Getting Started: A Beginner’s Guide to Cryptocurrencies for Individual and Institution
Background study
Since the creation of bitcoin in 2008, there’s been a lot of uncertainty and speculation about what the future might hold for cryptocurrencies. Cryptocurrencies have been the subject of uncertainty, scepticism, hype and disillusionment from those in the main mainstream media and traditional finance.
Because of the rapid growth and development of this technology, people are still unsure of what to make of it: some are calling for regulations, others say cryptocurrencies will never amount to anything.
Crypto currency has outperformed all other asset classes in recent years and was worth more than $2 trillion at the first quarter of 2021. Cryptocurrency based lending applications and decentralized trading venues are currently worth $65 billion in on-boarded assets. In the first quarter.
Because of the rapid growth and development of this technology, people are still unsure of what to make of it: some are calling for regulations, others say cryptocurrencies will never amount to anything.
Custody & Acquisition
The first issue raised was around acquisition and “custody” of your crypto
assets there are two options suggested which is either Third-party service or Self-hosted:
Custody here talks about the right of the rightful owner of a crypto asset to have control over it and dispose of it as they see fit.
Managing cryptocurrency can be a headache, particularly if you’re trying to buy or sell an asset in private — The market is very volatile and thieves can easily get access to your private keys. If you choose to store your crypto in a self-hosted service or on a third-party provider, there’s a chance that your funds may be in jeopardy should the provider get hacked. I recommend storing your wealth in cold storage until you’re ready to use it in
Cryptocurrency is secure but can be dangerous. There are different options for storing your cryptocurrencies, including an exchange, software, web wallet, or hardware. The most popular types of crypto wallets are the software wallets and the hardware wallets. A software wallet is a digital wallet that you can install on your computer or mobile device to store your blockchain assets such as Bitcoin, Ethereum, and so on. This kind of wallet makes it very convenient to make transactions while shopping, eating at restaurants, cab rides,
Trade off between Security & Usability
it’s important to make a trade-off between security and usability. When it comes to cryptocurrency, there are major differences in custody, including who has access to your private keys, how often sensitive data is exposed to the internet, and the kind of.
There are two ways to hold your cryptocurrency: you can use the services of a third party or you can use one of several hosted wallets.
When it comes to deciding whether to use a third-party exchange or keep your funds in a self-hosted wallet, each has its own advantages and disadvantages.
If you intend to hold onto your currency for a long period of time and aren’t interested in trading regularly, storing the currency in a self-hosted wallet is probably best for your circumstances. Otherwise, you may find it more convenient to use one of many third-party exchanges available.
However, third-party servers could be vulnerable to hacking with risk of loosing your cryptos asset with little or zero refund.
It's common for security measures to affect usability. For example, if you want to be sure that your cryptocurrency is safe, you might need to expose it to the internet less often or choose software that's harder for others to use.
for example you can adopt the use of a multi-signature wallet, where multiple private keys are required for a transaction to take place. Theoretically (for cryptocurrency), this method could prevent unauthorized transactions from being executed if there
Private Keys and Public address
A private key is a string of numbers that show you own cryptocurrency and allow you to spend it. A public address is a set of letters and numbers that allows other people to send cryptocurrency to your wallet.
Custodying cryptocurrency is really about the secure storage of your private key, which allows you to authorize transactions.
Acquiring Crypto Currency
If you want to own cryptocurrency, you can either mine it or buy it. One way to buy is to directly from any of the centralised exchanges (Coinbase, Binance, FTX, Bittrex etc) another way is to use a peer-to-peer network, which typically offers a wider range of option. Institutional investors use OTC markets because it is far cheaper than buying directly from exchanges.
Additional Readings
http://www3.weforum.org/docs/WEF_Getting_Started_Cryptocurrency_2021.pdf
