Cryptocurrency made a splash a few years ago, surprising tons of people with its sudden, meteoric rise in value.
People were sceptical at first, but now we all know it is here to stay.
Which leaves people wondering: How does one get into cryptocurrency?
It all starts with getting some currency yourself.
But how do you do that? Well, there are three things you need: The first is a wallet to store it in. The second is a platform where you can buy it. And the third is a plan of what to do with it once you have it.
However, every cryptocurrency works slightly differently. They are all based on the same fundamentals, but some are going to be easier to trade than others. Take Ethereum, for example. Ethereum is one of the biggest names in cryptocurrency, second only to Bitcoin. This makes it one of the easiest to trade.
For this reason, we are going to examine how to buy Ethereum in the United Kingdom.
Table of Contents:
Step One: Getting a Crypto Wallet ➡️
Ethereum, like basically all cryptocurrency, gets its value from blockchain technology. But that sounds like such a buzzword. What does it mean? There is no simple answer to that without explaining the blockchain: The blockchain is a network of computers connected over the internet that host Ethereum.
Each computer is constantly sending signals to all the other computers telling them where the Ethereum they carry is, as well as where it has been. So, imagine there were only three computers on this network: A, B, and C. Computer A has a single Ethereum coin on it. It tells Computers B and C this.
Now all three computers have a record of where Computer A’s Ethereum is. If you ask Computer A, it will say it has it. But you can also ask Computer B, and it will say Computer A has it. Expand this idea out one million times. Every computer contains the information of every Ethereum on the network.
Why is a Wallet Important?
A cryptocurrency wallet is important because it allows you to keep your holdings secure. Remember, the blockchain does not exist on any one computer. It exists in between every computer connected to it.
That means every Ethereum coin is locked behind a password in the blockchain. A crypto wallet helps you keep track of the key to that lock. It can help you produce a more secure lock, and a more easily ready key. And perhaps most important, it can help you recover your keys if you lose them.
You can hold cryptocurrency without a wallet, but it will be far less secure. In that case, anyone who finds the password to your holdings will be able to transfer them with no external record of your owning them. And again, if you lose your key, it will be very hard to get it back without a service to help you.
It is worth mentioning that most trading platforms basically double as crypto wallets.
Which leads to the next thing you have to do…
Step Two: Using a Platform to Buy Your Crypto ➡️
Now is the step where the actual buying happens. Buying crypto is all about using the right platform. There are tons of different crypto trading platforms out there. Most are normal stock trading platforms that support the crypto trade. These are more limited and tend to come with hidden fees. Ignore them.
What you are going to want to look for is dedicated crypto communities. These provide three things:
- A large, communicative community that allows you to talk to people. This is important because no platform can make every person on it a bot. A community that talks is a community that cannot be censored, and a community that cannot be censored will be honest with you.
- Access to lots of different crypto currencies. While most platforms will allow you to trade in Ethereum, not all will. This feature is one that the stock trading platforms lack the most. If you are using one of those, make sure they trade in more than just Bitcoin.
- Little to no commission or account fees. Platforms have to keep the lights on somehow, so a little bit of a commission fee is fine. If a platform had no commission fees or account fees, they would have to plaster themselves with ads just to keep the lights on. The fees that are most acceptable are fees on the crypto you buy and sell. These should be small, preferably less than 2 or 3%. But read the account terms very carefully to make sure they do not have inactivity fees. These can cause your crypto holdings to disappear seemingly overnight.
How Do You Use a Platform?
Using a platform is far easier than it seems as long as you take it slow. To begin with, you are going to want to gather up a few things: Namely, you will want your bank account number and routing number, your personal information (including your social security number), and your crypto wallet keys.
You cannot buy crypto with a credit card, or at least you should not. You will need to link your bank account to whatever platform you use and fund it that way. Most platforms will not require you to use your social security number, so if that makes you uncomfortable then you can probably work around it.
The reason some platforms do ask for a social security number is because the money you make through them is taxable, and it is required for tax forms. It also keeps people limited to one account.
Even if you do not own any crypto, you can still get your crypto wallet and its keys sorted out in advance. This is a great way to show up prepared and make things easier for you later one.
Once you have all this together, go onto whatever account you want. Coinbase, Crypto.com, Robinhood, just about all of them work mostly the same, plus or minus a few features that they use as selling points.
Verifying and Funding Your Account
An important step in getting your account working is funding it, but you can't fund it until you verify it. Most often, platforms will verify your account by sending two amounts to your account. These will usually be less than a pound—on your bank statement it will look like +£.22 or +£.14.
The platform will ask for what amounts it sent you. Sometimes getting the amounts will take a few days. Remember that once they send a second amount, they will then subtract everything they sent you. So, if they sent you £.22 and £.14, they will then “charge” you £.16 right after that to keep things balanced.
This is important, as that last “charge” is not one of the amounts you should enter. Enter the two positives, not the one negative. After that, you can transfer funds to your account to spend!
Once you buy your Ethereum, what then? What do you do with it?
Step Three: What to do With Your Ethereum ➡️
When most people look at the way crypto works, they think they are looking at a new version of the stock market. They think that all you need to do is buy it low and sell it high and you will make money.
And this is not totally wrong. It is skipping a couple of steps, but you can treat your Ethereum like that and make some money. But there is something you can do with Ethereum that you cannot do with a stock. In fact, you can barely do it with any other cryptocurrency as well: Staking.
What is Staking?
Buying low and selling high will make you money in the short term. It is high risk, medium reward, and highly volatile. Staking and yield farming are what is known as “passive income strategies”.
This means that you do not have to actively participate in them. They earn money over time.
Staking is done on select staking services; usually separate from the platforms you actually buy the Ethereum from. Here is how it works: When someone spends Ethereum, the entire blockchain is notified of the movement. This takes a while and slows down transactions. Staking allows transactions to go fast.
While the actual transaction is processing, a “stakeholder” puts forward a pre-approved amount of Ethereum. Then, once the original transaction is approved, they are paid back, plus interest. By staking your Ethereum, you will slowly grow it as you accrue more and more interest payments.
The process of buying Ethereum in the United Kingdom starts with finding a crypto wallet to store your future Ethereum.
Then you must find a platform that works for you and buy the Ethereum itself. After you do that, you can either sell the Ethereum once it appreciates, or stake it to make money over time.
Whatever you do, buying Ethereum is not that different from buying other crypto. So, once you have this process down, there is very little stopping you from expanding into Bitcoin, Doge, and others.