Investing in Bitcoin for the first time in my life?! We only tell you the essentials! ‘Virtual Currency Investment Guide’

Investing in Bitcoin for the first time in my life?! We only tell you the essentials! ‘Virtual Currency Investment Guide’

Cryptocurrency, I’ve heard of it a lot, but I don’t know what it is

Mr. L started searching the Internet to make an investment in virtual currency. But, what kind of cryptocurrency is good to invest in, what virtual currency is different from real money, and a lot of information just gives me a headache. Let’s start with what cryptocurrencies are and what types they are.

1) Definitions and Concepts

Cryptocurrency is electronic money that remains in the form of information on a computer, etc., and is traded only online without real money. Unlike fiat currencies issued by governments or central banks, they are valued according to rules set by the person who invented them.

Cryptocurrency utilizes blockchain* technology for trading. Therefore, a third party will always be involved in the transactions between individuals. The third party acts as a channel for the transaction. The more transactions, the bigger the blockchain. Since all transactions are recorded decently in each block, the transaction contents cannot be modified. For this reason, it is an advantage to be able to prevent problems such as fraudulent transactions.

*Blockchain: A technology in which small-scale data is connected in a chain form and the data is distributed and stored on the chain. Because data is stored in a distributed state, there is no need to centrally manage it, and no one can arbitrarily modify it. Also, anyone can view the result of the change.

How does cryptocurrency trading work? Most of the cryptocurrency trading is done through the brokerage process of the exchange. Individuals who wish to transact will need a cryptocurrency wallet. A cryptocurrency wallet is a block containing data in the blockchain. It is called a wallet because the data it contains is money. The exchange acts as a third party. During the trading process, the exchange receives a certain amount of commission.

The difference between virtual currency and real money is that ‘anyone’ can issue money. Existing currencies are issued by the central banks of each country under the leadership of the government. On the other hand, cryptocurrency issuers can be individuals or corporations.

PLUS TIP. How do you store cryptocurrency?

Cryptocurrency wallets are different from the wallets we usually use in our daily life. Cryptocurrency wallets store private and public keys. The public key is similar to your account number, and the private key is similar to the account password.

The types of cryptocurrency wallets are divided into hot wallets and cold wallets depending on whether they are online or not. A hot wallet is a wallet that is connected online and can be transacted in real time, whereas a cold wallet is a wallet that is offline and requires a separate procedure to transact. Hot wallets are always connected to the internet, so there is a risk of being hacked. The Ministry of Science and ICT recommends that more than 70% of exchange assets be stored in cold wallets for security. Cold wallets support different cryptocurrencies for each product, so be sure to check before purchasing.

2) Types of cryptocurrency

<Source – Coinmarketcap website, as of 2019.12.11.17:54>

Thousands of cryptocurrencies are currently being traded in the cryptocurrency market. Among them, three representative ones will be introduced. Bitcoin, Ethereum, and XRP are also the most traded cryptocurrencies in the market, so it would be good to know their characteristics before investing.

one. bitcoin

Bitcoin was the first cryptocurrency. Easy payment and transfer of funds are possible, and transactions can be made through a variety of transaction methods, and the associated fees are low. In addition, in Bitcoin, the target of the transaction is the wallet address, and the owner’s anonymity is guaranteed because the connection with the actual owner cannot be known. In particular, Bitcoin wallet addresses can be randomly created without any restrictions. It is impossible to know how many addresses a person uses while keeping his or her bitcoins. In addition, there is an advantage that the transaction details are transparently disclosed.

Bitcoin also has its downsides. Bitcoin transactions are slow and the amount of information that can be recorded is small. Each transaction is recorded through blocks at 10-minute intervals, and the size of data that can be recorded in each block is only 1 MB at most. Also, Bitcoin has a limited total mining amount. As a result, there is a structural weakness that inevitably increases the price when the number of consumers increases.

two. Ethereum

Ethereum was developed by Vitalik Buterin in July 2015. Users will pay the cost required to use the DApp, an application on the Ethereum platform. Ethereum can be linked with other blockchains. Because of this function, it can be used for stocks, bonds, insurance, lottery, gambling, tokens, coupons, voting, records, escrow*, prediction markets, etc. In addition, in Bitcoin, the block generation cycle, which used to take 10 minutes per transaction, was shortened to 12 seconds, significantly reducing the transaction speed. As a result, it has shown high growth in a short period of time.

