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How to Collect Cryptocurrency

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As the concept of cryptocurrency continues to push its way into the mainstream, it is also becoming easier for the average person to obtain. If you don’t care to familiarize yourself with the technical inner workings of crypto, you can just buy it with naira, dollars or yen. Before the Bitcoin mania of 2017, buying crypto was possible but difficult.

If you are looking for a way to build your crypto holdings without reducing your fiat holdings, consider mining and trading for it. You may be able to increase your crypto without giving up direct monetary value.

Mine Crypto

Like precious metals before, the first way to get crypto was to mine it. But Bitcoin (BTC) and Ether (ETH) aren’t hidden in the ground — they are your rewards for helping to dig up solutions to difficult problems within a digital network. Mining requires the biggest upfront investment, but it has arguably the highest payoff potential in terms of ROI.

How It Works

Decentralized cryptocurrency exists as a network of connected computers. Each computer serves as a verification hub for the transaction ledger, which eliminates the need for a central ledger. Ideally, no individual has the ability to change the transactions after they have been verified. This idea forms the basis of blockchain, the technology underlying Bitcoin and many other cryptocurrencies. 

Mining cryptocurrency means verifying transactions for the network. Your computer is one of many bank tellers writing down buys and sells and comparing your notes with other tellers. If your notes match with everyone else’s, the transaction is valid. By “proving your work” against everyone else’s work, the ledger validates itself and resists false transactions.

For this reason, traditional crypto mining is also known as the “proof of work” (PoW) validation model.

Equipment You Need

If you want to participate in a PoW network, you will spend some significant cash on computing power. You will need more power than any consumer-grade computer can provide. The bigger the network, the more computing power you need to compete for the work that needs to be proven. These hubs also use a considerable amount of electricity, which you will need to factor in your crypto mining costs.

Mining experts estimate that you would spend between $12,525 and $15,062 to mine 1 BTC on your own. This includes the cost of hardware, crypto mining software and electricity. If you don’t have that much to spend, you can join a mining pool. Mining pools are just like carpools — a way to get a group to a destination more efficiently.

You can purchase plug-and-play mining rigs or build them piecemeal. There are 3 major types of mining rigs: those powered through a central processing unit (CPU), graphics processing unit (GPU) and the application specific integrated circuit (ASIC).

  • CPU: Inexpensive and simple, the CPU is the most accessible rig type for crypto mining. Weekend warriors often modify their home computers to mine crypto straight from their current setup. Nonetheless, the CPU type is losing popularity because of its high electricity costs and lower ROI. But if you just want to download a few software programs and mine, this is your weapon of choice.
  • GPU: The powerful graphics cards in modern computer setups are actually better at mining crypto than most CPUs. They are more expensive, too, as many gamers will attest. You will be investing in plenty of cooling fans because mining crypto will take your GPU hardware to its limit.
  • ASIC: The application-specific integrated circuit (ASIC) is designed specifically to mine crypto. The ASIC is scarce because of its popularity, but it is extremely powerful — a dedicated ASIC can solve BTC problems 100,000 faster than any CPU. If you are willing to spend the money here, you will have an edge on other miners. Since they are specific to mining, however, they cannot be used for anything else after their lifespan is done. Many coins are actively trying to discourage the use of ASICs because of their enormous power.

Buy Cryptocurrency

If you don’t want to learn mining, skip all of the tech jargon and just use the money you have to buy crypto. Modern exchanges make these transactions relatively simple. If your chosen exchange supports a coin, you can get your hands on it.

There are 2 kinds of exchanges — the centralized exchange (CEX) and the decentralized exchange (DEX).

  • CEX: The centralized exchange is an exchange that takes responsibility for being the middleman between buyers and sellers of crypto. Because a CEX is a definitive entity, it is easier to regulate. Governments have used this characteristic to hold legal fiat-crypto transactions hostage to a degree. If you want to easily buy and sell BTC using U.S. dollars, you will likely need a CEX in the middle.
  • DEX: The decentralized exchange does not take responsibility for verifying the transactions on its platform. They are also known as peer-to-peer exchanges. The DEX simply provides a place to buy and sell. If your crypto seller finds a way to run off with your money, there is no 3rd party to appeal to. The advantage of a DEX is anonymity — you do not have to give up personal information in order to transact.

The largest and most trusted crypto exchanges in the world, including Bitmax, Binance, OKEx and Coinmama are all CEXs. Buying crypto on a centralized platform is usually easier because you can use traditional forms of payment like credit cards, debit cards and bank transfers. Exchanges like Coinmama also offer customer service and instant verification.

Decentralized exchanges are still the black sheep of the field, relying on more esoteric technologies like atomic swaps and smart contracts. The idea of a DEX corresponds more closely with the original idea of what crypto was created for — anonymity. Many DEXs actively avoid cooperating with government regulation. As a result, you may face slower transaction times and fewer transaction forms than with a CEX. In some cases, you may negotiate terms with your seller very directly, choosing to meet physically or exchange currency directly between wallets.

