What kind of problems do ordinary people face when they try to purchase cryptocurrency?

The Ubcoin Market team prepared a new article on how difficult it might be to buy cryptocurrency for the first time. We made a short analysis of exchanges, ICOs, P2P platforms and mining as means of purchasing cryptocoins for the first time. The analysis concluded that all these methods have drawbacks. Ubcoin Market is designed to be a platform that facilitates the process of becoming a crypto investor by giving the ability to people to sell their possessions for cryptomoney.

___

If you need to buy some greens for your dinner, you go to the grocery store. If you need some fish you go to the fish market. If you need a book you go to the nearest bookshop or shop online using Amazon. But what if you want to buy cryptocurrency? Where do you go?

2017 appeared to be the year of ICO. Unlike most predictions the cryptocurrency hype train is still on the rails. One can see that the fluctuations of Bitcoin are keeping the whole topic on the boil with increasingly more people becoming interested in cryptocurrency. Many people consider cryptocurrency as an investment tool or believe enticing stories of an easy and lucrative investment. The new aspiring crypto investors often are not only from the upper or business class or so called active ‘classical’ investors, but also includes non-classical grassroots investors. Many people from various backgrounds keep wondering how they can jump on the cryptocurrency bandwagon and become part of the new trend. Alas, there are more questions than answers.

Exchanges

The first and most probable choice an aspiring crypto investor might make is choosing an exchange. An exchange is where one can buy cryptocoins for fiat money. The mechanism seems pretty easy and similar to the typical trading on mainstream fiat exchanges. However, with cryptocurrency various difficulties arise.

First of all, the boom of cryptocurrencies over the last few years induced the establishment of numerous exchanges all over the world and they keep rising in number. A number of such exchanges are fraudulent and may close without notice, taking all your money. The main problem here is that for now in many countries there are no external regulators for these crypto-exchanges. In the worst scenario you won’t be able to address your loss to any governmental body to obtain your money back.

Therefore, choosing a safe and appropriate exchange to store your cryptocoins is not a straightforward task. Moreover, in many countries cryptocurrency in general and crypto-exchanges remain a grey area for legislation. Although, some countries have already articulated their attitude towards cryptocurrency negatively or positively.

For example, China keeps shutting down everything related to cryptocurrency. The government has already banned ICO and ordered to close all domestic Bitcoin exchanges, what BTCC did. The authorities go further and shoot down the access to any overseas exchanges and platforms. One of the local banks of Hong Kong even suspended a company account of Hong Kong-based cryptocurrency exchange. If authorities shut down an exchange, very little can be done for customers of the exchange platform. Meaning the customers may irreversibly lose their cryptocurrency due to the closure of the exchange by authorities. Barely anything can help a private customer to escape the same destiny if his or her account is somehow related to cryptocurrency transactions.

Japan in the past has had a much less hostile cryptocurrency environment compared to other Asian countries. Nevertheless, Japan appears to be reconsidering its policy towards exchanges after a massive breach in one of the biggest Japanese cryptocurrency exchanges.

Initial Coin Offering(s)

The second feasible way to obtain some cryptocurrency is to participate in an ICO.

According to statistics nearly 350 fully completed ICO were carried out in 2017. The number of ICOs this year so far stands at 92. In addition to the previous stated amounts of ICO, there were also numerous ICO that either failed or never intended to fulfill their projected promises in order to steal investors’ money.

The first question is how to navigate through the ocean of ICO and how to decide whether an altcoin is worth your investments. Even if you’ve researched and studied about cryptocurrency there are many dynamics and unknowns. For example, as a small private investor you cannot bear all the risks as a big investment firm can. On the other hand you will still need to use an exchange to procure altcoins since they are usually not traded for fiat money. After the first step, you then have to exchange your tokens for fiat money or the cryptocurrency that is actually accepted through the exchange of fiat money. Unfortunately, the convoluted process is only one of the issues of exchanges.

