Crypto 101, Part 3 of 9: How to buy, sell, and store cryptocurrencies.

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Welcome to Crypto 101! 

In the previous article, we learned that apart from being insanely secure, blockchain technology and crypto are designed to give you the power to verify information by yourself, to verify information instead of trusting a third party, and to regain control over your own money.

Finally, we also learn that blockchain and crypto are focused on promoting freedom.

If you haven't read the previous article in our series Crypto 101, Part 2 of 9: The Blockchain - The Unbreakable Shield.

I strongly recommend doing so before continuing with this one.

Cryptocurrencies have emerged as a revolutionary asset class, captivating both investors and enthusiasts alike.

While their potential for massive gains has garnered much attention, understanding the basics of buying, selling, and storing cryptocurrencies is essential to navigate this exciting yet volatile market.

In this article, we'll walk you through the step-by-step process of acquiring, trading, and securing cryptocurrencies, empowering you to enter the world of digital assets with confidence.

Not Your Keys, Not Your Coin! - The Mantra of the Informed Crypto Enthusiast.

Let's engage in a thought experiment. Take a moment to reflect on the most valuable things you have in life—those you've worked tirelessly to build and acquire.

Now, envision a secure vault where you can store these prized possessions. What do you see? A wooden shed? A cardboard box? A plastic bag?

Certainly not. More likely, you imagine a fortified vault with hard steel doors and walls, offering the utmost security.

Now, let's take it a step further. Picture yourself holding a key or a code that grants access to this vault. Would you entrust these keys or codes to a perfect stranger?

Would you willingly hand them the keys, forcing yourself to seek permission every time you wish to access your belongings?

Would you allow them to borrow any of your treasured possessions, enabling them to profit from what is most precious to you?

You would likely dismiss such a notion as utter nonsense.

However, remarkably, many newcomers in the world of cryptocurrency unknowingly fall into this trap.

They leave their digital assets in the custody of centralized exchanges, granting them control over their private keys and, consequently, their coins.

This situation is akin to trusting a stranger with your most cherished possessions, without any guarantee of their safety.

Remember, in the realm of crypto, possession of the private keys is paramount. It grants you complete control over your assets and ensures their security.

Adopting a cautious approach and managing your own keys is essential for safeguarding your investments in this ever-evolving landscape.

So, let's all embrace the mantra of the informed crypto enthusiast:

"Not Your Keys, Not Your Coin!"

All that glitters is not gold !

Before you dive into the mechanics of buying and selling cryptocurrencies, it's crucial to comprehend the concept behind these digital assets.

Real decentralized crypto are independent of any single authority, relying on a network of participants for control and validation.

They are decentralized digital assets that use cryptography for secure transactions and to control the creation of new units.

This sets them apart from centralized digital currencies, which are controlled by a single entity, introducing potential vulnerabilities.

When you are planning to buy a digital asset, you need to ask yourself, "Do I really know what I'm buying right now?"

It's essential to do thorough research and ask yourself some critical questions:

1. Do I fully understand the technology and concept behind this digital asset?

Before investing in a digital asset, it's crucial to have a comprehensive understanding of how the technology works and the underlying concept behind it. This involves learning about the cryptographic principles that secure the asset, its consensus mechanism (e.g., proof-of-work or proof-of-stake), and how transactions are verified and recorded on the blockchain. Knowing the technical details will help you assess the asset's potential and risks more accurately

2. Have I researched its use case and utility in the real world?

Investigate the practical application of the digital asset in the real world. Look into the problems it aims to solve and the industries or sectors it targets. Understanding the asset's utility and potential value proposition will give you insight into its long-term viability and growth prospects.

3. Is it a genuine decentralized cryptocurrency, or does it have centralized control?:

Determine whether the digital asset operates as a genuinely decentralized cryptocurrency or if it has centralized control. A truly decentralized asset operates without a single controlling authority, while centralized ones are governed and controlled by specific entities. Decentralization is often associated with increased security and censorship resistance, which are fundamental characteristics of cryptocurrencies.

4. Are there any potential risks or vulnerabilities associated with this asset?

No investment is entirely risk-free, and cryptocurrencies are no exception. Analyze the potential risks associated with the asset, such as market volatility, regulatory changes, security breaches, or technological weaknesses. Being aware of these risks can help you make informed decisions and take necessary precautions

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5. Do I know how to store and secure this digital asset properly?