Trade Crypto

If you are familiar with a traditional stock trading platform, you should be able to learn how to trade crypto within an asset portfolio. You can participate in crypto IRAs for tax-deferred trading if you wish.

You can speculate on the prices of cryptocurrencies using contracts for difference (CFD) trading. With CFDs, you never actually own any of the crypto you’re trading, although the user interface looks the same as a crypto exchange.

Modern crypto trading allows for long and short trades, and you have more than 5,000 altcoins to choose from. You can also purchase options on Bitcoin futures through the Chicago Mercantile Exchange. If you want instant diversification, you can try a fund like Grayscale® Bitcoin Investment Trust (OTC: GBTC). Expect the same fees that come with the funds dedicated to other sectors, but if you don’t feel comfortable outside of traditional markets, this is your in.

Although the entire market is volatile, larger coins such as BTC and ETH tend to be less volatile than small-cap altcoins. Small caps generally have the potential for more growth, just like stocks.

One of the most important decisions you can make when trading crypto is the broker you will use. Be sure to thoroughly vet the feature set of your chosen broker before committing to it.

Best For
Buying & selling Bitcoin
Overall Rating
get started securely through Robinhood’s website
Best For
Crypto Trading
Overall Rating
Get started securely through eToro’s website
Best For
Crypto Trading
N/A
1 Minute Review

eToro, headquartered in Cyprus, England and Israel, has provided forex products and other CFD derivatives to retail clients since 2007. A major eToro plus is its social trading operations, including OpenBook, which allows new clients to copy trade the platform’s best performers. Its social trading features are top notch, but eToro loses points for its lack of tradable currency pairs and underwhelming research and customer service features

Best For
  • U.S.-based cryptocurrency traders
  • Social and copy traders
  • Simple user interface
  • Community engagement and following other traders
Pros
  • Expansive network of social trading features
  • Large client base for new traders to imitate
Cons
  • U.S. traders can only buy cryptocurrency
  • Only 15 cryptocurrency pairs available
Best For
New Investors
Overall Rating
try for free securely through Gemini Crypto’s website
Best For
New Investors
N/A
1 Minute Review

Gemini is a cryptocurrency exchange and custodian that offers investors access to 26 coins and tokens. Founded in the US, Gemini is expanding globally, in particular into Europe and Asia. Offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x.

Gemini is 1 of the only brokers with multiple platform options based on skill level. New investors will love the streamlined interface of Gemini’s mobile and web apps, while advanced investors might appreciate all the tools that come with ActiveTrader. 

In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review.

Best For
  • New investors looking for a simple mobile and web app
  • Experienced investors who need a more advanced platform with more tools
  • Users looking for a 1-stop-shop to buy, sell and store all of their coins
Pros
  • Easy and quick signups — can get started in as little as a few minutes
  • Multitude of platforms to accommodate traders of all skill levels
  • Hot wallets include insurance to protect your from theft and hacking attempts
Cons
  • Charges both a commission and a convenience fee for users buying and selling through the desktop or mobile app
Best For
Crypto Investing
Overall Rating
Get started securely through Coinbase’s website
Best For
Crypto Investing
N/A
1 Minute Review

Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs. 

You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality.

Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade.

Best For
  • New cryptocurrency traders
  • Cryptocurrency traders interested in major pairs
  • Cryptocurrency traders interested in a simple platform
Pros
  • Simple platform is easy to operate
  • Comprehensive mobile app mirrors desktop functionality
  • Coinbase Earn feature rewards you with crypto for learning about available coins
Cons
  • Higher fees than competitors

Collecting Your Future

Learning how to collect cryptocurrency is an important topic for all young and working investors. The industry has grown through good and bad times. Institutional investors are now offering us crypto investment tools — 5 years ago, they couldn’t stop bashing the concept. Whether you choose to directly invest in crypto, you should know how it affects the investments you have in your portfolio. Crypto will be an essential part of our future, and its collectors will likely have a huge say in humanity’s financial future.

Frequently Asked Questions

How can you convert cryptocurrency into cash?

1
How can you convert cryptocurrency into cash?
asked
1

The best way is through a cryptocurrency exchange such as Coinbase.

answered

What factors should you consider when cashing out of cryptocurrencies?

1
What factors should you consider when cashing out of cryptocurrencies?
asked
1

You need to think about the amount, transaction fees and timeframe.

answered

Try Gemini

Gemini builds crypto products to help you buy, sell, and store your bitcoin and cryptocurrency. You can buy bitcoin and crypto instantly and access all the tools you need to understand the crypto market and start investing, all through one clear, attractive interface. Gemini Crypto Platform offers excellent account management options. You can manage your account at a glance, view your account balance 24-hour changes and percent changes. Get started with Gemini now.

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