Hackernoon logoA 10-minute guide to buy, sell, & store cryptocurrencies! by@Trex095

A 10-minute guide to buy, sell, & store cryptocurrencies!

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Source: https://tinyurl.com/ydczbovq

The best way to learn anything is to play with it — and well, play within limits if you are playing with your hard-earned money. This article is an attempt to ease the bootstrapping process which a new investor (or trader) usually struggles with.

If you are not aware of the basics of the blockchain or crypto-currency, I would advise to take a look at an article that I wrote last week.

The obvious questions that we face as a beginner are:

  • “What” to buy?
  • “Where” to buy it from and “How”?
  • “How” to store them properly? — a bit specific to cryptocurrencies.

“What” to buy? is a broader and complicated question, and let’s assume that you know that answer from a “friend”.

This article is going to cater the other two questions. Even these questions are hard to answer generically for every country (regulations, you know) and every A-Z coin but I will try to do my best.

How to buy & sell the coins?

For buying your favorite crypto-currency, you mostly have to buy Bitcoin (BTC) or Ethereum (ETH) first.

How to buy BTC or ETH?

An easy way to buy BTC or ETH is via Coinbase (sign-up). Coinbase is an exchange which is easy to use, provides basic functionalities and supports these coins at-the-moment — Bitcoin, Ethereum, Bitcoin Cash, Litecoin.

Although Coinbase is easy and fast in terms of transferring your money from your back account, it charges a huge amount in terms of the fee and doesn’t involve basic features like limit orders (buy or sell at a specified price or better)— in a market as volatile as crypto-currency, this is a must-have feature.

So what if not Coinbase?

Use GDAX— same entity as Coinbase, so, same credentials work and has added support for limit & stop orders. Fee at GDAX is super cheap (specially for limit-orders). The only issue with GDAX is that it doesn’t have a mobile app and it takes a while to transfer your funds back-and-forth from/to your bank — shouldn’t be a big deal.

Oops, I did not know that and have bought my coins on Coinbase. Can I transfer my funds from Coinbase to GDAX?

Yes, that is super easy.

a. Go to GDAX and click on “Deposit” of the respective currency — I have transferred Bitcoin Cash in this example.

b. Select the “Coinbase Address” and chose the “Source” to be respective wallet — “BCH Wallet” in this case. Put the amount of coins you want to transfer. I am transferring 0.1 BCH from Coinbase to GDAX.

c. Click on “Deposit funds” and you are done. Your coins will be reflected in GDAX account almost immediately without any fee.

Now you have figured a way to buy the currencies listed on Coinbase/Gdax with almost no fee.

What if you want to buy other coins — altcoins? Here are some most asked questions in today’s world.

  • How do I buy IOTA?
  • How do I buy Ripple?
  • How do I buy Verge, Cardano, Neo, Tron etc. etc.?

These are the steps I follow and have found them to be pretty reliable and simple.

Step 1: Go to Coinmarketcap

Step 2: Search for the cryptocurrency you are interested into

Step 3: Visit the page and look at the bottom section containing “Charts”, “Markets”, “Tools” etc.

All these tabs are important if you are looking to buy a coin (including the links on the top-left) but the “Markets” is the one that tells you where you can buy this coin from. They are all exchanges and depending on the reach/ caliber of the coin, they get listed on ’n’ different exchanges. The ones I have traded with are — Bittrex, Binance, and HitBtc.

Most of the coins can be found on these exchanges. If not, you can find the exchange your coin is listed on and create your account there.

Step 4: Now transfer your bitcoin (or ETH if the exchange allows it) to the exchange where your coin is listed.

a. As an example, go to the Bittrex, click on “Wallet”.

b. Search for the coin you want to transfer and click on the “+” sign on the left.

c. It will open a box with an address at the top. Use that address to deposit coins from your Gdax account — click on “Withdraw” and provide the address.

d. After some time, amount should be reflected in your Bittrex account.

e. Needless to say, transfer a small amount the first time.

Step 5: Buy the coin from the exchange.

a. Click on “Bittrex” at top left.

b. Go to “Ethereum Market” or “Bitcoin Market” as per what you have transferred from Gdax.

c. Select the coin you want to buy — I am buying Cardano from Ethereum in this image.

d. On the final landing page, put the limit price you are ready to pay per coin with the basic details. As you can see the conversion is on the basis of ETH and not the USD. This is normal case on most of the exchanges which don’t directly deal with fiat currencies.

Well, you are done buying the coin. Pretty simple, right?

It indeed is. People mostly get lost in finding the exchange which is a simple process and then the interface of the exchange but once you get used to a couple of exchanges, it is all the same.

Oh, I did not talk about the selling. But that is the same process as buying but in the reverse direction.

  • You sell your altcoins on the exchange that you bought it from.
  • You get ETH or BTC on the exchange.
  • You transfer your BTC or ETH to your GDAX account.
  • You sell your BTC/ETH and send the fiat money to your bank account.

Security — how to store the coins?

“The only truly secure system is one that is powered off, cast in a block of concrete and sealed in a lead-lined room with armed guards.”
– Gene Spafford

Now that you know how to trade the cryptocurrencies, comes the most important aspect — storing them.