For example, China banned ICO. Furthermore, Japan is not particularly friendly towards the new way of raising capital for startups. After a series of fraudulent ICO in Austria, the authorities in Vienna are now trying to involve Interpol to track down dishonest crypto-entrepreneurs. Austria is working on the restriction of transactions and any activities in the field of cryptocurrencies.

The USA has a generally friendly regulation policy towards cryptocurrency. However, since the US Securities and Exchange Commission equated ICO to an IPO, the companies issuing tokens and also exchanges trading them are subject to the same laws. That implies that that all transactions must be registered as transactions with stocks or securities. The US neighbor, Canada, holds the same positions on policy. Canadian authorities are considering the potential applicability of Canadian securities laws to cryptocurrencies and related trading and marketplace operations. The overall result for ordinary people, willing to purchase and trade tokens, is that all these transactions have to be registered with corresponding governmental or regulatory bodies, but no such procedures have been adapted for the crypto market yet. Additionally, such transactions are going to be taxed in the future similar to security transactions.

One should be extremely cautious when taking part in an ICO. One can very easily find himself involved with a scam ICO resulting in a loss of funds. One also must keep in mind that even if the entrepreneur you trusted with your money is, in fact, honest, your activity can become subject to taxation or other laws, which could render your venture illegal. However, there is a third way.

Peer-to-Peer Platforms

With the spread of cryptocurrency and as the number of people wanting to purchase cryptocurrency grows, the demand has led to the rise in platforms that conduct crypto-to-fiat exchange offline. Most well-known platform is Local Bitcoins.

Usually, if you are interested in the topic and join various crypto-related chats and forums, they find you on their own. The most commonly exchanged coin on such peer-to-peer offline platforms is Bitcoin, however sometimes they offer transactions with other popular altcoins. If you decide to use such a service, you may find yourself entering some real life detective or thriller film.

The scenario may unfold itself something similar to this: your online counterpart suggests an offline meeting place, hopefully, a public one. The location is where you will exchange your fiat money for some crypto-tokens. Now you have to use some muscle and drag a big sports bag stuffed with fiat cash, across the city to meet your contact. Once you meet, you verify each other’s identity and signal the successful transaction through numbers or QR codes on your mobile devices. In the end, if you are a fan of thriller films with briefcases stuffed with cash, this would be a decent way to roleplay such. However, in reality, the security and safety of your money and your own self are extremely questionable when employing this method of buying cryptocurrency.

Moreover, if the transaction wasn’t fraudulent and everything went smoothly, then you still will face the question ‘what do I do next?’. And the paths are more or less the same. You either go to an exchange and have to cope with all the previously stated problems, or you wait some time to switch sides and become a ‘dealer’ yourself.

Mining

The last, and for many reasons, the least feasible way to obtain cryptocurrency is mining. Mining was the initial way of getting tokens. It was a bonanza for early miners, but nowadays the entry threshold is too high.

The mining boom a few years ago hugely impacted the market of graphics cards pushing the prices to their highest points resulting in doubled or tripled prices for the most popular devices. Some of the biggest producers on the market even launched new series of specialized hardware tailored to mining certain cryptocurrency. The costs per one ‘mining farm’ and electricity now are covered, at best, within 6–9 months, compared to 3–4 months at the beginning of the more recent ‘mining fever’.

Moreover, it is hard to compete with ‘mass-mining’ in countries like China. Over the last year Chinese bitcoin miners made up over 50 percent of the worldwide mining population, building farms with high capacities. So as for now, this hype-train is way out of reach for private aspiring crypto-investors.

***

Up to this moment, everything related to cryptocurrencies was more about it’s first part — ‘crypto’. But how can one actually derive value and use it as means of exchange for benefits in everyday life? Our team understands all the risks and issues in addition to the interests of aspiring crypto-investors. Therefore, we decided to create an advanced platform that is transparent, easy to use, easy to understand and ultimately a simple way into the world of cryptocurrency. Our project is called the Ubcoin Market. A platform where people can purchase and sell real goods in a secure and simple manner using our specialized eretheum based altcoin.