You know something is changing when parents are talking Bitcoin over a playdate with the kids.
I recently arrived home from work to hear my wife having a chat with a friend of hers about Bitcoin – meaning that digital or cryptocurrencies are starting to go mainstream.
Cryptocurrencies have long been talked about as a solution with the potential to shake the foundations of financial, political and transactional systems around the world – but most people don’t know what these currencies are or how to use them.
I was one of these people, watching from the sidelines but never jumping in. I decided this had to change and I needed to delve in and buy some cryptocurrency of my own.
What is a cryptocurrency?
The easiest (maybe not 100 percent accurate) way to think about what a cryptocurrency is, is to say it’s a digital currency. They are created to facilitate fast payment or transactions between two entities in an electronic way.
Not all are equivalent to money, they can be a validation of a transaction or a way to record (securely and in a trusted way) data in the blockchain.
Examples of cryptocurrency
There are a lot of currencies (at time of writing there are over 830), with the most well known being Bitcoin.
I wanted to explore a couple of currencies to see what the noise was about and where they might be used, but I am not about to explore them all.
Bitcoin: this is the most well-known of the cryptocurrencies and was the first decentralised – meaning no one body controls it. Each coin is ‘discovered’ through mining – which is the repetitive verification of transactions on the blockchain. This makes the blockchain highly secure and data on it unchallengeable.
Ethereum: in concept, this is a ‘big computer made up of small computers’ and Ether (unit of currency) is transacted in exchange for time using this machine.
Ripple (XRP): Ripple is a payment network (among other things) and XRP is the unit of currency for near instant transfer movement of money between A and B – saving both time and money. 15 of the top 50 banks are using the Ripple network.
I decided that these were the three I was going to begin exploring, as they related to areas I know a little about.
How do you buy cryptocurrency?
One of the most frustrating first steps I had in exploring cryptocurrency was figuring out how to actually buy it.
It works a bit like walking into a bank and exchanging AUD in your wallet and walking out with USD. First of all, you need a wallet – software that allows you to store your currency. Most wallets also work as exchanges allowing you to buy, trade and exchange currency.
It’s important to note that some wallets will allow you to pay for cyrptocurrency in AUD, but not to convert it back.
Once you have your wallet you’ll need a way to load it with funds. Some allow you to use a credit or debit card, some allow you to load from other cryptocurrencies, some allow integration to your bank, and others will use local payment methods to allow you to load funds. Each will have different regulations and rules around the loading, and wait times for funds to arrive in your account.
I ended up selecting CoinJar (because they have an EFTPOS card, meaning I can buy everyday items like milk, bread and coffee) and CoinSpot (because it’s easy to get AUD in and out, and they support a huge range of coins) my foray – you may find other wallets that suit your needs better.
What else may you need?
All wallets will require some level of verification of who you are. They all do this differently so when you are registering you’ll find you will need documentation such as a passport, driver’s license or other forms of ID to get started. Think about it like opening an account with a financial institution.
It’s also worth checking what sort of access, fees, and security measures your selected wallet features.
The security point is especially important, as most wallets expect you to store recovery words, phrases or keys in an offline environment.
So, what have I learned?
I’m still very new to the world of cryptocurrencies, but I’ve found it fascinating to see the price fluctuations happening in real time. I’ve seen some currencies increase in value by 800 percent, only to fall drastically two days later.
Many banks are wary of cryptocurrencies, and none of the mainstream banks at this stage support cryptocurrencies, but the big banks in Australia and New Zealand are involved in and experimenting with them.
Now I’ve leapt over some of the hurdles in setting up my wallet and getting my head around how to buy and sell cryptocurrency, I’m finding it easier to explore different currencies and use them in online and offline transactions.
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