Knowing how to store and secure your digital asset is paramount in the crypto space. If you hold private keys to your assets, consider using hardware wallets or secure cold storage solutions to protect against potential hacking or phishing attacks. Understanding the best security practices will safeguard your investments from unauthorized access.

6. Have I considered its historical performance and market trends?

Look into the asset's past performance and how it has fared in various market conditions. While past performance doesn't guarantee future results, it can provide valuable insights into the asset's price trends and overall market behavior. Analyzing market data can help you make more informed decisions and avoid making impulsive choices based on short-term fluctuations.

7. Am I investing based on sound knowledge or just following hype and speculation?

Make sure your investment decisions are based on a sound understanding of the asset and its potential, rather than blindly following hype or speculative trends. Cryptocurrency markets can be highly volatile, and speculative investments can lead to significant losses. Having a well-researched and informed approach will help you make more prudent and rational investment choices.

An even after all that, there is two more crucial questions that are essential to consider before investing in a digital asset:

1. Does the digital asset have a limited supply?

Understanding the supply dynamics of a cryptocurrency is crucial, as a limited supply often contributes to its value proposition.

For instance, Bitcoin has a fixed supply cap of 21 million coins, which has been a significant factor in its appeal as a store of value.

2. Can the present architectures, settings, programs, or rules be changed later on after I bought it?

Examining the governance and development process of a cryptocurrency is vital. Some digital assets have decentralized governance models that require consensus among the community to make changes, while others may be governed by a central authority.

Knowing the potential for rule changes or protocol upgrades can help you assess the long-term viability and stability of the asset.

By considering these factors, you can better evaluate the suitability and potential risks associated with the digital asset you intend to invest in, making a more informed and confident decision.

We will learn more about the important knowledge to look for in a digital asset, Tokenomics in this series.

Crypto 101, Part 9 of 9: Brief introductions to crypto intermediary concepts, Multi-Sig wallets, smart contracts, layers, algorithms, tokenomics, consensus mechanisms, DAOs, and Web3 development.

How to buy, sell, and store cryptocurrencies.

Here is a list of some common methods to buy and sell cryptocurrencies:

1. Cryptocurrency Exchanges: These digital platforms allow you to buy, sell, and trade a wide range of cryptocurrencies using fiat currency (USD, EUR, etc.) or other cryptocurrencies. Examples include Coinbase, Binance, Kraken, Bitstamp, and Huobi.

2. Peer-to-Peer (P2P) Platforms: P2P platforms connect buyers and sellers directly, facilitating the exchange of cryptocurrencies for fiat currency without the involvement of an intermediary. Popular P2P platforms include LocalBitcoins and Paxful.

3. Bitcoin ATMs: Bitcoin ATMs are physical machines that allow you to buy cryptocurrencies using cash or credit/debit cards. They provide a convenient option for purchasing cryptocurrencies in person. Services like Coin ATM Radar can help you locate Bitcoin ATMs near you.

4. Over-the-Counter (OTC) Desks: OTC desks facilitate large-scale cryptocurrency purchases outside traditional exchanges. They cater to institutional investors and high-net-worth individuals who want to buy or sell large quantities of cryptocurrencies in a single transaction.

5. Crypto Apps: Some mobile apps, like Robinhood and Cash App, allow users to buy and sell cryptocurrencies directly from their mobile devices using fiat currency.

6. Cryptocurrency Vouchers or Gift Cards: Some platforms sell prepaid vouchers or gift cards that can be redeemed for cryptocurrencies on specific exchanges.

7. Crypto Debit Cards: These are debit cards linked to cryptocurrency wallets, enabling users to spend their cryptocurrencies at merchants accepting card payments.

8. Crypto Funds and ETFs: Some financial institutions offer cryptocurrency funds or exchange-traded funds (ETFs) that allow investors to gain exposure to cryptocurrencies without directly holding the assets.

9. Mining and Staking: While not a direct method of purchasing cryptocurrencies, mining and staking allow individuals to earn cryptocurrencies as rewards for validating transactions or supporting a blockchain network.

10. Decentralized Exchanges (DEXs): DEXs facilitate peer-to-peer cryptocurrency trading directly from users' wallets, without the need for a centralized intermediary. Examples include Uniswap and PancakeSwap.

