If you are entering crypto, it is normal to have many doubts.
How do you start? Where can you buy and sell your assets? Which investments suit you best? Navigating this space can feel overwhelming at first, but don’t worry, we’re here to guide you through the first steps of your journey!
Unlike traditional financial markets, digital assets like BTC and ETH are traded on specialized cryptocurrency exchanges using blockchain technology, rather than stock exchanges or brokerage firms, acting as primary gateways for buying, selling, and managing them. While sharing similarities with stocks, such as price fluctuations, acquisition processes, and the value of strong fundamentals, they differ by existing across multiple blockchains instead of a single marketplace.
This means that to access and securely store them, you’ll need a cryptocurrency wallet.
Cryptocurrency Wallets
Your crypto wallet only gives you access to your assets, it doesn’t directly store them.
Through a set of a private key, a public key, and a digital signature, the wallet grants you access and control over your assets on the corresponding blockchain.
For example, your wallet on Bitcoin’s original blockchain will be used for Bitcoin transactions on that blockchain. Meanwhile, a wallet on the Ethereum network allows you to operate with various currencies beyond ETH (the network’s native currency) since Ethereum supports many other cryptocurrencies.
But having a blockchain-specific wallet isn’t enough, you also need to consider how and where you store your assets. Security, accessibility, and investment strategy all play a role in choosing the right type of crypto wallet.
Note: In reality, it is possible to transfer Bitcoin (among other cryptocurrencies) from its original network to other networks, but this is a subject for another article.
How to Analyze the Need for Investment Wallets in Cryptocurrencies?
There are different types of wallets, each with its own way of storing your keys, offering different advantages and disadvantages. Some are free, while others are available for purchase in specialized stores.
The two main types of crypto wallets are:
Cold wallets:
A cold wallet is usually designed for the long-term, secure cryptocurrency storage. It’s disconnected from the internet, making it immune to online attacks like hacking or phishing. Examples include:
Analog cold wallets: These are physical plates or papers with manually engraved private keys. Since they are not connected to electronic devices or the Internet, they are highly secure against hackers. However, they are harder to use and pose a risk of physical loss.
Digital cold wallets: These function like USB drives, storing keys in a similar way to analog wallets and offering the same level of security. They provide faster and easier access to the blockchain. Once connected to a computer and submitting a transaction online these wallets are no longer cold wallets but still offer more security, such as a physical signature with a code to submit transactions. The most famous ones are Ledger and Trezor.
Hot wallets:
A hot wallet, on the other hand, is connected to the internet, making it ideal for frequent use or quick transactions.
It includes software wallets (e.g., mobile apps like trust wallet or desktop clients), web wallets (like Metamask), and exchange accounts.
In short, cold wallets prioritize security, and hot wallets prioritize convenience. Many people use both, balancing risk and accessibility.
As mentioned earlier, your wallet only stores the keys used to access your assets. The main one is the private key, which is used to generate the public key and the signature, being:
Private key: A seemingly random and encrypted set of characters used to access your cryptocurrencies, as well as to authorize payments and transfers.
Public key: Works like an email address and is derived from the private key. It is used for others to send assets and cryptocurrencies to you.
Signature: A security mechanism. You "stamp" your transactions on the blockchain with it, attesting to being the rightful owner of the assets.
Thus, the keys and signature prove that you truly hold the assets on the network. Although the public key and signature are public information, it is of utmost importance to protect your private key.
We talked about how to store and transfer your tokens, but first, you need to buy these assets with regular fiat money, right? The most common way to do that is through exchanges.
How to Analyze Cryptocurrency Investment Platforms?
A variety of investment platforms exist, each offering distinct advantages, and at some point, anyone looking to invest in cryptocurrencies will need to engage with one of these platforms to get started.
Centralized Exchanges (CEX)
Centralized exchanges stand out for their speed, affordability, and user-friendly interfaces.
Operating much like traditional financial market brokers, they allow users to create an account, deposit funds, and seamlessly buy or trade assets. These platforms take on the responsibility of safeguarding users’ assets, blending security with convenience, an appealing combination for many investors.
For instance, platforms like NBX exemplify this model and can be a solid choice for those seeking a straightforward experience.
Decentralized Exchanges (DEX)
In contrast, decentralized exchanges prioritize user autonomy by requiring minimal personal information and leaving asset custody in the hands of the individual. While this offers greater control, it can prove daunting for newcomers due to its complexity.
DEXs typically offer a broader range of available assets, but this comes at the cost of higher fees and a greater need for study. As good examples, we can mention Uniswap, Orca, and Camelot.
It is important to say that advanced traders often leverage both CEXs and DEXs to optimize their strategies and profits. As such, it’s worth carefully evaluating your goals and skill level to determine which platform, or combination of platforms, best aligns with your investment approach.
Conclusion
Getting the hang of crypto investing basics, like keeping your assets safe with wallets and picking between centralized (CEX) or decentralized exchanges (DEX), is your ticket to riding the wild crypto wave. They say one hour in crypto feels like seven years anywhere else, and honestly, they’re not wrong!
In the next part of the article, we’ll explore how investors evaluate opportunities, breaking down methods such as fundamental investment research and risk assessment. Plus, we’ll dive into popular strategies like spot trading, staking, yield farming and much more. Stick around!
Stay tuned for more educational content about the crypto space, and go to NBX.com to start trading today!
