A Crypto-Currency Quick Start Guide
2-24-2018 Last Update: 4-20-2018
Warning: This guide is not meant to be financial advice. I am not a financial advisor. I made this guide to answer questions and raise awareness about crypto-currencies and blockchain technologies. All investments carry risk. The classic advice is: Do not invest more than you would be willing to loose.
I first heard about Bitcoin at a music festival in 2011. The guy who told me about it was so excited about it he forgot to explain how to get started in any sort of practical way. So after learning about it for some time now I’ve decided to put together a quick start guide to getting involved with crypto-currencies. Crypto currencies are an emerging tech and it will take time to get things to the point of mass adoption. But that means it is a great time to invest in an emerging industry. Once mass adoption happens, the values will skyrocket.
Think of buying crypto like buying stock in a tech company. But the stock is digital and so it is easily divisible and transferable. So it also makes a great currency. If you want to buy stock in most companies you have to buy one full share. But crypto is not like that. You can trade any amount. You don’t have to buy one whole Bitcoin or Litecoin or anything else. The advantage is that it is more transferable than paper money and can be sent from any smartphone or PC faster and with lower fees than money transfer services. There are thousands of cryptos besides Bitcoin and they all do slightly different things. Binance is my choice to access many of these but Bitrexx and KuCoin and Poloniex are also popular.
Setup Your Binance Exchange Account: https://www.binance.com/?ref=22382678
They can be divided in to at least 6 main types.
Exchange/ Dividend Tokens
Crypto Currency Terms
Alt Coin = Alternative coin, everything but bitcoin
ATH = ALL Time High
Fiat = Government backed money
Wallet = A crypto storage program. It’s not called an account because an account means your money is managed by someone else the way a bank does. A bank holds money on your behalf. A wallet is not like that. It’s your money in your possession.
Cold Storage = A wallet that is physical. Basically a USB drive that holds crypto and can only be accessed when that device is pluged into a computer.
F.O.M.O. = Fear Of Missing Out
Hodl = Hold
Fork = When a crypto splits into two cryptos. Bitcoin Cash is a fork of Bitcoin. This happens when the developers of a crypto don’t agree on major issues and decide to part ways. For investor this is good. It helps create more competition and options.
F.U.D. = Fear Uncertainly and Doubt. As in, “That person is just spreading F.U.D.”
Bullish = Market tends to be going up
Bearish = Market tends to be going down
White Paper = A declaration of the purpose, function and founders of a crypto
Satoshi = The smallest possible unit of any crypto. Represented as 0.00000001 Named after the original developer of Bitcoin. Satoshi Nakamoto
Public Key or Wallet Address = The deposit code for a crypto wallet. Give this to the person who wants to send you payment.
Private Key = The withdraw code for a wallet. Do not give this out to anyone. It is like the pin code of a debit card!
ICO = Initial Coin Offering. This is how cryptocurrencies are launched. It’s a new method of crowdfunding.
Blockchain- This is a new type of programming that allows crypto currencies to exist. Bitcoin was the first of its type. It’s also known as a DLT or Distributed Ledger Technology. It allows multiple parties to conduct transactions as easily as sending an email. It’s a payment system and a currency all in one. This allows users to send money, quickly, with minimal fees, without the permission of a bank or Western Union type service. It’s open 24/7 and it works seamlessly between countries.
When you buy crypto, who gets your money?
The organization providing it. It’s basically like buying stock in a tech company, but since the stock is digital, it makes a great currency as well as an investment. Money issued by the “Federal” Reserve bank goes down in value over time. Cryptos go up over time. They are designed to do this. This works because there is a limited supply. You are basically trading one form of money for another. Which would you rather have:
1) A currency issued with debt attached to it by a centralized system like the “federal” reserve or…..
2) A crypto currency issued by an open source system where you can know how much money is in circulation at any time, and how much there will be?
You could say that cryptos are backed up by the fact that they were purchased with fiat currency. They are designed to increase in value over time as more people start using them.
Who started Bitcoin?
Satoshi Nakamoto is generally considered to be the creator of Bitcoin. It is unknown exactly who this is or even if he is a real person. Here is an interesting article detailing how NSA supposedly identified Satoshi but they never revealed who he is.
