How to buy, hold, and sell crypto
Keeping your crypto safe
Where to buy and sell cryptocurrency
If you're concerned about privacy, the best way to buy cryptocurrency is peer-to-peer. Look for sellers on internet forums and message groups, then meet in person (with a laptop) to make the transaction. This way, no one else knows about your purchase.
Centralized exchanges offer less privacy because you are required to verify your identify, which means that they (and potentially the government) will know the details of your crypto transactions. If this is not an issue for you or you're a beginner, centralized exchanges are the way to go.
How to "hold" cryptocurrency
Technically, all cryptocurrencies exist as a record on the blockchain, so nobody actually "holds" any.
Think of it like your bank account. Your money doesn't actually exist as stacks of cash sitting in a vault; It merely exists an electronic entry in the bank's computer systems. Similarly, all cryptocurrencies exist only in their respective blockchain records.
When you receive 1 bitcoin for example, what actually happens is that a record is made on the blockchain that 1 bitcoin is transferred from someone's account on the blockchain to your account on the blockchain. That's it. It's just an electronic record.
When you register at a centralized exchange, an exchange account (separate from a blockchain account) is created in your name. Let's call it a 'Binance account'.
When you buy 1 bitcoin, the exchange credits your Binance account with "1 bitcoin". This transaction exists only within the Binance computer systems (not the Bitcoin blockchain), so there are risks to it:
- The exchange's computer systems are a single point of failure. If something goes wrong there, you could lose all your cryptocurrency.
- Binance can - at their sole discretion - restrict access to your Binance account and your cryptocurrency at any time.
This is not to say that keeping your crypto at an exchange is always a bad thing. There are some benefits to it:
- You can sell your crypto quickly without having to find a buyer yourself
- The exchange computer systems are likely to be more secure than your personal computer or computing device
- It's easier (less hassle) to store your cryptocurrency at an exchange than anywhere else
Thus, if you're only investing a small amount in crypto and are willing to trust the exchange, it might not be a bad idea to hold your crypto there.
If you're investing a relatively large amount however, I'd suggest looking at the various forms of self storage.
If you want to take your crypto off the exchange and keep it yourself, you can do so with crypto wallets.
There are 3 main types (each with their pros and cons) which are explained in this video. I suggest re-watching it a few times to familiarize yourself with them.
Regardless of the type of wallet you use, never reveal your private key or seed phrase to anyone. Doing so is tentamount to giving them your crypto holdings.
And remember: Once your crypto is transferred off the exchange, you are fully responsible for them.
Though it costs a little and is slightly more inconvenient, I recommend using a hardware wallet; It's the best option for serious long term investors. The two most popular hardware wallets are Ledger and Trezor.
If you're going to use a hot wallet, make sure your computer system/mobile phone is not compromised by viruses, malware or keyloggers. A popular hot wallet is MetaMask.
Keeping your crypto secure
If you're storing your crypto in a personal (hot or hardware) wallet, pay extra attention to security. Because if you aren't careful, you can have everything in your wallet stolen from you; This has happened to many people who got scammed/hacked.
Here are some security best practices that will help keep your crypto safe.
1. Use new passwords
Many people use the same password for all their online accounts. This is very bad practice because if one online account is compromised (which is common), all other accounts are immediately compomised as well. For best results, use a random minimum 11-character password with uppercase and lowercase characters, numerics and special characters.
2. Use a password manager
If you use multiple websites/applications, I recommend having 1Password or LastPass to manage and auto-fill your login credentials. These are also great for generating strong passwords. All you need to do is remember a single master password and the password manager will do the rest.
3. Use 2-factor authentication (2FA)
2FA is one of the strongest security measures, so use it for every website/service you can. I recommend using Google Authenticator.
2FA via SMS is less secure so I don't recommend it.
4. When carrying out crypto transactions, use a separate browser with no extensions
Browser extensions are a big source of vulnerability; They can be illicitly programmed to copy your private/seed key - which must always be kept secret - and transmit it to unauthorized persons.
To prevent this from happening, use a separate browser with no extensions when carrying out crypto transactions.
Alternatively, use a separate profile on your existing browser. Here's how to set up a separate profile in Google Chrome.
5. Avoid clicking on ads
There are many scam advertisments that mimic legitmate applications and services. For example, see this fake Google ad for MyEtherWallet:
Notice how the domain for the ad is different from the real one. Bottom line: Don't click on ads. Just go directly to the website/application you wish to access.
6. Practice good online habits
The usual applies here. Don't open applications from people you don't know, and don't click links in emails from strangers. Anyone who gains access to your computer can easily gain access to your crypto wallet.
7. Use a hardware wallet
Every exchange and wallet provider has detailed tutorials on how to send and receive crypto. Go through them thoroughly to make sure you know what you're doing. If you make a mistake, you could lose the crypto you've sent!
*Tip: For your first transfer, just send a small amount of crypto so you don't lose much if you make a mistake. If the transfer is successful, you can then consider sending larger amounts.