Are you brand new to crypto? Worried you’ll never “catch up”? We got you - here’s everything you need to know about buying cryptocurrency in 2022.
What is Cryptocurrency?
We leverage currency every day. Your national currency might be dollars, euros, pesos, rupees, etc. Regardless of where we live, we all use a form of currency to buy and sell goods, assets, or services. So is a cryptocurrency just another kind of currency? Almost, but with a twist.
Yes, cryptocurrency is another kind of currency, existing in a virtual or digital format, used globally to transfer money. However, cryptocurrency is different from traditional money used for exchanging wealth. It is backed by software, a “peer-to-peer network”, giving additional features or functionality that money doesn’t have.
Spend a few minutes researching different types of cryptocurrency (such as in our article, Beginners Guide to Different Types of Cryptocurrency). You will see thousands of names all claiming to do something revolutionary or important. Often, the use case is more than just sending and receiving the money to your friends. But for a moment, let’s start there.
Let’s say you purchase a deli sandwich using your credit card today. You can log into your bank account and see a record of the transaction. You see that $10.59 (it was a fancy sandwich) was moved from your account to the cafe’s account. The cafe owner can log into their bank account and see that you sent them $10.59.
Now, let’s think about if you made the purchase using cryptocurrency. You still pay for your sandwich. Instead of seeing the transaction record in a bank account, the transaction record is sent to a network of computers across the world, called a blockchain. Each computer performs some work to validate that $10.59 moved from my account to the cafe's account. Now, when I purchase groceries tonight, this blockchain verifies how much currency I have in my account and ensures that I have enough to buy the groceries. Essentially, the network of computers agrees or disagrees with the monetary transaction. The transaction goes through if the network decides that I have enough currency in my account.
Now that we better understand cryptocurrency and the blockchain, let’s learn more about why it exists. You wouldn’t buy a sandwich using cryptocurrency. Or would you?
Why Do We Use Cryptocurrency?
Cryptocurrency can be used in a variety of ways. Some people purchase cryptocurrency as an investment, betting that the overall value will increase over time (similar to the stock market). Some cryptocurrencies are used to send or receive digital payments safely and quickly. More and more companies (especially those with global teams) rely on cryptocurrency to distribute and share their business profits.
Cryptocurrency is used in new and different ways as it becomes safer, more sophisticated, and adopted by more and more people.
Top Ways to Use Cryptocurrency:
::ordered-list-with-border :::ordered-list-item{number="1"} Invest and Store Value: Like buying into the stock market or purchasing gold, you watch your cryptocurrency investment rise or decline. You invest with the intention that your investment will rise over time. ::: :::ordered-list-item{number="2"} Leverage a Payment System: You can safely send or receive money using cryptocurrency. Some cryptocurrencies were explicitly created to send super-fast transactions across the globe. ::: :::ordered-list-item{number="3"} Share Business Profits: Distribute business revenue to stakeholders safely, automatically, and equitably. More and more companies are adopting this model to support businesses. ::: :::ordered-list-item{number="4"} Request a Digital Loan: Like you’d ask a bank for a loan against your current funds and assets, you can do the same in a cryptocurrency exchange. ::: :::ordered-list-item{number="5"} Earn Money: Cryptocurrency opens up a new world of earning money. For example, you can make money playing games such as Axie Infinity. ::: ::
Who creates Bitcoin and other cryptocurrencies?
Is Cryptocurrency Just a Passing Trend?
You may feel like you’ve heard more about cryptocurrency in the past few years, however, it has been around for over thirteen years. It has steadily gained traction since it emerged and is starting to disrupt industries such as online banking, payment systems, etc.
While you can find expert opinions for both arguments (fad vs. disruption), we at Bitcoin Noobs see cryptocurrency as a futuristic method for transacting, investing, and exchanging things of value over the Internet. It is bound to influence everything we do eventually.
What are the Most Common Types of Cryptocurrency?
You will frequently hear about Bitcoin and Altcoins. Altcoins describe any token that is NOT Bitcoin; it includes a large variety of coins, including Ethereum (ETH), Stellar (XLM), Litecoin (LTC), etc.
Stablecoins are another type of cryptocurrency. These coins are tracked 1:1 to currencies we already use, commonly the US Dollar, and do not move in value. It’s widely used for purchases, as it’s hard to use cryptocurrencies for spending when their value changes so much. Investments are not made using stablecoins.