11. In Person, Per Manum Fidelis: A cryptocurrency exchange that occurs in person, typically between individuals who trust each other. In this scenario, both parties physically meet and conduct the transaction, often using mobile wallets or hardware devices to transfer the digital assets securely.

The face-to-face nature of the exchange allows for real-time verification of the transaction, and it may offer an added level of trust between the participants.

However, conducting in-person cryptocurrency transactions comes with inherent risks. Participants need to exercise caution and meet in public places for safety reasons.

It's essential to establish trust and communication with the counterparty before proceeding with an in-person cryptocurrency exchange.

As with any crypto transaction, always verify the details and ensure you are taking the necessary precautions to protect your assets and personal safety.

Remember, regardless of the method you choose, ensure you conduct thorough research and exercise caution to avoid potential scams or security risks.

When selling and buying crypto it's important remember these best practices:

1. Choose a Reputable Cryptocurrency Exchange

The first step in acquiring cryptocurrencies is selecting a reputable cryptocurrency exchange. An exchange is a digital platform where you can buy, sell, and trade cryptocurrencies. Ensure you choose an exchange that is well-established, has a user-friendly interface, strong security measures, and offers a wide range of cryptocurrencies.

2. Set Up Two-Factor Authentication (2FA)

To enhance the security of your cryptocurrency exchange account, enable two-factor authentication (2FA). 2FA requires an additional verification method, usually a one-time code sent to your mobile device, making it significantly harder for unauthorized individuals to access your account.

3. Choose a Secure Cryptocurrency Wallet

While it's convenient to keep your cryptocurrencies on an exchange, it's not the safest option. Cryptocurrency exchanges are occasionally targeted by hackers, and in such cases, your assets could be at risk. Therefore, consider using a cryptocurrency wallet for more secure storage.

There are two main types of wallets: hot wallets and cold wallets. Hot wallets are connected to the internet and are suitable for daily transactions, while cold wallets are offline devices used for long-term storage. Popular hardware wallet brands include Ledger and Trezor, while software wallets like Exodus and Trust Wallet are also widely used.

4. Transfer Cryptocurrencies to Your Wallet

To transfer your cryptocurrencies to a wallet, access your wallet's receiving address and withdraw your funds from the exchange to this address. Make sure to double-check the address to prevent sending your assets to the wrong location. Once the transaction is confirmed, your cryptocurrencies will be safely stored in your wallet.

5. Make sure you conform to local law and regulation

If you decide to use a centralized exchange, when sign up for an account, you'll need to provide some personal information and verify your identity to comply with anti-money laundering (AML) and know-your-customer (KYC) regulations.

This step ensures the security of the platform and helps prevent fraudulent activities.

Additionally, adhering to these regulations ensures that your cryptocurrency transactions are transparent, traceable, and compliant with local laws.

Governments use this information to properly attribute any capital gains you may incur from cryptocurrency trading and to apply relevant taxation policies to your transactions.

On the other hand, if you plan on using other means of exchange, such as peer-to-peer (P2P) trading, decentralized exchanges (DEX), and decentralized finance (DeFi) platforms, you will likely need to exercise extra caution and take additional measures to ensure your security and compliance.

In these decentralized environments, you may have more control over your funds and private information, but it also means you are solely responsible for your security. Make sure to follow best practices for securing your wallets and private keys.

Furthermore, since P2P, DEX, and DeFi platforms may not require the same level of personal information as centralized exchanges, it becomes even more critical to thoroughly research and verify the credibility and reputation of the platforms and counterparties involved.

As cryptocurrency transactions in a decentralized space are often not automatically reported to tax authorities, you will have to make a voluntary tax declaration to ensure compliance with local tax laws.

Engaging with a tax professional or financial advisor will help you navigate the complexities of cryptocurrency taxation and fulfill your obligations appropriately. Being informed and responsible is key to a smooth and compliant cryptocurrency journey.

It's essential for cryptocurrency users to be aware of and abide by their local tax laws, as cryptocurrencies are subject to taxation in many jurisdictions.

How to store crypto currencies, the different storage methods: Pros and Cons

As cryptocurrencies gain widespread recognition, the need for secure storage solutions has become paramount.

Properly storing your digital assets is crucial to safeguard against hacks, theft, and loss.

Here are the most common cryptocurrency storage methods, along with their respective advantages and drawbacks:

Cryptocurrency Exchanges:

Pros:

• Convenient for trading and accessing multiple cryptocurrencies.