Really it does not matter who invented crypto currencies. What matters is that they do work and can eventually provide a lot more than just currency exchange.
The original “white paper” written by Satoshi can be seen here https://bitcoin.org/bitcoin.pdf
What is Blockchain?
Block chain is the underlying technology behind bitcoin and other cryptos. It’s a DLT or Distributed Ledger Technology. It’s a whole new method of computing designed around sharing information in an open source system. Here is a simple way to explain it. Let’s pretend you and a few friends go camping and you find a deck of cards. You decide to play poker but no one has any usable amounts of cash or poker chips. So you decide to keep track of the game with notes. You each get out a sheet of paper and give yourselves credit for how much money you want to start with. At the end of each hand you take notes on how money changed hands. If there was a mistake or someone tried to cheat it’s very easy to catch. So now you have a cashless system of value transfer. Now just pretend it has nothing to do with poker and its run on computers by millions of people all over the world. You now have an open source system of banking that anyone can join if they have access to the technology. Every crypto currency is based on a different blockchain that functions a little differently. This is what creates the vastly different capabilities and values of these projects. It can also be used for so much more than money. It can be the foundation for contracts, voting, data storage and more. It’s called block chain because blocks of data are stored in a chain, which is just a chronological archive of all activity. It’s a way for multiple people across the globe to come to consensus. To hack the system would be inefficient if not impossible. There is no way one computer could stand alone against all the others working together.
What are some of the problems with this technology?
It uses lots of electricity. At least when “mining” is done. Mining refers to activity done to earn crypto by verifying transactions. This is not necessary. Most cryptos do not use this system anymore, but since the original ones like Bitcoin do require mining, there will always be this factor. However this does create an opportunity to earn profit by mining Bitcoin or other cryptos. This is not recommended for beginners. It takes advanced computers and knowledge to do this. Some would argue that mining supports the value of the coin. If it cost money to create the coin the owners will not sell it for less than that amount.
Scams- Ponzi Scams like Bitconnect and Davor Coin have already risen and failed and cost people millions in lost funds. I recommend staying away from any sort of lending platform.
The supporting technology is still underdeveloped. Many of the apps and websites bases around crypto are so new they have issues. With time they will improve.
It is misunderstood Many people assume crypto is doomed to fail. Fair enough but oppinions don’t change the fact that it is being used everyday by millions of people. Even banks have started to adopt blockchain tech. The Ripple network is a system created by banks that works with cryptocurrency. So when banks are adopting the same technology they once insulted, it has proved it has value. Others assume it is only used for criminal activity. This is really a poor argument against crypto. People use cash for illegal transactions and no one argues that paper money should not exist for this reason. Cryptos are the most tracable form of money and probably a poor choice for illegal business.
Some governments are over-regulating it.
Many projects are just copy cats and will not provide any real benefits to users.
Hackers – There are scammers and hackers who have stolen peoples crypto. Although the system itself is safe, individual wallets can be hacked and exchange sites have been hacked. This happened to a site called Mt. Gox and it was a big disaster.
What Makes Crypto Valuable?
What makes anything valuable? Typically two factors determine this. Scarcity and utility. Gold is valuble because it is rare. But it does not make a good form of money in todays economy. Paper money is usable but it is not scarce. Governments print more all the time and they are not even entirely sure how much there is. This causes money to lose value over time. We have seen this happen with almost every currency ever created. Inflation has collapsed the economies of many nations. Cryptos are both usable and limited in supply. There can only be 21 million bitcoin for example. Would you rather own money that is limited in supply or one where more is printed all of the time. Ask any old person. Money used to be worth more.
What Can Crypto Currencies offer me?
Are you a business owner? Accepting crypto can help businesses of all sizes. Some people who have lots of it want to support businesses that accept it. I am a full time artist and accepting crypto has opened my art to a new market of clients.
Are you an investor? Since this is a rapidly growing business, it makes sense to invest. Cryptos are likely a product that most everyone will use in the future. Many projects will fail and loose value. The successful cryptos will be the ones that solve the most problems for users. The successful investors will be the most informed.
Do you send money overseas? Many people who used to send money to family overseas now use crypto instead of Western union. Its faster and more convenient and with lower fees. You might say that fiat money has political borders and crypto has use borders. Here are two examples.
