The Web 3 ecosystem has seen an explosion in user growth recently, and for good reason. Proof of Stake, DeFi, and NFTs have brought in a new era of participation for people buying cryptocurrency. Below are some useful tips for starting your Web 3 journey successfully as a token holder.
Looking to Buy Cryptocurrency with Fiat?
First, consider how you will store your cryptocurrencies after purchasing them. A cryptocurrency wallet is where you hold cryptocurrencies. Keep in mind that if your tokens get stolen from your wallet, you will most likely never get it back.
There are generally three types of wallets to store your tokens, with different levels of security:
- Online Wallets: A browser extension the quickest to set up and the least secure. Online wallets include Keplr or MetaMask. You can usually connect these to a Ledger device for added security.
- Software wallets: An app downloaded to a personal device, like Trust Wallet.
- Hardware Wallets: A portable device that can be plugged into a computer, like Ledger. Hardware wallets are the most secure.
If you’re using a web-based wallet, make sure you store your seed phrase offline and don’t lose it. If you forget your password and lose your seed phrase, you’ll lose your funds.
Where to Buy Cryptocurrency:
Coinbase is one of the largest and most recognized cryptocurrency exchanges; it accepts bank transfers, credit/debit cards, and PayPal. There are over 40 tokens like ETH, ATOM, GRT, CELO, and NU available for trading. You can find a full list here.
Kraken is also a popular exchange. Kraken allows for more trading pairs: cryptocurrency to cryptocurrency, and cryptocurrency to fiat and supports over 50 tokens for trading like KAVA and DOT. Find the full list here.
Binance is a global cryptocurrency exchange that supports over 280 tokens. We recommend only using Binance if you are already familiar with purchasing cryptocurrency from an exchange. Find a full list of tokens that Binance supports here.
Wyre + Metamask – You can bypass centralized exchanges entirely by purchasing Ethereum with your debit card using Wyre and Metamask. Fees are usually higher using a debit card, but you will have access to your tokens immediately.
There are a lot of exchanges out there, so if one that we’re listed isn’t available in your language check out this list here.
After you’ve purchased your crypto, you’ll want to transfer it out of the exchange and into a wallet. You’ll need the public wallet address. If you keep those funds with the third-party broker or exchange, that money is susceptible to security breaches. After purchase, move those funds into a wallet that you control. If you want to move funds off an exchange as soon as possible, it is recommended that you wire money instead of using ACH transfers of credit cards, which can take 5-7 days to clear.
It is important to never give anyone your private key information. No one legitimate will ever ask for that information and your funds will most likely be stolen.
Looking to Trade Tokens?
Coinbase or Kraken might not have the token you are looking for. You can purchase Bitcoin or Ethereum from an exchange, transfer them into a wallet, like MetaMask, and take them to a decentralized exchange like Uniswap. There are two different kinds of exchanges – centralized and decentralized.
- Fast trading – simple interface; high liquidity
- Limited control – requires private info; funds can be lost by a third party.
- Slow trading – sometimes challenging interface, low liquidity, high fees, and slippage
- Full control – no private info required; funds secured by smart contract
Centralized exchanges are currently most popular because they are easy to use and provide access to lots of liquidity. If you don’t have access to Kraken or Coinbase, you can find a list of some other popular exchanges here. Centralized exchanges have historically lost customer funds due to security breaches, negligence, and internal corruption, so we must emphasize the importance of moving your tokens off of an exchange once your funds clear.
If you want to keep your tokens on a centralized exchange, we recommend:
- Using a unique email address specifically for this account.
- Enabling 2FA (2 Factor Authentication)
- Whitelisting known addresses – this will limit where your cryptocurrency can be sent to in case someone is able to access your account.
Decentralized exchanges (DEXs) and automated market makers (AMMs) are less used in comparison to centralized exchanges, but are growing in demand. Users trust them to be more secure. Traders often rely on smart contract security to protect their funds rather than third-party custody. You cannot use a DEX or AMM to transfer cryptocurrencies back into fiat, but you can transfer them into stablecoins like USDC and DAI.
Using AMMs can be more tricky and risky for beginners. We recommend doing some research before getting your feet wet. Here are some article we like:
Depending on your local jurisdiction, you may need to pay taxes on any earnings you have made buying, selling, trading cryptocurrencies. There are also special rules associated with tokens earned through staking and participating in DeFi. If you are planning to make more than a couple trades, we recommend using a service like CoinTracker that will help you keep track of your trades and crypto earnings.
If you made it this far, congratulations! You now have all the basic information you need to start your journey as a Web 3 token holder. Stay tuned for more blockchain for beginners articles and sign-up below to receive our newsletter and weekly digest.