A Noob's Noob's Guide to Cryptocurrency
Disclaimer: I am not an expert and I may have no clue what I am doing… but so far it is working and satisfying what my initial intentions were. This is purely my experience in the last 1.5 weeks. I write this as a guide for others to potentially enter into the cryptocurrency world or gain a better understanding on what it is. This is not advice but just a recount of what I did and my thoughts on it all. If anyone wishes to correct any of my misunderstandings or miscommunications, please leave a comment!
What is cryptocurrency?
You can definitely look this up anywhere, but in my opinion, cryptocurrency is a major opportunity to invest and participate in technologies that could become the center of our economy and lives in the near future.
Really, what is cryptocurrency?
Okay, you’ve heard of Bitcoin, right? Bitcoin is one of hundreds of cryptocurrencies based off blockchain technology. Feel free to research that term if you’d like. What you really need to know is that it’s a digital coin, stake or ownership that is being used in many ways. Most coins serve as a currency for a certain purpose but some function almost like a stock in a company with the sales of the coins acting as initial investments and those coin holders having votes in company decisions. In simple terms, I would say cryptocurrency is a decentralized and deregulated way of raising money, storing value and paying for goods. No middle man, no central bank printing unlimited amounts of money and most don’t have an owner. Think of it as a stock market but one that you don’t need to pay middle men or invest in corrupt companies to be a part of.
Why should I invest or partake in this?
Cryptocurrencies are exploding in value as of late. Some main reasons why I think this is happening:
- Political turmoil or the continuing devaluation of central bank currencies (currencies based on debt - basically all the countries in the world are running these schemes).
- Bitcoin (one of the first and the most famous and valuable) is growing in value at an enormous rate. Most other cryptocurrencies are traded in a Bitcoin market and their values are based on the value in Bitcoin… meaning, if other coins that you own stay neutral, they are still gaining in value when Bitcoin continues to rise.
- I have heard that countries/citizens in Asia are now just catching on to this and are investing in large amounts. This is adding more value to these coins as more demand and less supply is occurring.
Though this technology has been out for 8+ years, this is all still real new and still considered a ground level. There are still many coins that have yet to really see their value mature. Because all coins are broken out in 8 decimal places, you can purchase fractions of a coin and the costs are sometimes fractions of a penny in USD.
So.. why? There is the potential for unprecedented growth in investment. Let’s look at Bitcoin as an example. Today it reached over $2000 per coin. It is more valuable than an OZ of gold. On 1/1/2017, Bitcoin had just surpassed $1,000, which wasn’t the first time it had done that but since then it has had steady growth and has doubled in value and is currently slated to rise to $10,000. There are not many investment opportunities out there that can claim a 100% growth in 5 months!
Bitcoin may be really high in value but I believe the real opportunity lies with the other Alt. coins. As an example, I purchased a coin after researching it’s purpose, path and community and it went from 0.00000319 BTC to 0.00000678 BTC just today! So over 100% gain in less than 24 hours. Obviously, I am in it for the long haul and did not cash out… but my point here is, the lower the cost, the bigger of an opportunity to see your investment grow exponentially.
What are the risks?
As with the stock market or anything that can yield a high percent of return… there comes a high rate of risk. Because this area is not under a governing body there can be (and there has been) some coins that were created solely for the purpose to make money for the creators. Some term this as a “pump and dump scheme”. Critics may point to this and scream but this has happened in the regulated stock markets as well. It’s important to always do your research!
I suggest researching what the main purpose of the coin is, what, if anything is different from the X amount of coins that are already out there, and to purchase coins that already have a large and passionate community around them. Those are the ones that seem to have far more of a chance for major growth in the long haul and less of a chance to be a fraud or a “shit coin” as others have called them. There are several sites I will list out that can help with this research.
An Example of a New Technology
I mentioned that these “cryptocurrencies” are not only being used as currency but also for other purposes. One awesome example is a site called SteemIt. http://www.steemit.com. SteamIt is a social network that is decentralized. There is no owner and no one can censor the content added to it. It functions similarly like a combination of reddit, twitter and Facebook. The cool thing is, it actually rewards you for posting quality content! When other users like your posts you gain money that you receive in different cryptocurrencies. These can be collected and exchanged on a market for other currencies or cashed out in USD. It has been around for over a year and is really starting to form a tight-knit community. This is an opportunity to become part of something at it’s roots… and get paid especially if you are a quality content curator.
** note: if you sign up for steemit it can take a day to get your account approved **
So, where do I begin?
