An Introduction to Cryptocurrency


Below is a quick guide I put together to help you understand what Cryptocurrency is, how to buy, store and use it. This post contains many great resources, as I  really tried to leverage existing work and not reinvent the wheel.

What is Cryptocurrency (Bitcoin, Ethereum, Litecoin, and many, many other)?

  • Here is the Oxford Definition:

  • Here is My Definition:
    • Cryptocurrency typically refers to a digital asset that utilizes blockchain technology.
    • Some cryptocurrencies behave more like fiat currency (Bitcoin, Ethereum, etc.), while others are more similar to equity shares/Stocks (STEEM, OMG, PAY, etc.)
  • Here is a simple 2 min Infographic Video that explains Bitcoin (one of the many cryptocurrencies). Note that this YouTube video is from 2011, then Bitcoin was just $1, if you invested a $100 you would be a millionaire today.
  • Coin “mining” is a critical part of the whole process here is a short 9 min video by Vice News that goes a bit deeper into Bitcoin mining. No pickaxes needed.
  • If you want to understand what’s “under the hood” of cryptocurrency, check out this “Blockchain 101” video is a bit long (17 min), but this was the video that really made it all ‘click’ for me.
  • If you’re a fan of podcasts check out this one by Tim Ferris where he learns about cryptocurrency http://tim.blog/2017/06/04/nick-szabo/
  • If you have some time on your hands check out these great cryptocurrency documentaries.

How do you Buy Cryptocurrency ? 

  1. Decide on the best exchange for you.
    • These articles from coincentral.com might help
  • Coinbase vs Gemini
  • Coinbase vs GDAX
  • I would recommend starting with Coin Base (Yes that’s a referral link, if you deposit more than $100, I get $10 and I will use it wisely, thank you)
  • Once you become more comfortable with cryptos I’d definitely look into other exchanges. FYI, you can access GDAX using your Coin Base account as they are owned by the same company. GDAX.com is designed more for traders but offers much lower trading fees.
  • There are many others, but I would try to stick to the larger ones, exchanges have crashed in the past , but don’t worry, below I’ll show you how to store your cryptocurrencies outside of exchanges.
  1. Open an account, get verified* and deposit funds ($)**
    • * Be aware this can take WEEKS, so start the process today, even if you’re not ready to invest.
    • ** Some exchanges like Coin Base allow you to buy cryptocurrencies, using Credit Cards, for an additional fee of course
    • If you don’t want to buy coins  through a traditional exchange, you can use services like Local Coins or even Craigslist.
  2. Decide on what you want to buy
    • There is really no right answer for this but one option to consider is diversification
    • If I was to invest $1000 and used only Coin Base I would buy $500 of Bitcoin, $300 of Etherum and $200 Litecoin. (Updated 11/19/17)
  3. Decide on the right time to buy.
    • Again, there is really no correct answer for this question.
    • My thoughts are that if you are buying for long-term holding (over 1 year), then don’t worry about it and buy today, the price might drop in the near future but it will be back  up long run.
    • On the other hand if you think you might need to withdraw this money in the next 3 months, I would be more aware of the market conditions and always keep in mind the phase “Buy Low, Sell High”.
    • Another approach to consider is ‘dollar cost averaging‘ where you make your purchases in several small chunks over a period of a couple days, this way you are able to hedge yourself against drastic changes in price.

Please remember THIS IS NOT FINANCIAL ADVICE, only you are responsible for the decisions you make with your money.

Where do you Store Cryptocurrency ? 

  • The exchange where you bought it, but this is Risky! (If the exchange goes down, so do your cryptos)
  • In a Paper or Digital Wallet
    • When you open a cryptocurrency wallet you are given two numbers or ‘keys’
      • A Public Key/Address  is used for Deposits , think of this as your ‘Account Number” 
      • A Privet Key is used for Withdrawals, this is more like your ‘Password
      • DO NOT SHARE YOUR PRIVATE KEY!

ledger nano s

  • Here is a great cryptocurrency wallet overview by Ameer Rosic

 


How do I Spend Cryptocurrency?

 

Additional Resources on Cryptocurrency

*All Information on this page and other pages at www.alwaysimprove.me are for educational and entertainment purposes only and are in no way meant as  financial advice.

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