*Escrow: A trustworthy, neutral third party intermediary between seller and buyer to transact money or goods in the case of commerce.

three. XRP (Ripple)

XRP is an altcoin* that can provide international remittance services by connecting banks, payment providers, exchanges, and companies. The total issuance is limited to 100 billion, and 0.0001 XRP is paid as a fee for trading. Since XRP paid as a fee is burned, the value of XRP naturally increases as the supply gradually decreases.

The advantage of XRP is that the payment speed is fast. You can pay in 4 seconds. Unlike Bitcoin or Ethereum, XRP is characterized by using blockchain technology without a mining process. This is because it was developed for the purpose of simplifying the complex settlement system in the international remittance service. Since XRP is a cryptocurrency specialized in payment and remittance functions, the prospects are bright and it is expected that it can replace the international payment system network in the long term.

Altcoin : A generic term for a late -stage cryptocurrency other than Bitcoin , a pioneer in the cryptocurrency market.

PLUS TIP. Cryptocurrency earned through investment, where can it be used?

If you make a profit from investing in cryptocurrency, you can withdraw it in real money. In addition, you can pay directly with virtual currency. Payment can be made at shopping malls and restaurants. Let me introduce you to some platforms.

1) Ebit Mall 

Ibit Mall is a virtual currency shopping mall with products at the level of a general shopping mall. You can shop in KRW, but a larger discount is applied if you pay in cryptocurrency. At Ibit Mall, you can currently pay with 16 cryptocurrencies, including Bitcoin, Ethereum, and Bitcoin Cash. The discount rate is different for each cryptocurrency, so please refer to the website.

2) Bithumb Cash 

Bithumb Cash is a payment service provided by the cryptocurrency exchange Bithumb. It allows you to use the won and all virtual currency assets you have on Bithumb like real money. It can be used offline, such as convenience stores, movie theaters, large marts, and coffee shops. Online, you can use it at Shinsegae Duty Free, Internet shopping mall Qoo10, Interpark Biz Market, and gift certificate mall. Please refer to the website for details.

3) Cryptoshop

Cryptoshop is a market operated by Upside, a cryptocurrency exchange. It is a commerce platform that allows you to pay for various products such as coffee, chicken, and movie tickets with KRW, points, and cryptocurrency. About 250 brands and 35,000 offline stores are connected. In Cryptoshop, you can pay through Plus Coin and Smart Plus Cash along with Bitcoin and Ethereum. By the end of this year, Cryptoshop plans to expand its services by adding blockchain game items, digital content, and artworks, in addition to general products.

In addition, services that allow payment with virtual currency are being launched. Danal, famous for mobile phone transactions, started a cryptocurrency payment business through its subsidiary ‘Pay Protocol’. Users can use Danal’s PayCoin (PCI) at over 500 online stores that have partnered with Danal, such as Domino’s Pizza and Dalm Coffee.

Is cryptocurrency worth investing in?

Cryptocurrency has the advantage of making the investment of existing companies more freely than in the existing financial market. This is because it is faithful to the function of ‘the medium of exchange’. Since they are invisible, cryptocurrencies have value only to the parties to the transaction. For example, there is no need for a bank to review a loan or measure the value of collateral to close an investment. Transaction costs are also very low. In particular, there is no need for regulations and procedures such as exchange rates, fees, and restrictions on money movement that occur in international transactions. You only need to pay a certain amount of commission to the cryptocurrency exchange.

