There are a lot of reasons to get involved in the cryptocurrency economy. Champions of cryptocurrency site everything from political leanings to concerns about privacy; and from looking for new ways to find value to supporting new technologies.
There are plenty of uses for cryptocurrencies beyond buying and holding for investment purposes. A better system of remittance payments or smart contracts enabled by cryptography are just two examples.
In the future, I’ll be exploring some of reasons for excitement around the crypto economy in depth, but regardless of motivations, the first step in participating in the cryptocurrency economy is actually obtaining cryptocurrencies. There are a few ways to do this, but in this post I’ll focus on one of the easiest and most straightforward way for a new user: Using a traditional bank account to trade dollars for cryptocurrencies on an exchange.
I opened an account on Coinbase, a California-based exchange where you can buy Bitcoin and Ethereum.
Coinbase allows you to buy cryptocurrencies with US dollars. You are able to connect a credit/debit card or set bank transfers and then choose if you want to buy either Ethereum or Bitcoin.
It’s pretty simple to set up an account. You’ll have to create a Coinbase profile and then decide how you want to transfer funds.
Once you input your bank info, you’ll have to verify a couple of small transactions to make sure your accounts are synced up.
After your account is set up and working, the user interface that guides you through buying and selling is straightforward and easy to use.
After purchasing cryptocurrencies they are automatically transferred to a Coinbase wallet, where they can be stored or transferred. (I haven’t done that yet, but it looks pretty straightforward, and this feature can be used to send Bitcoin or Ethereum from Coinbase to another wallet or exchange and then buy different kinds of cryptocurrency.)
You are able to set up a two-step verification for accessing your account.
The two-step id and the bank account verification creates some level of confidence in the general security of the exchange.
There’s an option to automate weekly buying transactions, which is useful if you are trying to build up a position in Bitcoin or Ethereum over time.
If you use a credit or debit card you have to provide a lot of identifying information, just like you would with a traditional bank.
For some, the necessary step of inputting identifying information runs counter to idea of privacy enabled by cryptocurrencies. Put another way: you are giving up privacy for the ease and security.
There is a transaction fee associated with each cryptocurrency purchase (right now it’s about 3.99%) for a credit/debit card transaction.
Credit and debit card transactions have maximum transaction amount of $100 USD a week. If you want to up that limit you have to provide additional documentation confirming your identity.
If you are looking to start buying cryptocurrencies using the traditional financial infrastructure and are not looking to conduct financial transactions with a high level of privacy, buying cryptocurrencies through an exchange might be a good idea. You’ll have to provide identifying information, but the tradeoff is security.