Crypto terminology and crypto wallets
There is some crypto terminology you need to know in order to buy crypto currency. Good news - you should already know a lot of terms by now, except for crypto wallets. These terms are important because you cannot just go to any crypto exchange and buy any crypto currency.
What are some of the most popular crypto currencies?
You should know that Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), and Litecoin (LTC) are four of the most popular crypto currencies. Anyone discussing crypto currencies should be familiar with these crypto currencies. To see what are the most popular cryptocurrencies - check these websites for prices:
What is a crypto exchange?
A crypto exchange is where you buy or sell crypto currencies. Similar to a stock exchange where you buy stocks. Typically online. You can use a credit or debit card to purchase Bitcoin, Ethereum, or Litecoin.
Note - each exchange supports different crypto currencies. For example, some crypto exchanges only allow you to buy and sell Bitcoin. Other crypto exchanges only allow you to buy and sell Bitcoin and Ethereum. Some crypto exchanges allow you buy over 100 different crypto currencies - but are not considered as reliable / reputable / secure as other crypto exchanges.
We will tell you what crypto exchanges have the highest reputation and what crypto currencies are bought and sold at those exchanges.
What is a crypto wallet?
A crypto currency wallet is where you store your crypto currencies. When you buy crypto currency you have to put your coins in a crypto wallet. There are several general categories of crypto wallets:
- Online wallet - a website is your wallet and holds your crypto currencies online. Although this is convenient - it is easier for hackers to steal your money.
- Paper wallet - you can transfer your crypto currencies to a piece of paper with a bunch of security codes on it. It's like printing a $1,000 dollar bill. If that $1,000 bill gets lost, stolen, burned up in a fire - it's gone! There are a bunch of security codes that go along with the paper wallet. If you lose those security codes - you've also lost your crypto currency.
- Hardware wallet - this is a special hardware device that plugs into a USB drive of your computer and allows you to store crypto currencies. Your crypto currency is stored on that hardware wallet. If you lose that wallet - your crypto currency may be gone. If you lose the security phrases for that hardware wallet - you may or may not lose your crypto currency. If someone steals your hardware wallet - but not your security codes - you can usually recover your crypto currencies. Hardware wallets are typically considered the best type of wallet since they are more secure than online wallets but easier to use than paper wallets. But hardware wallets usually cost around $100 each.
- Device wallet - you can store your crypto currency on your cell phone or computer hard drive. A lot of people do this - but if you lose your cell phone or computer - or if your cell phone or computer is damaged - you may have problems recovering your crypto currency.
Before you can buy crypto currency
- You have to make sure your wallet(s) can hold the crypto currency you want to buy. Some wallets only hold Bitcoin but you want to buy Ethereum. Other wallets may hold Ethereum but not Bitcoin. So you might end up with two wallets - one wallet to hold Bitcoin and the other wallet to hold Ethereum.
- You have to setup your wallet(s). Usually not too difficult - just a bunch of hoops to jump through and then saving a lot of very important security words and numbers in a safe place. We highly recommend a fire and water proof safe designed for paper documents.
- You have to provide your wallet address to receive the crypto currency. When you give money to a crypto exchange to buy a crypto currency - the exchange asks for the address of your wallet and then the exchange sends the crypto currency you bought to the wallet address.
Example of crypto terminology and crypto wallet
Let's say you want to buy $100 worth of Bitcoin, $100 worth of Ethereum, and $100 worth of Litecoin.
First, you have to find a wallet that will hold Bitcoin, Ethereum, and Litecoin. Some wallets only hold Bitcoin. Other wallets only hold Ethereum. Other wallets may hold Bitcoin and Ethereum but not Litecoin.
After you buy crypto currency - you receive some number of Bitcoin, Ethereum, and Litcoin. Where are you going to store them? In your crypto wallet.
We know this concept of the wallet is crazy sounding to beginning crypto investors. The reason we went over all of this is because the wallet you choose is important.
Assuming your first purchases will be small amounts (not tens of thousands of $) - we will suggest an online crypto wallet that we think is secure and you will not have to worry about a crypto wallet to get started.
You can buy crypto currency now and figure out crypto wallets later.
Why did we tell you about cryptowallets?
Here is the most confusing concept for beginning crypto investors.
You cannot just pick any crypto currency you want to buy and just pick any crypto exchange you want to use. Many exchanges do not have online crypto wallets. Different crypto exchanges buy and sell different crypto currencies. Different crypto wallets support different crypto currencies.
What you need is a crypto exchange that supports several crypto currencies and stores your cryptocurrencies - securely - online so you do not need a cryptowallet. We will tell you how.