It is also recognized in the market as an ‘asset’. Bitcoin traded in won accounts for about 30% of the total. Even compared to stock market trading, the proportion of trading is close to 80%. Considering the role of the dollar as the key currency, Korea occupies a very large position in the virtual currency market. Now, I will introduce an investment method based on two functions of cryptocurrency. One is to make a profit by trading according to the market price of each virtual currency on the exchange. The other is ICO (Initial Coin Offering), in which companies attract investment by issuing virtual currency. One is similar to investing in stocks or futures, and ICOs are easy to understand when you think of crowdfunding*. In this article, we will mainly guide you on how to earn capital gains. It is a method to make a profit by buying virtual currency, grasping the fluctuations in the market price, and selling it when the selling price is higher than the buying price. It is affected by international economic flows and political fluctuations. As it is similar to stocks, it will be helpful to make good use of known investment information. If you are curious about ICO, please refer to the good content to watch together.

Crowdfunding : A method in which consumers who need funds raise funds to an unspecified number of people through online platforms , etc.

Good content to watch together : What is the ICO (virtual currency disclosure) that Telegram attracted $1.7 billion in investment?

PLUS TIP. Cryptocurrency Investment Tips

1) Small initial investment

First of all, it is important to familiarize yourself with the trading system. Unlike traditional banking or stock investing, cryptocurrencies should be approached with small amounts in the beginning because you can lose money in a single mistake. The minimum investment unit of most virtual currencies can be divided into decimal places, so you need to invest according to your level.

2) Invest only as much as you can afford to lose in full.

Unlike general investment, cryptocurrency investment can become zero within a day. You should always manage your investments with the potential for loss in mind. For inexperienced investors, it is better to have a low cryptocurrency investment ratio.

3) Invest 40-70% of the total amount of virtual currency investment in Bitcoin

Although there are various cryptocurrencies that are discussed along with Bitcoin, such as Ethereum and Ripple, Bitcoin is the most widely traded cryptocurrency worldwide. Bitcoin is still attracting tens of millions of investors. It is recommended to invest 40-70% of the weight in Bitcoin and distribute the remaining percentage in other cryptocurrencies.

How far can cryptocurrency expand?

Blockchain, the core technology of virtual currency, is a technology that has a lot of room for use in various industries and has great potential. It is noteworthy that 90% of the major banks in Australia, Europe and North America have already started pilot investments in blockchain technology, and venture capital funds invested in new blockchain companies are steadily increasing . In addition, considering that the ICO market discussed above has also rapidly expanded to a size of 5 billion dollars, it can be seen that cryptocurrency is a market worth paying attention to. In particular, as they announced that they would create coins and wallets that can be used directly on the most influential platforms in Korea such as Kakao and Line, experts predict that the cryptocurrency market will be activated in earnest in Korea as well.

Mr. L, who started to get a sense of what virtual currency is, decided to invest now. As this is his first investment, he wants to start by trading virtual currencies directly on exchanges. But it’s not easy. I’ve looked at several exchanges, but I don’t understand how they trade. But he thought it was better to do something than just worry. After researching several exchanges, he decided to get information while joining one. There were more procedures than I expected. Let’s see how to invest in cryptocurrency through Mr. L’s sign-up process.

How to invest in cryptocurrency, STEP BY STEP

1) How to buy cryptocurrency?

There are three main ways to earn cryptocurrency. The first is ‘mining’. Cryptocurrency is issued only after the calculation process to solve the complex password is completed. The difficulty of this cipher has continued to increase since its first publication in 2009. Also, the issuance is gradually decreasing. This prevents currency depreciation (inflation). This process is called mining because it is like digging for gold. The second is to sell goods in exchange for cryptocurrency. You can use virtual currency in connection with shopping malls at some domestic exchanges, but it is not in the commercialization stage.

The third is to buy what others have mined. This is the most common way. There are a few steps to buying cryptocurrency on an exchange. It is not difficult if you go to the website of the exchange and follow it step by step.

Step 1. Create an account on the exchange website

Step 2. Open a bank account for the amount required for cryptocurrency trading. Don’t forget to set up OTP for safe transactions.

After Step 3. ​​​After depositing the required amount into the bank account opened, you can purchase the desired amount of virtual currency according to the market price.

PLUS TIP. Where to buy cryptocurrency?

Currently, there are more than 200 exchanges in Korea. Each exchange has slightly different fees and features. It is difficult to decide which exchange to choose. We will introduce three major cryptocurrency exchanges in Korea.

