Your Essential Guide to Cryptocurrency: Wallets, Payments & Investing
Cryptocurrencies are changing the market, with global revenue expected to reach €52.5 billion by 2024. The best cryptocurrencies to invest in for 2024 include Bitcoin, Ethereum, Binance Coin, Solana, and Ripple.
If you’re interested in crypto trading, then having the right wallet is crucial. Crypto wallets are designed for digital currencies and blockchain networks. They ensure a safe way to store and manage your coins.
There are two main types of crypto wallets: cold and hot. Each has its own storage methods and ways of use. In this cryptocurrency for beginners guide, we’ll explain the differences between crypto wallets and guide you on how to safely invest in cryptocurrency.
Cryptocurrency Basics: What is Cryptocurrency?
Cryptocurrency is a type of digital money that uses cryptography for secure online transactions. There are over 9,000 different types of cryptocurrency.
Unlike traditional money, it doesn’t depend on a central bank. Cryptocurrency operates on a decentralized technology called blockchain. One significant benefit is its independence and privacy since neither banks nor governments control it. Instead, a worldwide network of computers ensures the blockchain stays secure and trustworthy.
How Does Cryptocurrency Work?
Cryptocurrencies use a public ledger called blockchain to record all transactions. New coins are generated through mining, where computers solve puzzles to create them. You can also buy cryptocurrencies from brokers and keep them in secure digital wallets.
When you own cryptocurrency, you don’t have anything physical. You just hold a key that lets you transfer value directly to someone else without a mediator.
Benefits & Drawbacks of Cryptocurrency
Cryptocurrencies have the potential to revolutionize the financial system. However, the reality isn’t quite as perfect as the ideal vision of a decentralized world. So, let’s check out the benefits of crypto first to get a clearer picture:
- Many see cryptocurrency as protection against inflation.
- Crypto offers a new way to decentralize money.
- It enables fast and cost-effective global money transfers.
- Investing in crypto can be quite profitable.
- Using cryptocurrency is easy — all you need is a computer or smartphone with internet access.
- Your funds are safe as long as no one gets hold of your crypto wallet’s private key.
- Your account remains private because there is no third-party intervention.
Investing in cryptocurrency can be attractive and profitable, but you should think about the risks too:
- The government might monitor people’s financial transactions.
- In the blockchain world, a 51% attack is a risk. It occurs when a miner or a group of miners controls more than half of the network’s mining power.
- Most blockchains use proof-of-work. This means participants need powerful computers and the right hash to add a block.
What are the Safest Crypto Wallets for Beginners?
Every cryptocurrency wallet has a unique address, similar to a bank account number, used for sending and receiving funds. There are two main types of wallets to keep your cryptocurrency safe: hot wallets and cold wallets. While these terms might be new to you, the key distinction is that a hot wallet is connected to the internet, whereas a cold wallet is not.
Hot Crypto Wallets
A hot wallet is kept on an internet-connected device. Usually free, these wallets can also offer extra services like trading or staking for a fee. They make it easy to do crypto transactions, though they can be more vulnerable to hackers since they are online.
Cold Crypto Wallets
A cold wallet is kept on a device that doesn’t connect to the internet. You typically need to buy special hardware for it, which costs money. Since it’s offline, it provides better security from online threats. However, if you lose the hardware, recovering your crypto can be very tough.
| Hot wallets | Cold wallets | |
| Safety | Easier targets for online scams | The user’s private key stays offline |
| Ease of use | Simple to use with internet-connected devices | Setting up hardware devices with wallet apps can be tricky |
| Price | Most hot wallets are free but have transaction fees | Hardware wallets usually cost between $50 and $250 |
| Ways to use | Perfect for daily trading and crypto payments | Perfect for storing crypto long-term |
Setting Up Your Crypto Wallet
Setting up a software crypto wallet is crucial for anyone looking to trade and manage cryptocurrency. Here’s how:
Step 1: Choose a software wallet. Pick a trusted provider like Exodus or Electrum.
Step 2: Get the app and set up the wallet on your phone or computer.
Step 3: Make an account by following the setup instructions.
Step 4: Move your cryptocurrency into your new wallet.
Safe Payment and Exchange Methods
Safe payment means using a secure method to transfer money from one location to another. It’s essential to protect payments from potential fraud. There are also various payment or exchange options available, each with its own advantages and disadvantages.
Fiat Exchange Method
Let’s first explain what fiat currency is. Fiat money is a currency that doesn’t have physical backing but is legally used for buying goods and services. Most of the money we use today is fiat money.
You can exchange fiat money through various methods like bank transfers, credit/debit cards, and e-wallets such as PayPal. Bank transfers are secure and reliable. Credit/debit cards are convenient but can be prone to fraud if not protected. E-wallets like PayPal offer fast payments but might have limits on how much you can transfer and where you can use them.
Cryptocurrency Exchange Method
Cryptocurrency is a new way to pay, and it has some great perks compared to traditional methods. You can trade it in a few ways: decentralized exchanges (DEXs), centralized exchanges, peer-to-peer (P2P) exchanges, and ATMs.
DEXs use blockchain technology for secure and transparent transactions. Centralized exchanges, run by one company, offer more services but can be less secure. P2P exchanges let people buy and sell directly to each other without an intermediary. ATMs are a convenient way to buy cryptocurrency, though they’re not available everywhere because of government rules.
