Cryptocurrency 101: What You Need to Know to Start Investing
Over the past year or so, cryptocurrency has made its way from a niche point of discussion to a phenomenon of popular culture, poised to impact day-to-day life as it continues to transform how goods and services can be bought and sold. Bitcoin is the most recognizable, but it’s just one of many forms of cryptocurrency that investors can choose from; some of the other popular ones in the market right now are Litecoin, Ethereum, Dash, and Ripple. And, as all these currencies are traded on a larger scale, the market has seen dozens of apps and platforms pop up to better manage a crypto portfolio.
It’s tempting to think you can simply go to an app store and find something reliable, but I found there are way too many options just to guess and pick properly. Instead, I decided to reach out to a few friends and colleagues who had already been investing and trading cryptocurrency for at least six months. I spoke with three individuals working at various tech companies in Silicon Valley with knowledge of cryptocurrency and how to invest in it.
I asked each of them: What app(s) should a beginner download to enter the cryptocurrency trading world?
The first piece of advice from all three was to get a dedicated app for my crypto wallet. A wallet is a program or application that securely stores the crypto, such as Bitcoin. These wallets, according to Investopedia, activate “a private key (secret number) for every Bitcoin address that is saved in the Bitcoin wallet of the person who owns the balance.”
I decided to take a look at Coinbase and Blockchain. A straightforward verification process allows you to link the Coinbase wallet to a bank account to buy and sell Bitcoin. There is an initial limit on what the user can instantly buy, but that doesn’t seem to be an issue for the average user.
With its simplicity of use comes some drawbacks, though. Most notably the transaction fees, which are upwards of 1.5 percent per transaction.
CNBC did a story at the end of 2017 highlighting the issue of big transaction fees, how individuals were paying $28 on average – as of December 2017 – to make transactions. It’s a problem, but a pain shared amongst all users.
When considering Coinbase, I spoke with a digital marketing analyst about the apps he’s using for buying/selling crypto. He said even though he downloaded both Coinbase and Blockchain, he’s stuck with Coinbase due to its ease of use. “I’m not too happy with the fees though. I’ve noticed some foreign transaction fees that I wasn’t aware of in the past. It also takes 7-10 days to deposit money from a bank account which has been a thorn in the day-to-day of trading,” he said.
Blockchain Wallet – similar to Coinbase – allows for a seamless process to enter the crypto world, but adds a layer of security. Blockchain Wallet, though, is different than the term blockchain. Cryptocurrency is the medium of exchange on a blockchain. As a result, blockchain is a medium of recording data – essentially a ledger that a variety of apps use, including Coinbase.
When I spoke with a Silicon Valley sales manager about the app he uses most for his crypto trading, he immediately dived into Blockchain Wallet’s security protocols, saying: “Simply put, Blockchain gives the individual user more control over of each transaction. I know if any of this stuff gets hacked, I’m better off with Blockchain [Wallet] because I’m part of the security process.”
After some research into both platforms, his statement made more sense. Coinbase handles 100 percent of the security for every transaction on their platform, but Blockchain Wallet has the user create a unique password as a part of a multi-factor authentication. Better safe than sorry, better Blockchain than CoinBase.
Ease of use, we’ve got covered. Security, check. What else could a new user want from their crypto trading platform?
I spoke to a mechanical engineer, a colleague and friend who has been buying and selling crypto for years now, about anything else he’d suggest to a beginner. He brought up that some apps like Coinbase and Blockchain Wallet don’t offer the best real-time data and tracking options. Enter an app like Blockfolio, not necessarily used as a wallet, but more of a virtual portfolio used for monitoring and analysis. He said, “I think most end up having an app used as a wallet, and one or two apps for analysis. Blockfolio is a great way to keep track of price swings and how different headlines in the news are making an impact on your portfolio.”
So there we have it. Choose between Coinbase and Blockchain for the wallet, then download an app like Blockfolio to monitor price changes.