• User-friendly interface for beginners.

• Some exchanges offer insurance against hacking incidents.

Cons:

• Exchanges are central points of attack for hackers.

• Limited control over your private keys, as the exchange holds them on your behalf.

• The exchange's security may not be as robust as that of dedicated wallets.

Software Wallets (Hot Wallets):

Pros:

• Available as desktop, mobile, or web-based applications for easy access.

• User-friendly and convenient for daily transactions.

• Some software wallets allow users to retain control over their private keys.

Cons:

• Connected to the internet, making them potentially vulnerable to cyber threats.

• Malware or phishing attacks can compromise the security of your funds.

• Not recommended for large sums of cryptocurrency due to security risks.

Hardware Wallets (Cold Wallets):

Pros:

• Offline storage provides enhanced security against online threats.

• Private keys are kept offline, reducing the risk of unauthorized access.

• Support for multiple cryptocurrencies and compatibility with various platforms.

Cons:

• Costlier than software wallets or exchanges.

• Possibility of physical damage or loss, requiring proper backup measures.

• Not as convenient for frequent transactions due to the offline setup.

Paper Wallets:

Pros:

• Completely offline, providing a high level of security against digital threats.

• Inexpensive and easy to generate, making them accessible to most users.

• Private keys are not stored digitally, minimizing the risk of online attacks.

Cons:

• Vulnerable to physical damage, loss, or theft if not stored properly.

• Importing paper wallets can be complicated and cumbersome for beginners.

• Once used, paper wallets are no longer secure, necessitating the creation of new ones.

Cryptocurrency Custodial Services:

Pros:

• Managed by professional firms, offering a higher level of security.

• Suitable for institutional investors or those seeking third-party management.

• Some custodial services provide insurance coverage for digital assets.

Cons:

• You don't have direct control over your private keys.

• Reliance on a third-party for security exposes you to counterparty risks.

• Custodial services may charge fees, affecting your overall returns.

Multi-Signature (Multisig) Wallets:

Pros:

• Enhanced security through multiple private keys and signatures required to authorize transactions.

• Can be used with different wallet types, such as hardware or software wallets.

• Suitable for joint accounts or businesses, providing control to multiple parties.

Cons:

• Setup can be more complex than single-signature wallets.

• Losing access to one private key could lead to difficulties in accessing funds.

• Not widely supported by all cryptocurrency platforms.

Choosing the right cryptocurrency storage method depends on your individual needs, risk tolerance, and investment strategy.

For small, regular transactions, software wallets or exchanges may suffice.

However, for long-term holding or larger sums, hardware wallets or paper wallets offer better security.

Remember to stay informed about the latest security practices and always exercise caution to protect your valuable digital assets from potential threats.

In conclusion, we have explored the fundamental aspects of acquiring, trading, and safeguarding cryptocurrencies, equipping you with the knowledge to navigate the exciting world of digital assets confidently.

Throughout this article, we covered various methods of buying and selling cryptocurrencies, ranging from centralized exchanges to decentralized platforms. We also emphasized the importance of understanding the assets you invest in, conducting thorough research, and considering critical factors like limited supply and governance before making decisions.

Furthermore, we discussed the significance of securing your digital assets through appropriate storage methods. Whether you opt for software wallets, hardware wallets, or paper wallets, each choice presents unique advantages and considerations that align with your security preferences.

As you venture further into the realm of cryptocurrencies, always remember to stay informed and exercise caution. The mantra "Not Your Keys, Not Your Coin" serves as a guiding principle, encouraging you to retain control over your private keys and assets to ensure maximum security.

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In our upcoming installment, Crypto 101, Part 4 of 9: Wallets and Security, we will delve deeper into protecting your digital assets and selecting the right wallet for your specific needs. By learning about advanced security measures, you can fortify your holdings against potential threats in the rapidly evolving crypto landscape.

Thank you for joining us on this educational journey. We hope this article has provided you with valuable insights and empowered you to make informed decisions in your crypto endeavors. If you found this content beneficial, consider subscribing to our newsletter for exclusive updates and future articles.

As we continue to unravel the intricacies of cryptocurrencies, we welcome your feedback and questions. Your engagement is essential in shaping our future content and ensuring that we deliver relevant and valuable information to our crypto community.

Thank you for your readership, and we eagerly await connecting with you soon in "Crypto 101, Part 4 of 9: Wallets and Security."