Buying crypto for the first time can seem daunting. With so many new terms and platforms available, you might be wondering where to start. Should you opt for a crypto exchange or trade directly with a buyer/ seller?
Listed below are some of the safest ways you can buy and sell cryptocurrency online.
Using a crypto exchange
One of the most common methods for buying and selling cryptocurrency is using an exchange. However, making this decision will prompt another question, whether you should use a decentralized or centralized crypto exchange.
Creators invented cryptocurrency to be decentralized and promote individual sovereignty. As a result users can remain anonymous while exchanging one crypto for another.
On a decentralized exchange, the platform will not require users to provide identity verification. The major advantage of using a decentralized exchange is that there is no single point of failure. The platform does not store any cryptocurrency on their exchange, so you don’t need to worry about hacking. Instead, you will be required to manage your own cryptocurrency storage. However, you can’t buy crypto with fiat money on decentralized exchanges.
Peer-to-peer exchanges allow users to transact with each other. Every crypto trade you make is person to person; however, only under rare circumstances will you be able to select the person you are trading with.
To set up an account, users will need to provide an email address and password and then verify their account. Once registered, they can browse through the buy and sell offers available for the cryptocurrency of their choice. They will notice that each offer has a different rate and condition on the transaction, so you may choose to keep browsing until you find one that suits your needs. When you do, you may contact the seller to set up the transaction.
After a trader initiates a transaction, some platforms will require users to transfer funds to a third-party escrow service to guarantee security. An escrow service provider will hold either the whole payment or a fraction as collateral until the successful completion of the exchange. At that point, they will release the funds to the seller. If a conflict were to arise, the escrow could reimburse the funds to the buyer protecting the safety of both parties.
Oddly enough, the most popular exchanges are not decentralized and require user verification through Know Your Customer (KYC) protocols. Each of these exchanges offers unique and extensive features to ensure customer safety.
Once you have chosen a cryptocurrency exchange, you will need to gather personal documents to verify your identity. Be sure when you are setting up your account to follow generally practiced safe Internet standards such as using a complex password that is difficult to guess and two-factor authentication (2FA). After the exchange completes your verification, the platform will prompt investors to add a payment method such as a debit or credit card. It is important to look into the fees for using either method.
Larger exchanges may charge a 4% fee for certain credit cards, while others may charge a lot less. For investors, it is important to shop around and ensure you are getting the best deal when compared to the features of the exchange. It is also important to note that users must pay these fees in addition to the transaction fee, which may be a set amount or a percentage of the amount you are trading.
After setting up your payment, you can buy cryptocurrency. Users can simply place an order in the trading pair they would like to purchase. Like a brokerage account for traditional stocks, most cryptocurrency exchanges have high enough liquidity that the platform will fulfill your transaction almost instantly.
Buy crypto on Paypal
Another method of trading crypto online is using a payment processor such as PayPal. Users may choose to load their accounts with a balance. In turn, users can then use the balance to purchase cryptocurrencies on their accounts. Alternatively, investors may use their PayPal balance to purchase the digital currency from a third-party provider, which is often a much less convenient process.
Safely store your crypto
If you purchase from an exchange, the platform may generate an online wallet for you to store your crypto. This feature is effective if you store small amounts of crypto but can be risky if you have a large holding. In the past, cryptocurrency exchanges have been subject to attacks from anonymous hackers. Although these platforms have tightened up their security protocols, they still run largely unregulated by government authorities. Therefore, if a repeat of the Mt. Gox attack were to occur, investor funds would remain largely unprotected.
Therefore, to maintain safety when trading crypto online, a major factor comes down to safe storage. Moving funds into an offline wallet ensures users have full control of their private keys. These offline or cold wallets are not connected to the Internet and have a lower risk of being compromised. Among cold storage, platforms will generate paper wallets as a QR code printed on a piece of paper. Since the paper is the key to accessing your funds, many investors will leave these with their bank or keep them in a secure lockbox. Alternatively, several options for a hardware wallet will also exist. These wallets may also take the shape of a USB drive. Investors should store cryptocurrency through one of these two methods if they don’t plan on transacting with it right away.