Safe Online Exchangers
When picking an online exchanger, ensure it has good security, like two-factor authentication, cold storage, and insurance. Choose one with a reliable and secure track record.
Some popular and safe options are Coinbase, Binance, and Kraken. Coinbase, for instance, is well-established and provides a secure wallet for storing cryptocurrency. Binance is another option known for its wide range of trading options and low fees. Kraken is probably the best exchange for fiat to crypto and is popular with serious traders and investors for its advanced features.
How to Choose Crypto Wallets?
As crypto becomes more popular, there are many wallet options available. It’s crucial to understand the different types of wallets and their pros and cons to choose the right one for you.
Best Crypto Wallets From Our Side
When picking a crypto wallet, you’ll need to decide between a cold wallet and a hot wallet. Cold wallets offer more security, while hot wallets are more convenient. As such, your choice depends on whether you prioritize security or convenience. For long-term storage, we’d suggest going with a cold wallet to avoid risks. For active use and quick access, however, a hot wallet is a better choice.
The best hot crypto wallets for 2024 are Zengo, MetaMask, and Coinbase. For cold wallets, you could use Ledger and Trezor.
Investment Potential in Cryptocurrency
Investing in cryptocurrency can lead to big profits through buying and holding coins such as Bitcoin, Litecoin, Ethereum, etc.
Crypto’s appeal for many buyers is its potential as an innovative digital investment. While some are in it for quick profits, others see it as a way to diversify their portfolios beyond traditional assets like stocks or real estate.
Is Cryptocurrency a Viable Investment?
You need to know your risk level, financial goals, and investment timeline to decide how much money should go into cryptocurrencies. They can be very unpredictable, so your comfort with risk will determine if they’re right for you. If big price swings keep you up at night, these might not be the best investments.
Risks of Cryptocurrency Investing
Here are some common risks associated with crypto investments:
- Crypto prices are very unpredictable and can change quickly. Many different factors cause these ups and downs.
- Government rules on crypto vary by place and can change frequently, making things even more uncertain.
- Not all cryptocurrencies or trading platforms are equal. Some, like Bitcoin, are more secure, while new coins can be riskier and more prone to scams. Last year, around 80% of Americans who were scammed in crypto and investment schemes lost money. Since there’s no insurance for lost or stolen crypto, it’s essential to research carefully before making any choices.
Pros and Cons of Buying Popular Cryptocurrencies
Let’s explore how to invest in cryptocurrency, including the potential benefits and downsides.
Pros of Buying Popular Cryptocurrencies
Investing in popular cryptocurrencies can be very rewarding. Here are some key benefits of cryptocurrency:
- Potential for high returns: Some popular cryptocurrencies have experienced substantial value growth, offering opportunities for high returns for crypto investors.
- Decentralization: Cryptocurrencies give users more freedom and privacy as there’s no central authority in control.
- Increasing percentage of users: Many businesses and organizations accept popular crypto coins as payment, which makes them a more viable investment option.
Cons of Buying Popular Cryptocurrencies
There are also some risks of investing in popular cryptocurrencies, like
- Volatility: Crypto prices can be volatile, with frequent large price swings.
- Security concerns: Cryptocurrency exchanges and wallets are vulnerable to fraud, which can cause the loss of funds.
- Complexity: Crypto assets can be challenging to understand and handle for those who are not familiar with blockchain technology.
How to Store Cryptocurrency Safely
Investing in cryptocurrency needs a mix of technical know-how and smart strategies to manage your funds well. So, be aware of the market’s ups and downs, and set reasonable return goals. This will help you spread out your investments across different cryptocurrencies to lower risks. Also, keep an eye on market trends and news that could impact your holdings.
For those wanting to minimize risks, there are several strategies on how to manage a crypto investment portfolio. One is using stop-loss orders, which automatically sell cryptocurrency assets at a certain price. Another safe option is to also store your coins in a secure digital wallet rather than on an exchange. Additionally, you can regularly check and adjust your portfolio to keep your investments on track.
What Should You Pay Special Attention to When Withdrawing
When withdrawing cryptocurrency, keep these important points in mind:
- Double-check the wallet address to ensure the funds go to the right place.
- Network fees can affect the speed and cost of the transaction, so check the current fees.
- Processing times can vary based on network traffic, so plan accordingly.
- To stay safe, enable two-factor authentication and use a secure internet connection.
Security Measures for Safe Transactions
It’s a great idea for everyone, no matter beginners and experts, to send small amounts of cryptocurrency at first to avoid scams.
For better security, use a mix of hardware and hot wallets. This way, you get the perfect balance of protection and ease.
Also, improve your security with password managers. They create strong, unique passwords and keep them safe, so you don’t have to remember them all. It’s an easy and effective way to protect your passcodes.
Common Crypto Scams & How to Avoid Them
Cryptocurrency scams typically fall into two categories:
- Hackers may try to get your digital wallet info or security codes, sometimes even targeting your computer or smartphone.
- Scammers might trick you into sending them cryptocurrency by pretending to be someone else or offering fake investment opportunities.
Here’s how to avoid crypto scams and stay safe:
- Always verify debt payment requests by calling the company’s official customer service. Real businesses won’t ask for cryptocurrency payments or offer rewards for using it
- Be cautious of investments that sound too good to be true
- Keep in mind that crypto transactions are irreversible, so you can’t get your money back once it’s sent
- Only invest what you can afford to lose
