Have you ever considered investing in cryptocurrency, but found it all overwhelming? It seems so complicated! What is the difference between tokens and coins? What are private keys, public keys and seeds?
On Wednesday morning, OneCoWork members were joined by Emily De Dios from the Waves Platform who shared the basics of cryptocurrency investment (along with cinnamon rolls).
This blog is a summary of the talk given on 25 July 2018 by Waves Platform and does not constitute advice from OneCoWork, the author nor the Waves Platform. All investments involve risk.
STEP 1: KNOW THE LINGOS AND DYR
Without knowing the necessary terminology, it becomes difficult to learn even the basics, given that all the articles out there are using them! So to get us started, Emily explained that FOMO means “fear to miss out” and is used to describe the urge to invest in a popular crypto. Crypto-whales are people who own a major amount of cryptocurrencies. DYR means “do your research”. Never enter the market unprepared, DYR and make sure you fully understand how the crypto works. FUD means “fear, uncertainty and doubt”. If you don’t DYR, you will have a lot of FUD.
STEP 2: UNDERSTANDING THE KEYS
You've done your research, you're now ready to sign up to a trading platform. But what on earth are seed, private key and public key? Though the terminology is unusual, it's really quite simple.
Your seed is a sequence of words with no meaning. Yes! It is gibberish, but these words are super important. It is what you need to retrieve the money you have in your encrypted crypto-wallet. It's the passcode to your safe.
Your private key is your password. It's long and complex, to keep your account secure. Don't share your seed or private key, but write them down in a safe place. Also consider entrusting your seed to someone, so that if the worst happens, your family can inherit the funds.
The public key is like a day pass to your office. If you want to invite someone to trade with you, you can send them your public key. It's a username, essentially.
STEP 3: CHOOSING A WALLET
Wallets are digital versions of the same thing! Normally there are two kinds of wallet, hot and cold. Hot wallets are like Google Drive. They are flexible and it is convenient to make changes to them. However, they are more vulnerable to internet attacks. Cold wallets are like Word documents. They are offline and stored in your computer or a special device. Though it's more troublesome, cold wallets are more secure.
STEP 4: PICK YOUR CURRENCY
There are more than 1500 cryptocurrencies in the world at the moment. All of them run in different algorithms and have different values. There are also tokens like cryptokitties which runs on the algorithms of coins. All in all, it is very confusing. Maybe your FUD level is rising again. No worries, you can start with well-known coins that are easy to understand, like Bitcoins and Etherium. Derivatives and ICOs often involve scams and are more risky, so most new traders stay away.
STEP 5: INVEST
It is never wise to go all-in from the get-go. Invest a small amount first. If you manage to make some revenue out of that, store it in your cold wallet. Perhaps only use the money you already have in the wallet for further investment. If you used up all the money in your wallet, maybe crypto investment isn’t for you after all. If you want to retrieve from your wallet, beware of the region you are in. Some countries like Germany and the US may tax you while other regions have different rules. In Spain, there are no current laws regulating cryptocurrency revenue. However you might choose to announce your revenue because you risk legal offense if a law is passed in the future to regulate cryptocurrencies.
Great round of applause to Emily for the enlightening breakfast club. We hope this is enough to help you start investing in crypto. That being said, there is always more information to the topic. Emily has been to OneCoWork before to host a roundtable talk about some advance and technical areas of cryptocurrency. Read our blog for that event to check out part 2 of cryptocurrency trading: https://www.onecowork.com/en/blog/cryptocurrency-danger-or-opportunity