TL;DR You can read the entire post to better understand why you need a crypto wallet and exchange, but my final recommendation is to get started with Coinbase. Use my referral link to get $10 in free Bitcoin.
Let’s say that you have a very generous friend who wants to gift you some Bitcoin.
Where does she send it to?
You need a wallet of some sort to hold and send your Bitcoin.
Your wallet has an address, essentially just a random string of alphanumeric characters.
Your kind friend, from her wallet, sends you Bitcoin to your wallet address.
Your wallet address can be public facing — just like a Venmo ID or Paypal email you’d use for payment.
(Use cases: take donations for your blog or drop it in your Tinder profile.)
When you first create a wallet, you also get a private key. You’ll need this private key to open your wallet.
As the name implies, you keep your private key a secret.
No one can access your account unless:
- You share your address and private key
- Your wallet gets hacked (the analog equivalent would be getting robbed).
The difference between regular banking and cryptocurrency is that wallet addresses are public, so anyone can view the full history of transactions on that address.
It’s as if Venmo made all your transactions — including the amounts, not just cute emojis — public to the world.
This is essentially what blockchain technology is. A public ledger that anyone with an internet connection can see — all you need is someone’s address and look them up on a blockchain explorer website like Blockr.io or Etherscan.io.
For this reason, some wallets allow you to create multiple addresses to help protect your privacy.
Example: politicians might have some questionable (read: huge) transactions coming to their private wallet address. When asking for donations for a campaign, they can use a separate address altogether.
Now you’re wondering, where do I get such a wallet? Here’s where things get interesting.
Different types of crypto wallets
Now here’s the un-intuitive bit: You can’t necessarily hold all types of cryptocurrencies in one wallet (Btw, there are now over 800 cryptocurrencies other than Bitcoin).
In the analog world, you can hold different types of bills in one physical wallet — dollars, pounds, Chinese yuan — as long as it fits in your wallet.
In the crypto world, most cryptocurrencies have their own dedicated wallets.
Bitcoin Wallet, Ether Wallet, etc.
But such as they are in the crypto world, things change fast and there are always new and alternative options out there.
For example, the most popular Bitcoin wallet Blockchain.info used to only accept Bitcoin, but now it holds Ether too.
Besides digital wallets that hold your money in an online account, there are also desktop applications and hardware wallets to help you store cryptocurrency offline. That’s a topic for a whole ‘nother article, so we won’t get into that today (I know, the dizzying amount of options is cray).
Let’s say you don’t have that nice friend who’s just going to send you some sweet BTC. How can you get some for yourself from the market?
The most common step for people is to open an account on an cryptocurrency exchange. It’s just like opening up a trading account and buying stocks.
You want to find an exchange that lets you trade your fiat of choice — let’s say USD — into your cryptocurrency of choice (BTC, ETH, etc).
There’s a lot of shady exchanges out there with varying degrees of security. This is now where I make my recommendation…
Coinbase, the most user friendly starting point for cryptocurrency
The best place to start for newbies to cryptocurrency is Coinbase. There are several reasons why…
First, signing up for Coinbase grants you access to a wallet for three of the most popular cryptocurrencies: Bitcoin (BTC), Ether (ETH) and Litecoin (LTC).
Coinbase provides you the capability of creating unlimited addresses to help protect your security.
Then, you can buy BTC, ETH and LTC within Coinbase at current market rates.
Most importantly, Coinbase — at least for U.S. customers — is the most trustworthy and well known cryptocurrency exchanges. Headquartered in San Francisco, Coinbase has raised $200 million from investors.
Why this matters is that Coinbase is incentivized to perform and stay within regulations. In extreme cases of Coinbase being hacked, it’d be easier for class action lawsuits and consumer protection to help recover user funds, much more so compared to smaller overseas exchanges.
Coinbase is also one of the few crypto exchanges that offer FDIC insurance up to a maximum of $250,000.
Personally, I’m a UX guy so Coinbase also wins in the design category. The web & mobile apps are probably the most user friendly out of all cryptocurrency applications I’ve seen so far.
So there you go. Coinbase is time and time again my safest recommendation to friends who want to get started in cryptocurrency.
If you want to get a little boost when starting out, join Coinbase using my referral and get $10 in free Bitcoin:
Join Coinbase with Oz and get $10 in free Bitcoin
Full disclosure: I get the same reward too for you using my referral link when you invest your first $100. It doesn’t cost you anything to use Coinbase, so using my link gets you free crypto money vs signing up solo.