There are very few places nowadays where you can turn your USD into cryptocurrency. The US government has started it’s reach into regulating these which has reduced the amount that could commit to their standards. The main one and easiest is Coinbase.
Coinbase does have an affiliate program. If you sign up using my link and you buy or sell $100 or more of cryptocurrency we both receive $10 in free Bitcoin: https://www.coinbase.com/join/5890dcc939e5ce6997ca58f6
This is not why I am writing this but is a nice perk
On Coinbase you can purchase Bitcoin, Etherium or Litecoin using a Debit or CC, ACH or bank wire. So a few things here:
- You most likely want to always initially purchase Bitcoin because most other coins are in a Bitcoin market meaning you need Bitcoin to purchase/trade for them.
- There are several steps of security measures that you will need to undergo to prove you are not a fraud. One may be to upload images of your drivers’ license among entering your name and address. I believe this is all government regulated so they can later try to run a dragnet for tax purposes.
- If you want to get started purchasing right away the Debit or CC option is instant… ACH takes about a week to receive funds.
- All ways of payment have initial purchase limits that go up with time and with levels of verification.
Let’s pretend you choose to purchase $100 of Bitcoin using a CC. After filling out the order form you will receive that fraction of Bitcoin in your CoinBase wallet. If you only want to hold Bitcoin, you are done! You now have Bitcoin in your virtual wallet. You can also choose to send that amount to an offline wallet which I will not get into.
Let’s pretend you want to buy/trade for a different coin! What you will then do is find an exchange that has that certain coin on it’s market. I prefer to use Bittrex as my market. It seems to be the most reputable and one of the best looking and functioning sites. http://www.bittrex.com
Let’s pretend you want to trade your Bitcoin for some Digibyte coin! (one of the coins I have personally invested in). To begin this process you will sign up for a Bittrex account then go to your wallet on Bittrex. You will need to find Bitcoin listed under account balances and click the + sign next to it. This is going to bring up a popup that will give you your address for that currencies’ wallet in your Bittrex account. You will copy this and then head to Coinbase. In Coinbase you will go to Send/Receive, then go to Send, choose Bitcoin and the amount you want to send… then paste your address in there. Make sure to double/triple check the address. If you enter it wrong your money could be lost forever!
It can take 10-30 mins for your Bitcoin to go from Coinbase to Bittrex. (This is one of the downfalls that Bitcoin has as a currency… the length of time to verify transactions - other coins are different). Once your Bitcoin is showing under account balances in Bittrex with your amount, you are ready to trade! To find Digibyte (DGB) you will click on B Markets in Bittrex. It will show you a dropdown where you can enter in the call letters of the coin you are looking for. Once you find it, click on it. This brings you to where you can place a BUY order or a SELL order. This is where it can really play with your mind because everything is based in fractions of Bitcoin instead of USD. You can always see the actual value in USD by taking the fraction and multiplying it by the current cost of a Bitcoin in USD which is located in the bottom of your Bittrex window.
Creating a BUY order… You can do this by first entering the amount you want and then the price you want which would then tell you how much Bitcoin it will cost. You can always hit the MAX amount and set your price if you want to convert all of your Bitcoin to a specific coin. Once a BUY order has a seller, you will see a popup in the right hand corner and your trade is complete! You can now go to your wallet to see your new coin and your estimated value of all of your coins. (Again this is in Bitcoin so you need to convert this using the same formula)
If my blabbing on was confusing, you can read the article I read on how to buy a coin other than Bitcoin (when reading the article just replace ‘Steem’ with another coin name)
https://steemit.com/steem/@steampunkpowered/where-and-how-to-buy-steem
Links to consider when researching:
https://www.coingecko.com/en - A ranking system of the top coins based on various criteria
https://www.cryptocompare.com/ - lots of data for nerds
Google - searching a particular coin will yield forums where users discuss the coin, it’s purpose, and their opinions on if it has a place in the future of cryptocurrency or not.
https://steemit.com/trending/cryptocurrency - some good articles written here for consideration
Links for purchasing Bitcoin:
https://www.coinbase.com/join/5890dcc939e5ce6997ca58f6 - really the only one I trust as this moment in my experience
Noobs guide... very useful thing. Thanks for your help to noobs, there are so many of them around. Sure they need this.
Vic
Interesting post. Same thoughts here. Be prepared for a fluctuating crypto market. We do need to look better at the insights of every coin. What team is behind it, is there any management. How strong is the product, is there any product at all? Personally I always use: https://www.coincheckup.com The site that lets you check all there is to know about the team, product, communication transparency, advisors and investment statistics on every crypto.