This is the most analog way to store your funds that is humanly posssible. Not recommended that you play with this around water. Operates similarly to a Hardware wallet, has both private and public keys, since it is offline, it cannot be hacked. If you’re extremely paranoid or just want to do things the old-fashioned way then read this tutorial by Coindesk, and whatever you do. Don’t lose it.

Altcoins, trading pairs and transferring funds

As you go deeper and deeper down the blockchain rabbit hole and become more and more familiar with the space you may find yourself tempted to invest in other cryptocurrencies (dubbed “altcoins,”) not featured on Coinbase. To do this, you’ll need to find an exchange that hosts the coins of your choosing.

My recommendation is hands down Bittrex, or Binance which support the most robust inventory of coins available. What’s nice is that with these exchanges, generally as long as you’re not intending to trade fiat in for crypto you should be able to open wallets on these platforms without extensive verification.

The process of transferring funds from Coinbase to your chosen exchange is relatively straightforward:

1. Select accounts on Coinbase and click send on whatever currency you’d like to transfer
2. Copy the wallet address from your chosen exchange and paste it into the recipient box
3. Allocate funds to send and click continue
4. Wait.

See? Easy. Watch out though; every currency has its own transaction time which can vary substantially from days, to minutes and this transaction time can cause some a great deal of stress while everything hangs in transit.

Once you’ve secured your funds on an exchange, you can begin buying and trading altcoins instantaneously. You’ll notice that all the currencies have trading pairs in which to trade against such as BTC/LTC, or ETH/BTC.

These trading pairs represent what currency is required to purchase the coin. In most circumstance coins are only available to be traded in BTC. However, there is a growing ETH market and USD market. In chapter 3 I’ll go over some fundamental trading strategies, but there are already a plethora of YouTubers and blogs to learn from in the meantime.

GDAX and Transaction Fees

Once you’ve been purchasing cryptocurrency for a minute, you’ll probably begin hate transaction fees. They’re a thing, they suck, but they exist. Coinbase especially can end up taking a decent chunk out of your purchase, despite being the best option for beginners. Fortunately, there are ways to skirt this. Coinbase has a sister site known as GDAX that mainly operates as a mildly less user-friendly version of Coinbase and operates on its back end. What’s nice about this is that your GDAX account is linked to your Coinbase account and you can instantly transfer funds between them. If you’re American, you should be able to purchase currencies at a lower rate as well, but for everyone else, it’s still beneficial to be able to send our coins to other wallets without incurring fees

Cashing out

It’s always smart to take profits, after all, what good is accumulating wealth if you can never use it? One of the most common questions I get asked by newbies is “how do I cash out?!” If you’re American, then it’s all fine and dandy, and Coinbase should allow you to make deposits into your account. However, if you are Canadian (or reside in any other country) you’ll need to find an exchange or wallet that supports your currency.

Once you’ve transferred your crypto to the chosen wallet, you’ll need to convert it back into fiat currency, and from there you can deposit it directly back into your bank account.

Ultimately there is no real winner to the question “which wallet is best.” A couple of recommendations for Canadians looking to withdraw their investments.

• Ntrust
• CoinSquare

The Taxman

This one’s easy. A big mistake is to think that because it’s “crypto,” that somehow, you’re tax exempt. I guarantee you. You. Are.Not. Talk to your accountant, find an expert or at the very least treat your crypto as you would any other investment, and down the road, you’ll be spared some significant headaches.

TL;DR (Too long didn’t read)

Use the links below to start buying crypto. No, you don’t have to buy a whole bitcoin (or any other coin). Safety first, protect yourself from hacks with a hardware wallet. Don’t lose your wallet addresses or screw the address up when you send funds, or you are S.O.L. Investing is hard, be dedicated, be smart. You can dodge transaction fees on Coinbase with Gdax. Keep track of your transactions, wisdom suggests the IRS or CRA or whatever financial institution that governs your taxes, will eventually come for you if you’re not reporting your capital gains.

• Start buying Crypto: Coinbase
• No you don’t have to buy the whole bitcoin (or any other coin)
• Get a hardware wallet to keep your digital assets safe from hacks: Ledger
• Popular altcoin exchanges: Binance
• Find a wallet that supports your fiat currency and use that account to withdraw your investments like CoinSquare

Now that you’ve gotten your hands on some of that digital gold feel free to check back here weekly as new chapters are released and we cover everything from basic investment strategies, to understanding smart contracts, and learning the mysterious origin behind Bitcoin and more. Remember, having a plan or strategy to investing is always important so make sure you’re being calculated in your navigation of the crypto-world. Good Luck!

~ More Chapters

Laymans Guide to the Blockchain: Chapter 3
Laymans Guide to the Blockchain: Chapter 2

If you’d like to any of the BlockABL team we’d love to have you join us in our telegram channel: https://t.me/ABL_Ecosystem