As always, purchasing other cryptocurrencies, including Stablecoins, has their inherent risks. For example, some stablecoins employ new, novel computer algorithms without long enough histories to prove they work. Other coins, like Tether, claim they are backed 1:1 with US dollars but haven’t yet proven where the funds are.
To learn which stablecoins are safe and what we think about other risks involved, read more in our article, Beginners Guide to Different Types of Cryptocurrency.
What Terms Do I Need to Know?
Don’t be discouraged when you run across new terms that you don’t recognize. We were right there with you once (and so we created this website!). Check out our cryptocurrency dictionary here for a head start.
For this article, it’s essential to understand these foundational concepts:
1. Coins (or Tokens)
A coin or token is a unit of cryptocurrency. When you make a cryptocurrency purchase, the investment is transferred to you in coins. You will decide how many coins to purchase when you make a cryptocurrency purchase. It can range from tiny fractions, like .001 coins to 1+ coins. When viewing your wallet, the balance shown reflects how many coins you own.
Another word for coin may be “token”.
2. Blockchain
You will hear a lot about the blockchain as you continue your crypto education. The blockchain is the name of the technology powering cryptocurrency. It is an online ledger of every cryptocurrency transaction. This technology is unique and different from other online ledgers (like Quickbooks) because of how it is stored. Instead of the list of transactions being stored in a single platform, the blockchain’s ledger is stored on thousands of computers worldwide.
Each computer is owned by willing participants in the cryptocurrency network. They run the blockchain software on their own, taking part in recording and storing transactions in the online ledger. So when you transact using cryptocurrency, the small fees you pay don’t go to a Mastercard or Visa; they go to the individuals running the blockchain software.
3. Digital Wallet
When you go to a regular ATM, you take cash out and put it into your wallet to protect it. Or, perhaps, you are paid by check and deposit it in your local bank. A digital wallet in cryptocurrency is similar. In addition to protecting your cryptocurrency, it will also allow you to make purchases and monitor your transaction history. To engage in cryptocurrency investing or transactions, you must have a digital wallet, whether inside a cryptocurrency exchange, called a Custodial Wallet (e.g., Coinbase), or on your own with a wallet such as Metamask.
For more information on Wallets, check out our article “Absolute Beginners Guide to Cryptocurrency Wallets”.
How Do I Purchase Cryptocurrency?
It may seem intimidating to purchase cryptocurrency at first. However, like riding a bike, the rest becomes easy once you learn the first time. And you can successfully buy cryptocurrency with the proper preparation!
Read on for guidance on making your first cryptocurrency purchase, from learning which coin to buy to safely storing your tokens.
The first step in participating in the cryptocurrency universe is identifying which type of cryptocurrency (e.g., Bitcoin, Ethereum, etc.) you want to purchase. You can read more about the various types in our article, Types of Cryptocurrency in 2022. Consider your goals before making your first purchase.
- Do you want to test the waters with an investment?
- Do you have a friend in need and want to send them money?
- Are you interested in moving money outside your bank into stable cryptocurrencies (stablecoins)?
- Are you eyeing a purchase that needs to be paid for using a specific cryptocurrency?
Start there.
Once you feel confident about which cryptocurrency you’d like to purchase, you’ll need to find an exchange that buys and sells that particular token. Our favorite exchanges are listed below. If you have never purchased cryptocurrency before, we recommend buying from one of the more well-known exchanges, as they have Help Centers and Customer Support if you get stuck.
We do not recommend using exchanges that do not have responsive support teams to give you peace of mind. Always use your intuition and read our reviews to find the right exchange for you. We don’t direct you to anything we wouldn’t personally use!
Is Coinbase A Bank? Review of Coinbase Exchange
How To Pick a Cryptocurrency Exchange
Now that you’ve read about each exchange and chosen the one that feels most comfortable to you, leverage our guides to help make your first purchase. And as always, be sure to confirm and double-check the website address before entering any personal data (e.g., name, email address, etc.). People have been fooled by hackers imitating popular cryptocurrency exchanges (for example, they’ve added an extra letter in the URL).
We recommend starting with a small test transaction ($10-20) to practice making the purchase. After making the practice purchase, move your tokens into your digital wallet as an additional practice step. If you’re brand new to cryptocurrency, we do not recommend plunking down thousands of dollars in your first transaction before doing a practice run. Just don’t do it.
