How do I set up a wallet? – Part 1
First we need to define wallet. Each particular type of cryptocurrency has it’s own syntax. For instance you can’t send Ethereum to a Bitcoin wallet. Now, what is a wallet? It can be a lot of things. The passcodes for a wallet could be written on a piece of paper, or even memorized. The most secure wallet is a “cold” wallet. That is, one that is not connected to a computer whatsoever, and cannot be hacked. There’s even a service that engraves the codes onto steel, making them fireproof.
So, for most new users a wallet is going to exist on the internet. For instance, if you have used the faucets right here on CryptoNinja.co than you already have a a CoinPot wallet. These are “hot” wallets, and while ultimately less secure, they make transactions much easier. We’ll talk more about wallets in Part 2.
How do I buy Bitcoin?
Well, you can GET some Bitcoin for free, right here at CryptoNinja.co by using the faucets. But not a lot. Let’s say you wanted to buy $1000 worth of Bitcoin and you had the money in US dollars. You might be able to find someone on LocalBitcoins.com or HodlHodl that will sell it to you in person. There are also Bitcoin ATMs but they may have limits, high fees, or not be available in your area. Of course there is a business that sells Bitcoin, you can even use a credit card, and that business is Coinbase. Update: Many credit cards have since banned purchasing crypto. You may have to link your bank account, or you can use the The Cash App.
Coinbase, in this way, is both a wallet and an exchange. You can hold Bitcoin in your “vault” there very securely and you can link it to your bank and sell it for USD any time you want. Coinbase also has an exchange called GDAX.
What is a cryptocurrency “exchange”?
An exchange is (like the NYSE, New York Stock Exchange) a service which completes trades for you. For instance, if you bought $1000 worth of Bitcoin, and decided you wanted to trade it for some Ethereum an exchange would allow you to do that. Trading, be it stocks or cryptocurrency is not for everyone, however for the small investor some of the perks these new Bitcoin exchanges provide are just fantastic, even if you aren’t an active trader. Just like in the gold rush the best way to get rich was to sell the picks and shovels, there is a lot of competetion amongst exchanges and there are new ones coming.
These are our top rated exchanges. – ALWAYS use a 2FA (2 Factor Authentication) app like Google Authenticator or Authy.
Note that I am not a financial adviser and you make your own decisions and take your own risks on exchanges, staking pools, etc. Bitmex is another one where you can trade on margin (with borrowed money) but it sounds super shady and I would suggest you avoid it. Not available to US customers.
Are there a lot of scams out there? How can I avoid them?
Yes. There is a group that continually run the same HYIP (High Yield Investment Program) cloud mining site and then disappear with everyone’s money after a couple weeks. Aurora Mine I believe was the first one. DO NOT register with any cloud mining service not listed on our cloud mining page. Also, there are a variety of “lending” sites, like Bitconnect that we don’t link to here, even though it would likely be very profitable for us, it just has to be a ponzi scheme. We only hope that when it crashes, it’s already priced into the market that it was a ponzi. All the smart people already know. (Update: since writing this Bitconnect has shut down its lending platform, and is getting sued). There are other scams and there are hackers and people that will try and steal your private keys. Be very carefull. Always set up Two Factor Authentication (2FA) on your “hot” wallets or exchange accounts.
Ok, so what if I want both hot and cold wallets?
There are “hardware” wallets which allow you to store Bitcoin and other cryptocurrencies offline when you aren’t using them, and then you plug them in, authenticate and they are hot. The Ledger Nano S is a very popular hardware wallet you can you use to be both secure and able to make transactions. There are even apps like the Airbitz wallet that allow you to have hot crypto on your phone, so you could easily make purchases in a retail setting.