How to Buy and Store Crypto
In this article I’ll explain the way to buy, or invest, in cryptocurrencies, as well as the different ways to store them.
Bitcoin and cryptocurrencies are part of a promising new asset class. I encourage you to read my article The Basics of Crypto to get an introduction on this market. There are a lot of interesting aspects about crypto, but how exactly can you get your hands on some?
Exchanges
Long gone are the days when there were only a few places where you could buy crypto. In the early days of Bitcoin, there was basically one online platform, the infamous Mt.-Gox. In February 2014, the Tokyo-based exchange suspended all trading and went offline after losing about 850,000 Bitcoins valued at around $500 million US dollars at the time.
Now, a variety of options exist that allow users not just to buy Bitcoin, but also many other crypto tokens. Learning from the vulnerabilities in the past, current crypto exchanges are a lot more secure. The largest exchanges in volume traded, and likely the most reliable, are Coinbase and Binance. In my native country of Mexico, Bitso is the leading exchange. Not all of them work in every country, but thankfully there are enough of them out there for most people around the world to be able to buy crypto.
Crypto exchanges allow anyone with a bank account to deposit fiat money, such as US dollars, to trade for cryptocurrencies. Most even have the option to use a credit card. For each crypto you buy, the exchange creates a unique public address, which is represented by an alphanumeric code. As its name implies, this code is public and not meant to be secret. It’s mostly used to transfer funds to different accounts within the blockchain network, whether they’re yours or someone else’s.
You’ll probably end up needing to transfer crypto at some point. Keep in mind that it is extremely important to input the correct public address at withdrawal, otherwise you risk losing your funds. I recommend you access the QR code with the camera in your phone or computer, whenever you can. This allows the public address to automatically be imputed onto the corresponding field, rather than having to type it. In any case, I suggest you always double check the addresses you input before confirming any transaction.
There’s actually another alphanumeric code that is generated with every public address, although this one is secret. It’s called a private key and it’s part of what the blockchain network reviews to validate transactions. The cryptographic nature of the technology allows this sensitive information to remain secret in the process. However, when you keep your crypto in an exchange, they hold custody of your private keys for you. Some people are ok with this, but if you prefer full ownership of your crypto, there is an option to also be the custodian of your private keys.
Non-Custodial Wallets
Mt-Gox was unfortunately not the only crypto exchange that has been hacked. In 2016, Bitfinex was hacked and lost almost 120,000 Bitcoins, valued at around $70 million US dollars at the time. In the wake of the breach, a known Bitcoin and security entrepreneur, Andreas Antonopolous, gave birth to the famous phrase: Not your keys, not your coins. The phrase means you only really own crypto if you hold custody of the private keys. This may be more philosophical than factual, but the point is, there are options out there.
Like in crypto exchanges, you can generate public addresses and private keys for your crypto in non-custodial wallets. The difference is, they’re not controlled by a centralized entity, in other words, they’re decentralized.
Non-custodial wallets are decentralized applications that can store your crypto. Most are in the form of a browser extension, but some can be downloaded as a desktop application. Metamask is a good example and one of the most widely used. You can access your non-custodial wallet from any computer, you’ll just need to download the application and a series of random words that serve the purpose of your private keys, called a seed phrase. It’s best to store your seed phrase offline, written down on a piece of paper for example, and to never share it; it’s like a master password that gives anyone access to your funds.
Other than store crypto, non-custodial wallets allow you to access other decentralized applications, or Dapps, like the ones used for Decentralized Finance, or DeFi. Refer again to my article The Basics of Crypto to learn about DeFi.
Now, it’s worth mentioning that by keeping your crypto in non-custodial wallets, you may be holding your private keys in an online environment. In theory, they may still be susceptible to hacks. Thankfully, there is an option to store your crypto in a way that allows your private keys to remain offline.
Hot vs. Cold Wallets
If a crypto wallet is in an online environment, it’s called a hot wallet. Naturally, all wallets in centralized exchanges are hot. Non-custodial wallets can be hot, but there is another option.
If you store your private keys within an offline environment, you’re using a cold wallet. Only non-custodial wallets can be cold and you can achieve this with a hardware device, like a Trezor or a Ledger. These devices normally connect to your computer through the USB drive and add an extra layer of security to your funds. You can even connect your cold wallet to applications like Metamask and interact with online Dapps. You just need to “sign” to verify every transaction through your hardware device. It’s an extra step, but worth it if you value security.
Among the nuances in cryptocurrencies, getting your hands on some and keeping them safe is definitely critical. Hopefully, I was able to give you a good starting point on how to make this happen, along with a few pointers. So if you’re just starting your crypto journey, welcome and stay safe out there.
Daniel Riojas is a Blockchain Marketer at stakefish. The views expressed in this article are solely his personal opinions and do not reflect those of stakefish. You should not treat anything written in this article as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion.
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