-A woman in Ontario who cleans houses sends money to Ecuador every payday. She used to use money transfer services but the fees were as much as 30% and it took a lot of her time. She now uses her smart phone to purchase bitcoin and sends it to a man who lives near her family in Ecuador. The man receives the crypto currency and gives cash to her family. He can do this at a fraction of the cost of any other service.
-A man who owns manufacturing businesses in Brazil used to send money every month via bank transfer. His amounts are in the hundreds of thousands of dollars. Doing this with a bank cost a lot of money in fees and took days if not longer. He actually got so sick of the banks he started flying down with cash on planes because it was faster and cheaper. That’s how slow and expensive the bank transfers were. So when he heard about crypto he started using it. Now he saves huge amounts of time and money. Crypto markets are open 24/7 and take no holidays. You might say that traditional money has political borders and cryptos have use borders. Now it’s just a matter of who can design the most useful crypto. The race is on.
Two Piles of Sand
Imagine all of the cash and stocks and bonds and other liquid assets are one big pile of sand about the size of a house. That’s a big pile. Trillions in value. Now imagine all of the crypto currencies are next to this pile. It would be just one small bucket of sand in the driveway of this house. So what? Who would care about that tiny amount of value when there is so much else to invest in. Well how popular could cryptos get? How much of the economy could it come to represent? It could replace most if not all of the value in the world someday. Cash could become obsolete someday. So that little bucket of sand has to grow in value to meet demand. Since the supply is limited, the only way it can do this is to increase in value, exponentially. Meanwhile the value of fiat money declines. So what will happen in the long run? Logic would dictate that cryptos will be the preferred choice in the future.
How Do I Get Involved?
Get the right apps. I really just use 3. Coinbase, Binance and Coin Market Cap. I can manage all of my crypto activities on my phone with these.
Coin Base- . For most people, the best place to get started is with an exchange called Coinbase. It’s an exchange and a set of wallets for 4 crypto currencies. You will need to link it with a bank account and a debit or credit card. You also need to upload photos of your ID, front and back. This can be a bit of a hassle so have patience with it. One problem I had was verifying my bank account. I had to do this on desktop because there was a glitch that prevented me from doing this with the mobile app.
Using this link will get you $10 of free bitcoin if you buy $100 worth
Setup Your Binance Exchange Account: https://www.binance.com/?ref=22382678
Make a purchase or sell something for crypto.
Know your strategy. Hold or trade? Do you want to buy and sell often and day trade or swing trade? It is possible but can be tricky. Day trading means buying and selling every day. This might work but I think a better strategy is to buy and sell on cycles that are more weekly or monthly highs and lows.
Pick the right coins for your strategy.
Use an exchange like Binance to obtain those coins. If you bought and hold your crypto on Coinbase you can send it to an exchange site quite easily. Just find the deposit code in Binance for the coin you want to deposit. Copy and paste that wallet address into the send field of the coinbase app. There are videos on Youtube showing more specifically how to do this.
Move the coins to a secure wallet.
Watch the values and sell when ready or spend it as more and more businesses begin to accept it.
Do not send crypto to a wallet that it was not designed for. You will loose it. For example you cannot sent Bitcoin to a Litecoin wallet. It just disappears. Someday they will solve this problem but for now it is an issue.
Do not store large amounts on exchange sites. Move it to a wallet. Exchange sites can be hacked.
Do not get involved in lending platforms. They are almost always Ponzi schemes.
Ripple – This is a crypto based on a privatized blockchain. It was created by Japanese banks for the banking industry. It can be used by the general public. Its token is known as XRP.
Dogecoin – What started off as a joke based on an internet meme about Shiba Inu dogs became one of the top cryptos. It’s hard to tell who is in charge of this project. The website undeveloped compared to most other projects, yet there it is, holding a spot among many other more serious cryptos.
People to Follow
Andreas Antonopolous Brock Pierce John McAffee Don Tapscott Banff Alberta Rick Falkvinge Leeman Baird Michael Maloney Mike Novagrats Vitalik Buterin
Doug Polk Crypto Mr Sotko Crypto Crypto 99 David Hay
In It For The Money Crypto Love Data Dash Boxmining Node Investor
Coin Market Cap
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