-Bithumb (only available for NH Nonghyup Bank accounts)

It started in 2014 as the first generation of domestic cryptocurrency exchanges and is currently one of the largest cryptocurrency exchanges in Korea. In 2017, when the cryptocurrency boom broke out, there was a time when we competed for the first or second place in the world’s trading volume, not just in Korea. It operates a customer center that provides 24-hour consultation, and its advantage is that the withdrawal limit is higher than other exchanges. In addition, as the number 1 trading volume in Korea, coins listed on Bithumb are guaranteed to have a certain amount of trading volume. With Bithumb, deposits and withdrawals are possible using NH Nonghyup Bank accounts. In this case, please note that only the account of the National Agricultural Cooperative Federation, not the local Agricultural Cooperative Federation, can be used. More information can be found on the Bithumb website

– Upbit (only available for IBK accounts)

A differentiating advantage compared to other cryptocurrency exchanges is that, in partnership with the US exchange Bittrex, you can buy and sell various altcoins in addition to Bitcoin and Ethereum. The disadvantage is that IBK, the main bank, has not opened an account since 2018. Currently, it is not possible to deposit KRW for new subscribers. To trade on Upbit, you need to purchase cryptocurrency from another exchange and then move to Upbit. In this case, it is better to use a stable coin with a fixed value. This is because it is a loss if the value of virtual currency decreases when moving between exchanges. Withdrawal in Korean Won is possible with domestic banks, and deposits and withdrawals of virtual currency are also possible. For more information, check the Upbit website.

– Gopax (Domestic bank and securities accounts available)

Gopax is a cryptocurrency exchange developed by Streamy Co., Ltd. after receiving investment from Shinhan Bank. Unlike other exchanges, it has the advantage of being able to deposit and withdraw money by registering your original bank account without opening a new account. The transaction volume ranks 5th in Korea, and the fee is lower compared to Bithumb and Upbit. For more information, please visit the Gopax website.

Blockchain technology is not stable because it has just been commercialized. Because of that, many cryptocurrency exchanges have suffered from hacking problems. In addition, due to the nature of the blockchain, it is difficult to clearly distinguish responsibility for transaction errors. Most exchanges specify this risk, and in some cases it is difficult to recover virtual currency in case of hacking.

You can also withdraw purchased virtual currency by converting it into KRW. The daily withdrawal limit varies depending on the personal information verification step. Withdrawal is basically possible outside of server maintenance hours. However, it may be different depending on the circumstances of the exchange, so it is recommended that you carefully read the instructions when using the exchange.

Wait, can you buy Ethereum with Bitcoin? How to buy cryptocurrency with cryptocurrency

Cryptocurrency exchanges have two main functions. They are the ‘exchange office’ role and the ‘exchange’ role. The role of the exchange office is to exchange spot currency into virtual currency for virtual currency transactions. When you open an account at a bank designated by the exchange and deposit money, it is converted into virtual currency according to the market price. ​The role of the exchange Intermediaries are easy to understand if you think of them as providing a conduit through which to trade. Just like stock trading. In this process, the exchange receives a certain amount of commission. In the case of Hanbitco, the same 0.1% commission rate is applied to both buying and selling, and this applies to all cryptocurrencies traded in Hanbitco.

You can buy virtual currency with virtual currency at Hanbitco, a cryptocurrency trading platform. You can get cryptocurrency and sell cryptocurrency. Signing up for Hanbitco is not much different from the existing portal site signup process. You need to verify your real name through email verification or mobile phone. However, there is OTP registration in the authentication process as much as money comes and goes. There are several types of OTP, but Google Authenticator is the most common. In addition, membership can be divided into individual members and corporate members.

You may see the term wallet, but you can think of a wallet as the same concept as an account in a bank. However, it must be issued for each transaction and must be created for each coin. Opening is not difficult. Just press one button. The important thing is that the information required for transaction is different for each virtual currency, so you must make sure that the wallet you have been issued is the wallet of the virtual currency you want to trade with.

