ParsonsOnline | Australia | Cryptocurrency

All About Crypto!

This site is to provide information about how to start buying Bitcoin, and all other cryptocurrency. Also to provide Information on where to store cryptocurrency safely for the long term and short term investor.

Where to exchange Bitcoin and other cryptocurrency for Australian currency AUD.

IMPORTANT NOTE: All advice and information on this site is from personal experience and is NOT financial advice.

Please always do your own research before investing your money.

For Cryptocurrency to become mainstream, early adopters will pave the way and benefit the most.

Firstly, What is Cryptocurrency?

Cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

"Decentralised cryptocurrencies such as bitcoin now provide an outlet for personal wealth that is beyond restriction and confiscation".

How many Cryptocurrencies are there?

Although there are technically thousands of cryptocurrencies, only a handful are relevant. Of those, even less have a market cap above $1 million.

As of February 2022, there are approximately 17,203 cryptocurrencies, according to Coin Market Cap, with 458 Exchanges.

Total Crypto Market Capitalisation is $2,482,502,418,937.00(AUD) as of 30th January 2022,

with Bitcoin dominating at 41.6%.

For an up to date figure go to https://coinmarketcap.com/charts/

Top 3 cryptocurrencies are:

For more information go to the Coin Market Cap website.

www.coinmarketcap.com

There are other websites that list current tradable cryptocurrencies, if you cannot find a cryptocurrency on Coin Market Cap, try these websites:

CoinLib https://coinlib.io

Crypto Compare https://www.cryptocompare.com

What is a ‘blockchain’?

A blockchain – originally ‘block chain’ – is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data.

By design, blockchains are inherently resistant to modification of the data. A blockchain can serve as "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.

For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which needs a collusion of the network majority.

Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance.

Decentralised consensus has therefore been achieved with a blockchain.

This makes blockchains potentially suitable for the recording of events, medical records, and other records management activities, such as identity management, transaction processing, documenting provenance, or food traceability.

Credit Wikipedia. https://en.m.wikipedia.org/wiki/Blockchain

Exchanges

How do I buy Bitcoin?

In Australia there are a few (exchanges) and apps that you can use to convert AUD into Bitcoin.

The few I have used are listed below and all require you to verify who you are because of Australian laws preventing money laundering. You then link your Australian bank account to start buying and selling Bitcoin and other coins.

Australian Cryptocurrency Exchanges:

The following exchanges are members of the ADCA (www.adca.asn.au). ADCA members work together to build understanding of the potential of blockchain technology, share best practice and engage with government and regulatory stakeholders.

For a full list of Exchanges that are members of the ADCA, head to their website at http://adca.asn.au/membership/

Fees are charged to use these exchanges and are fairly reasonable.

For a beginner, CoinSpot is the easiest to use.

There are many more out there, that are not members of the ADCA and can also be used to purchase cryptocurrency. Do some research and make your decision carefully.

There is also a very popular app used to purchase Bitcoin, Litecoin and Ethereum instantly by credit card, and that is Coinbase.

Coinbase is UK based and allows you to buy using your credit card. Coinbase does not allow you to sell yet in Australia. (Coming soon).

I use Coinbase a lot to buy Bitcoin, Litecoin and Ethereum. The fees are higher than the above mentioned exchanges however you can use a credit card with Coinbase.

To sell your coins you will need to transfer them to an exchange to sell for AUD.

There are many other exchanges available but they can be tricky to learn and use. If you have traded before then these exchanges are for you.

Here are just a few:

Bittrex
Yobit
EtherDelta
Cryptopia
Binance
KuCoin
LiveCoin

Security Tip: ALWAYS check the address bar of your browser to ensure you have the correct address (URL) to the site you want to use. Many scammers use fake links with only one letter difference that can be missed if you are not careful. A fake site can look identical to the legitimate site, there will always be slight anomalies such as grammar mistakes, spelling mistakes, colours and incomplete sections of a fake site. If you can bookmark a site that you use, after checking it is legitimate, this is a preferred way to use exchanges. Other tools to use are the exchanges Apps, Google, Facebook and other social media sites to research.

Wallets

What is a cryptocurrency wallet?

A cryptocurrency wallet is a digital wallet that you can use to store, send and receive various cryptocurrencies. The wallet doesn’t exactly “store” your money as a real-world wallet does. Instead, it saves your public and private keys which in turn helps you send and receive money.

What are public and private keys?

Let’s think of a real world situation before we understand what public and private keys are. Imagine a vending machine. Can anyone and put their money inside the machine right? But, they can’t take out the money because they don’t have the key, they can only put money in the machine. The only person who can take out the money is the owner of the machine who has the key.

