1–2–3, First steps into crypto…
Dear fellow crypto enthusiasts,
After our introductory Webinar to Decentralized Finance many of our users have asked us: what is the best way to get started into crypto? How to get started into DeFi?
The first step is to get some cryptoassets. There are several ways to acquire them, in this article we are going to talk about Crypto Exchanges. They will be your first gateway into the crypto economy so it is good to understand how they work. We will also discuss what assets have the potential to be used as money in the emerging DeFi ecosystem. So let’t jump right in!
DeFi Step 1: Buy crypto at an exchange
The first option you have to acquire crypto money is to go to a Crypto Exchange. What are they exactly?
Crypto exchanges are banking institutions that enable you to exchange your local currency into cryptomoney. They are similar to traditional exchanges in which you exchange your local currency against a foreign one like Euro or US Dollar, with the difference that in crypto exchanges you trade a fiat currency against a cryptoasset like bitcoin and ether. Crypto exchanges are the bridges between the traditional financial world and the new crypto networks.
As they are registered banks, they have to comply with local regulations, which include KYC (Know Your Customer) and AML (Anti Money Laundry). This means, among other things, that exchanges are required to verify the identity of the users. The process of opening an account in a crypto exchange is similar to the one in a traditional bank. However, the exact conditions and documentation required depend on the country where you live. Usually you need to provide a proof of identity and residency. The process can take a few business days.
Which exchange should I use?
Each exchange has a list of supported countries. Verify which exchange is available in your country. See here a list of crypto exchanges. Each one has its own fee structure and also a list of tradable assets.
It is recommendable to pick a large exchange that has a high liquidity. Why? Because you have more certainty that your exchange will actually get through as expected and your order will be matched faster. Larger exchanges tend to have lower slippage.
Which assets should I buy?
For DeFi purposes, we recommend to start with Ether, the native token of the Ethereum blockchain. Currently the DeFi ecosystem is emerging on top of Ethereum because is the first and largest permissionless smart contract platform. Ether, the asset, is being used as collateral in many DeFi protocols so you will definitely need to test many applications. Ether is positioning as the reserve asset of DeFi and the whole Ethereum economy. Additionally, you will also need Ether to pay for the transaction fees (called gas fees).
The second obvious option is Bitcoin. It is the first, largest and most liquid blockchain network. Bitcoin, the platform, is the first digital p2p payment network that works with no intermediaries (this will prove to be one of the most important inventions of the century!). Bitcoin, the asset, is positioning as the “digital gold”, a scarce, Store of Value asset with predictable inflation that will probably compete with physical gold as the reserve asset for the financial world.
We expect that the demand and value of bitcoin and ether as alternative Store of Value assets will increase in the upcoming global recession / depression. As we analyzed in our previous article, when confidence erodes in the current system (because the risk of devaluation and default), capital usually flees to alternative assets to hedge inflation risks, such as gold. Now we have digital alternatives to store our wealth in uncertain times.
These are the two cryptoassets that are best positioned to be used as money in the global economy. Traditionally, economists have recognized three important functions for money: a) medium of exchange, b) measure of value (unit of account in which debt is denominated) and c) store of value. Ether and bitcoin are the first two assets we will need with because of their potential to be used as money, or in other words, because of its monetary premium.
You can acquire bitcoin and Ether at any large exchange. Some allow credit card payments, others only traditional wire transfers.
You can learn more about this two assets here: Contact us if you want free access to this tool, offer limited in time!
Do you have questions, are you having trouble? Get in touch with us!
P.D. The content of this article is for academic and educational purposes only. This is not financial, tax or legal advice. Please do your own due diligence. The author of this article has Ether and bitcoin holdings.
Blue Swan Academy announces the launch webinars and online workshops to train individuals and businesses to use decentralized finance tools. The educational offers will be entry-level, with no previous knowledge required. We believe in “learning by doing”, so you will learn to use the most important protocols and applications. Please check out here our current offering.
Blue Swan Academy is an educational platform for blockchain powered economies, focused on the legal and financial industries.
Author: Juan Escallon
Follow us on twitter !