Points to note when investing in cryptocurrency

Having opened an account, Mr. L started looking for investment information here and there. But when it comes to trading, there are a lot of things to be aware of. Let’s take a look at the information that L has collected for beginners in cryptocurrency investment.

1) Security

In the history of cryptocurrency, there have been several cases of hacking due to poor security management of exchanges. There are countless cases of hacking due to an individual’s inexperienced security knowledge, and the amount varies widely. Due to the nature of virtual currency, the trader is responsible for the transaction, so the safety of the transaction is important. Let’s take a look at each of the points you should pay attention to when it comes to security.

one. password management

It is recommended to manage passwords with 16 characters or more by mixing special characters, lowercase English uppercase letters, and numbers. For example, personal information was leaked from one exchange. If the password is the same between cryptocurrency exchanges, other exchanges may be hacked one after another. Keep in mind that different passwords for each exchange can prevent chain damage.

two. OTP

OTP is a security method of entering a 6-digit number that changes every minute secondarily after the first login. Because of that, OTP generation can only be known by an OTP generating machine or a person who has a mobile phone with the program installed. Many exchanges also recommend using OTP. Note that you should keep the OTP backup code separately in case you lose the mobile phone with the OTP.

three. phishing site

Accounts are often hacked by phishing sites. If a phishing site is mistaken for a safe exchange and you enter your ID and password, the hacker logs into the safe exchange with that information and withdraws the victim’s property. Phishing sites add one more letter to the middle of the address or change the last digit, so you need to check the site address when making a transaction.

four. log in automatically

If you enable the auto-login feature, anyone can connect to the device and directly access your account. There are frequent cases of hacking due to the automatic login function, so please make sure to disable the automatic login function.

five. Malware and Viruses

A trading computer must be 100% safe from malware or viruses. We recommend using a proven antivirus program. Also, you should regularly scan and clean your computer for viruses. This is because viruses can also slow down computer performance, which can put you at a disadvantage for fast-flowing cryptocurrency transactions.

2) Notes on remittance

Remittance of virtual currency is a method of entering information into a one-line address. When sending large amounts of money, many people are uneasy about the way they send money by address alone. There are a few things to keep in mind when sending money.

one. Check for transmission issues

You need to check if there are any transfer problems with the cryptocurrency you want to trade with.​You need to check in advance that there are no problems with your wallet It is best to find out before trading.

two. Try sending a small amount

You can experience the transaction process by sending a small amount in advance. Know in advance what the risks of the trading process are before this trade. It is especially recommended when transferring large amounts of money. Even if you are trying to send money for the first time, it is recommended to send a small amount and then send the difference.

three. Wallet address verification

Be sure to check your wallet address. Some cryptocurrencies require you to enter only one line of address, while others require you to enter two addresses and a note, and others require you to enter three. For cryptocurrencies that require multiple input, it is a good idea to double-check that you have entered each item correctly.

four. Check wallet private key

If you are transferring to a wallet, you must make sure that you have secured the private key of that wallet. There are frequent cases where you can’t withdraw money because you sent money but couldn’t access your wallet. Transactions using the blockchain can never be canceled due to the technical structure. When making a transaction, it is necessary to secure your private key and familiarize yourself with the transaction procedure.

3) Volatility Management

In fact, security and remittance issues can be easily solved once you have mastered the transaction. The most difficult thing is the volatility problem. The stock market has upper and lower limits, but the cryptocurrency market has no limits. Volatility management is essential. However, volatility is not something investors can control themselves. Knowing and applying volatility is what investors can do. It takes training, practice and experience. It is also a good way for beginners to invest in cryptocurrency to try investing in Bitcoin and Ethereum first. As long as the value of the cryptocurrency market rises, the value of Bitcoin will continue to rise.

So far, we have talked about cryptocurrencies. The most important thing is to have your own investment philosophy and investment standards. It is important to understand cryptocurrencies and systems, and to acquire information about the stocks you invest in. I hope that the information I found with Hanwha Investment & Securities, the virtual currency market that others do not know as much as I do not know, will be helpful for your investment.

TTBR

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