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First Steps with Cryptocurrencies

Cryptocurrencies

Getting started with cryptocurrencies was harder than I thought

It took me quite some time to finally get started with cryptocurrencies. Probably some years too late to become insanely rich. But from my recent experience: early enough - as using this technology is still far from easy and therefore far from becoming a commodity. Which is by design, I have learned.

This article describes what needs to be done after the decision to get started has been made. For all the theoretical background and the very practical security advice, consult an expert or the internet or both (that's what I did). I got into cryptocurrencies in Germany - hence I am describing the necessary steps here for other newbies.

So my decision was made after thoroughly researching the topic, talking to some experts - and waiting for some time, hesitant to get started. I wanted to play around with various cryptocurrencies, not limiting myself to Bitcoin (which would have been considerably easier). So here's what I did, maybe these experiences are of some help.

I fugured I needed these tools to get started with what I wanted to do:

  • A bank account at a bank linked to a Bitcoin exchange for easy handling of the "money-to-Bitcoin" exchange
  • An account at a Bitcoin exchange I could trust (to the best of my knowledge)
  • A hot wallet for (half way) convenient and (half way) safe transactions
  • A hardware wallet for safe storage
  • An account at an exchange for other cryptocurrencies to not limit me to Bitcoin

So I started by getting a bank account at Fidor Bank. Then I set up an account at German Bitcoin exchange "bitcoin.de".

It took some time for the bank to verify my identity, so plan to wait for one or two days at this step. Once that was done, I transferred some money from my bank to Fidor. Which took another day.

Next, I set up an account on bitcoin.de, enabled two-factor authentication (this is suggested by the platform - I recommend to do it from the beginning) and linked my bitcoin.de account with my new Fidor bank account. All these steps are explained in detail on the platforms and work seamlessly.

Then I needed a hot wallet, something like an online purse, to transfer my money to and work with it. As stated above, I wanted to buy not only Bitcoin but other cryptocurrencies as well (like Ethereum). So my research gave me Exodus and Jaxx as alternatives, and I picked one. To safely store my money, I followed the recommendation of an expert friend and bought a Ledger Nano S hardware wallet.

After that, I was all set to buy Bitcoin. I decided to start with an end-to end test:

  • Buy Bitcoin on bitcoin.de
  • Transfer it to the hot wallet
  • Transfer ist to the hardware wallet
  • Transfer it back to the hot wallet
  • Transfer it back to bitcoin.de
  • And finally sell it, to see my money reappear on the Fidor bank account

This more or less worked like a charm, no major technical or process obstacles.  Well, until I wanted to transfer the Bitcoin from bitcoin.de  to my hot wallet.

Nothing happened, the website just told me I could not transfer. So I e-mailed bitcoin.de support and learned, I had to authenticate with them again, before I could perform my first withdrawal to my wallet. I found this pretty annoying for the simple reason they didn't tell me in advance. After going through another verification process, I was able to withdraw the Bitcoin, however.

The process from getting started to having bought and withdrawn my first Bitcoin took about five days in total. Just to give you an idea if you want to get started.

After successfully performing my test, I was ready for the next step: buy other cryptocurrencies than just Bitcoin. I thought about buying Ethereum and Golem for starters. Ethereum can be bought directly for money (just like Bitcoin) whereas Golem can't (as of now). However, I decided to use an exchange to buy both Ethereum and Golem with Bitcoin.

I got the recommendation to setup an account on poloniex.com to trade other cryptocurrencies, so this is what I did. And enabled two factor authentication as well, of course.

Now I was ready for the next and final end-to-end test:

  • Buy Bitcoin on bitcoin.de
  • Transfer it to the hot wallet
  • Transfer it to poloniex.com
  • Buy Ethereum and Golem, paying with Bitcoin
  • Transfer these to the hot wallet
  • Transfer them to the hardware wallet
  • Transfer them back to the hot wallet
  • Transfer them to poloniex.com
  • Sell Ethereum and Golem for Bitcoin
  • Transfer Bitcoin to the hot wallet
  • Transfer it to bitcoin.de
  • Sell it on bitcoin.de and get my money back

You get the point: it's harder than I thought, but it works. However, that's how buying and selling stock before the advent of online brokers was.

So I think if you are interested in the topic, you have to get started, learn how to do it - and practice it. With the additional complication of having to safely record and store keys, passwords, adresses etc. Probably a good place for these is a vault in a good, old fashioned bank.

To sum up on my experiences: it is not as easy as I thought, but it is doable. It needs some effort, but once you've mastered it, you feel much more up to speed for the cryptocurrency "revolution" than before. Try it out, hopefully this little text will help!

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