You’re ready to make your more significant purchase once you’ve completed your small transaction and moved the coins into your digital wallet. Hoorah!
To recap:
- Leverage our reviews to find respected and credible exchanges
- Always confirm the website address
- Do a small test transaction first
- Practice moving your coins into your digital wallet
- Do a celebratory dance
- Start your larger transfer
How Do I Avoid Being Hacked?
Do you remember when you learned how to drive? You didn’t jump into a car, start the engine, and roll out of your parent’s driveway. You listened as someone explained the basics, watched someone demonstrate the steps, and practiced driving in a safe environment - perhaps a parking lot. As time went on, you became more confident behind the wheel and eventually were able to chow down on McDonald’s fries while driving in the rain.
Buying cryptocurrency is no different. Thoughtful preparation will ensure you have the tools to buy successfully, trade, or sell cryptocurrency.
Top 10 Recommendations for Staying Safe in Cryptocurrency:
1. Learn about the cryptocurrency market
Cryptocurrency is a fast-moving industry with buzzwords abounds. We recommend taking it slow and learning the fundamentals first. Follow our guide: “Getting Started with Learning Cryptocurrency”.
2. Familiarize yourself with the cryptocurrency exchange of your choice
We offer many articles outlining the benefits of different cryptocurrency exchanges. Some exchanges focus on simplicity and ease of use but charge a higher premium. Other exchanges specialize in offering lesser-known tokens that you may be interested in but suffer in user-friendliness. Learn more in our article, “Which cryptocurrency exchange is right for me?”
3. Always check key details when returning to the exchange, such as the URL
One of the top methods hackers trick people into giving up their funds is through the use of phishing attacks. Phishing attacks are attempts to get you to click a link that looks like a normal website you visit but is a clone owned by the hacker. You must always verify the URL of the website you are visiting.
4. Make a plan for how you will store your cryptocurrency BEFORE making your first purchase
Planning will help you protect yourself from ever losing funds if you make mistakes or end up on the wrong website. Don’t worry; we have your back and understand that it’s scary out there – we all need backup plans. By employing strategies like Hot/Cold wallets, Hardware wallets, or Paper wallets, you can be sure your funds will always be safe. Read our guide, “How to store your cryptocurrency in 2022”.
5. Don’t invest more than what you’re willing to lose
Cryptocurrencies are highly speculative bets. Even though we are long-term believers in technology, no one knows what the future holds. Be responsible for investing and only invest what you’re comfortable losing.
6. Set up key protections such as two-factor authorization and/or a yubikey
Two-factor authorization is a bare minimum for your most trusted exchange accounts, and if at all possible, do not use Cell Phone SMS two-factor authorization to avoid the risk of SIM Swap Attacks. Want to go the extra mile? Read our article on Yubikeys, which are physical devices that protect you from phishing attacks.
7. If you are a member of a crypto social community (e.g., Discord, Telegram, etc.), turn off private messages
“Moderators won’t DM you!” It’s a common theme you will encounter on Discord or Telegram groups if you so venture out. Scammers are waiting for newbies to join their ranks to direct message them with phishing links, pretending to be a valued community members, wolves in sheep's clothing. Be careful, and do not pay attention to any direct message you receive from a stranger.
8. Avoid brand new or gimmicky cryptocurrencies (e.g., a “Tiger King” themed cryptocurrency)
There are many gimmicks out there. You will discover them as they appear to some cryptocurrencies will appear to be copies of other projects or marketing themselves based on a recent trend or meme. Examples of these are “Tiger King Coin” or “Squid Coin”. Always do your research and learn the reputation of the people behind cryptocurrencies before you invest.
9. Never, ever, share your private seed value and keep it in a safe place
Anyone who has possession of your seed phrase can recreate your wallet, so that is their own. It provides full ownership and 100% access to send and receive your tokens. Never send or provide your seed phrase to anyone. Print a version of it to store in a secure place (such as a fire safe or safety deposit box) if it is lost.
Want to learn more about seed phrases? Read our article here
Beginners Guide to Understanding Cryptocurrency Seed Phrases
10. Don’t draw unneeded attention to yourself or your holdings
Hackers employ “phishing” attacks where they will send crafty emails, Twitter DMs, or Discord messages to individuals with links to scammy websites that send them your cryptocurrency. Don’t draw attention to yourself, and refrain from bragging about how much crypto is in your wallet :)