TL;DR You can read the entire post to better understand why you need a cryptocurrency wallet, but my final recommendation is to get started with Coinbase. Use my referral link to get $10 in free Bitcoin.
Let’s say that you have a very generous friend who wants to gift you some Bitcoin.
Where does she send it to?
You need a wallet of some sort to hold and send your Bitcoin.
Your wallet has an address, essentially just a random string of alphanumeric characters.
Your kind friend, from her wallet, sends you Bitcoin to your wallet address.
Your wallet address can be public facing – just like a Venmo ID or Paypal email you’d use for payment.
The difference between regular banking and cryptocurrency is that wallet addresses are public, so anyone can view the full history of transactions on that address.
It’s as if Venmo made all your transactions – including the amounts, not just cute emojis – public to the world.
This is essentially what blockchain technology is. A public ledger that anyone with an internet connection can see – all you need is someone’s address and look them up on a blockchain explorer website like Blockr.io or Etherscan.io.
For this reason, some wallets (I’ll show you which in a moment) allow you to create multiple addresses to help protect your privacy.
Example: your sugar momma and baby daddy (it’s 2017) don’t know each other and you’d rather keep it that way. Rather than use the same wallet address, you can create an unique one for each of them.
Now you’re wondering, where do I get such a wallet? Here’s where things get interesting.
Different types of crypto wallets
Now here’s the un-intuitive bit: You can’t necessarily hold all types of cryptocurrencies in 1 digital wallet (Btw, there are now over 800 cryptocurrencies other than Bitcoin).
In the analog world, you can hold different types of bills in one physical wallet – dollars, pounds, Chinese yuan – as long as it fits in your wallet.
In the crypto world, cryptocurrencies have their own dedicated wallets.
Bitcoin Wallet, Ether Wallet, etc.
Some services create wallets that allow you to hold several types of cryptocurrencies in one wallet. (Things change faster in the crypto world and there are always new and alternative options out there.)
For example, the most popular Bitcoin wallet Blockchain.info used to only accept Bitcoin, but now it holds Ether too.
Besides digital wallets that hold your money in online accounts, there are also desktop applications and hardware wallets to help you store cryptocurrency offline. That’s a topic for a whole ‘nother article, so we won’t get into that today.
Let’s say you don’t have that sugar momma nice friend who’s just going to send you some sweet BTC. How can you get some for yourself from the market?
The most common step for people is to open an account on an cryptocurrency marketplace. It’s similar to opening a stock trading account.
You want to find an exchange that lets you trade your fiat of choice – let’s say USD – into your cryptocurrency of choice (BTC, ETH, etc).
There’s a lot of shady exchanges out there with varying degrees of security. This is now where I make my recommendation…
Coinbase, the most user friendly starting point for cryptocurrency
The best place to get your first cryptocurrency is Coinbase. There are several reasons why…
1: Signing up for Coinbase grants you access to a wallet for three of the most popular cryptocurrencies: Bitcoin (BTC), Ether (ETH) and Litecoin (LTC).
Even if you want to invest other coins, you’ll often need BTC or ETH first in order to attain them.
Example: to buy another coin called NEO, you can’t buy it currently with USD. You have to turn your USD -> BTC or ETH, then use BTC/ETH -> NEO.
2: Coinbase provides you the capability of creating unlimited addresses to help protect your security.
3: For U.S. Customers, Coinbase is the most trustworthy place to buy, hold and sell cryptocurrency.
Headquartered in San Francisco, Coinbase has raised $200 million from investors.
Why this matters is that Coinbase is incentivized to perform and stay within regulations. In extreme cases of Coinbase being hacked, it’d be easier for class action lawsuits and consumer protection to help recover user funds, much more so compared to smaller overseas exchanges.
Coinbase is also one of the few crypto exchanges that offer FDIC insurance up to a maximum of $250,000.
4: Easy to use! Personally, I’m a UX guy so Coinbase also wins in the design category.
The web & mobile apps are probably the most user friendly out of all cryptocurrency applications I’ve seen so far.
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So there you go. Coinbase is time and time again my safest recommendation to friends who want to get started in cryptocurrency.
If you want to get a little boost when starting out, join Coinbase using my link and get $10 in free Bitcoin:
Join Coinbase with Oz and get $10 in free Bitcoin
Full disclosure: Both of us get the $10 bonus when you use my referral link. It doesn’t cost you anything to use Coinbase, so this method gets you free crypto money vs signing up solo.