This is a beginner’s guide and that’s why we will only be covering the basic aspects of security.

So, “where are the crypto-currencies stored?” — in a wallet.

Does that mean that our currencies are in the wallet?

No, coins are NOT stored in the wallet and that is one of the biggest misbeliefs people have.

Coins are stored in the blockchain and that’s where all our money is.

So, “what are the wallets for?”

Your wallet stores the secret (or private) key and your public address to interact with the blockchain securely. If you don’t have your “private” key, although the money would be available on the blockchain, there would be no way to access them — it’s like forgetting your password with no “Forgot Password?” option.

And that is the biggest threat in crypto-investing world — losing your private key.

So, “how can you lose your private key?”

Well, to lose it, you have to have it — yes, not many people keep their private keys with them. If you keep your Bitcoin or Ethereum at GDAX/Coinbase, you never had access to your private keys. Same is the case with using Bittrex, Binance, or any other exchange. If your coin stays with an exchange, the respective exchange keeps your private key and it is their responsibility to ensure the security of your data — sounds easy enough, right? Security is hard and securing millions of accounts is even harder. If a hacker manages to breach the security of the exchange, a lot of people lose their hard-earned money.

There are many other ways where our account could be compromised without the exchange being compromised.

So, how do you keep your private keys securely? There are different ways to store them in your own wallet:

  • Software Wallet — Private keys are stored on your computer (desktop wallet), mobile (mobile wallet) or a third-party service (online or cloud wallet) and you can use them whenever you need.
  • Hardware Wallet — These wallets differ from the software wallet in the sense that keys are stored in a separate device and effectively disconnected from the internet unless you have to do the transaction.
  • Paper Wallet— One of the best ways to store your cryptocurrency is using a paper wallet. In simplistic terms, you write down your public and private keys on a piece of paper and keep that paper secure — obviously.

Let’s cover a couple of basic concepts with references which you can use.

Software Wallets

Third-party software wallets are easier to setup but they have inherent issue of your key being stored with someone else. Desktop wallets are recommended in this category as they are mostly offline and pretty secure as long as your computer is not hacked. So, let’s discuss a bit about the desktop wallets.

Exodus is a pretty new but easy-to-use and easy-to-setup desktop software wallet that you download onto your computer. It’s backed up with not only your password but also with an auto-generated passphrase. Exodus is also integrated with Shapeshift.io — in case you want to trade a few crypto-currencies.

No matter which wallet you use, it’s always recommended to keep a backup of your keys and there is an easy-to-follow guideline for backup & restore for exodus.

Hardware Wallets

If you trade on regular basis and are willing to spend ~$100, this is probably one of the best ways to store the private key of your account.

Hardware wallets can be compatible with several web interfaces or apps and can support a bunch of coins. Although the keys are stored in a hardware device, making a transaction is easy. You simply plug-in your device to any internet-enabled device, enter your pin and perform the transaction — confirmation is managed via hardware device.

There are some good products in the market but Ledger Nano S is my personal favorite.

If you decide to buy Ledger Nano S, follow the instructions on their website to set it up.

These are some small but important things to keep in mind:

  • Order from authorized websites.
  • Ensure that you reset your device once you receive it.
  • Backup — Keep the copy of your seed i.e. a n-word sheet to recover your data, at two (or more) physical places.

Can I store Altcoins (other coins than Bitcoin) with hardware wallet?

Yes, a bunch of them. As long as they follow Ethereum contracts (ERC20 compatible), you can use MyEtherWallet to transact the AltCoins via Ledger Nano S. Additionally, Ledger Nano S has native support for a bunch of coins via a cleaner interface.

What if the coin is not supported by my wallet?

Some coins like IOTA have fundamental differences and they aren’t supported on many wallets. Respective coins usually have a way on how to store these coins in a secure way.

Paper Wallets

Paper wallets are probably the most secure and old-school way to store the crypto-coins. I would recommend to have paper wallet if you are in for a long haul and are not going to do a lot of trading — hardware wallets are more suitable otherwise.

Private key in a paper wallet is kept on a piece of paper (given that you don’t use an additional software to make them a Desktop wallet) which is not connected to internet. But anyone can read and copy that information if they manage to find that paper. Hardware wallets don’t give that key even to you — although hardware wallet has a seed which can be compromised in a similar way.

How to create a paper wallet?

We use online tools like WalletGenerator or MyEtherWallet to generate the keys for the first time and store them forever. We only use them while making the transaction.

There is a very good step-by-step guide on blockgeeks for creating the paper wallet, if you are planning to have one.

Sample Paper Wallet for ETH

….if keeping your coins on Exchanges

This is not the recommended option but if you just started, you might be too lazy to setup your own wallet or to buy a hardware wallet.

Even with a good exchange, these are the mandatory things to keep in mind:

  • Use difficult & different passwords per exchange.
  • Use two factor authentication using Google Authenticator app — DO NOT use text-message based 2-factor-authentication.

Hopefully, these details help you take baby steps and make 2018 a great year of investing.

Happy New Year!!

Still have questions? Feel free to drop a note and I will try my best to answer them!

Disclaimer: This post is purely educational and opinions are my own. Please do not use this as a professional investment advice.


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