In this example, the vending machine is the public address which anyone uses to send money to you. You are the machine owner, and the key that he is carrying is your private key. Using this private key only you can access your money and do what you please with it.

The public key is the address that anyone can use to send you the money, while the private key is what you will use to send money to anyone else. Remember, ONLY you should know what your private key is, otherwise anyone can use your wallet to send your money to any other addresses.

Under no circumstances should you ever lose your private key. Let’s put this in super simple terms. If you lose your private key, then you are SCREWED (yes, uppercase has been used to emphasize the gravity of the situation). You should use at least two different techniques to save and store your private keys. We will discuss these various techniques a little later in the article.

As of right now, let’s discuss the two methods of storage that you can use to store your cryptos, hot storage, and cold storage.

Hot Storage Vs Cold Storage

Let’s understand the basic distinction between the two with a real-world example. Hot storage is like the wallets that you carry around in your pocket. The Cold storage is somewhat akin to your savings bank account. Keep this distinction in mind as we move forward. If you want to use your currency frequently then you must use hot storage. On the other hand, if you want to store your money for a long time then you must use cold storage.

Hot Storage

Hot storage, in simple terms, is when you keep your cryptocurrency in a device which is directly connected to the internet. This connection is what makes a device “hot”.

You should think of exchange wallets, desktop clients, and mobile wallets (any wallet that exists on a device that will ever connect to the internet) as a hot wallet. It’s easy to access funds on a hot wallet, and if you live somewhere that accepts cryptos for micropayments, there’s nothing wrong with using one for day-to-day spending. Think of it like fiat (government issued) currency. You might walk around with a portion of your wealth in a wallet for convenience but the majority you keep secured away. Your hot wallet should behave in the same way as a real-world wallet. You use it to carry a small amount of cash for ease of access. That is all.

While transacting with hot wallets is very simple, there is a huge drawback when it comes to them. They are easily hackable. The whole crypto-space has been gaining a lot of value recently and where there’s value, crime is never far behind. Recent ransomware attacks and previous compromises of large exchanges should be sufficient beacons to newcomers.

Even though you’ll not be storing a great deal of value on your hot wallet, it’s vital that you follow the backup steps within the restoration section of your wallet to avoid losing funds through human error. With your private key, and seed phrase intact, you should be able to restore any wallet painlessly enough.

Cold Storage

When you keep your currency in a device which is completely offline it’s called cold storage. For those seeking the most secure form of storage, cold wallets are the way to go. These are best suited to long-term holders, who don’t require access to their coins for months, or years at a time.

They aren’t without their own set of risks but if you follow the instructions correctly, and take every precaution possible, these are greatly minimized. Given the amount of attention that cryptocurrency has been receiving over the last few years, it has unfortunately piqued the interest of attackers.

In the light of that, it’s a far more secure option to use cold storage as means of storing your money.

Paper Wallets

Without a doubt, the safest way to store any cryptocurrency is using a paper wallet. By following a few pointers below, you can set one up entirely for free. This truly makes you the master of your investment, and if precautions are followed, there’s no possibility of your private keys being known by anyone else. Of course, this means that keeping a record of them is even more important. Losing private keys means you’ll forfeit the entire contents of your paper wallet (but then again, that’s true for every wallet out there.)

What is a paper wallet?

To keep it very simple, paper wallets are an offline cold storage method of saving cryptocurrency. It includes printing out your public and private keys on a piece of paper which you then store and save in a secure place. The keys are printed in the form of QR codes which you can scan in the future for all your transactions. The reason why it is so safe is that it gives complete control to you, the user. You do not need to worry about the well-being of a piece of hardware, nor do you have to worry about hackers or any piece of malware. You just need to take care of a piece of paper.

Do you need a paper wallet?

The answer to this question will largely depend on your circumstances. If you plan to spend the summer day trading a few coins, perhaps you don’t. Alternatively, if you’re in for the long haul, and don’t intend to touch any portion of your stash, then a paper wallet is the most secure option available to you.

Setting up a paper wallet...

Paper wallets are formed by using a program to randomly generate a public and private key. The keys will be unique, and the program that generates them is open source. Those with advanced knowledge of coding can check the backend of the program themselves for randomicity in results. What’s more, we’ll be generating our keys offline. This eradicates the exposure to online threats, and deleting the simple program after use will destroy any trace of them.

Don’t worry if it sounds confusing, it’s not. You’ll need no specific knowledge of coding, or encryption. All you do need is a computer, an internet connection, something to record your keys on.

Anyway, let’s create our paper wallet. Follow these steps:

Ensure your computer is entirely free from any form of malicious software. A brand-new computer would be ideal but is often not feasible.
Visit the page WalletGenerator.net.

For more details check out Block Geeks website:

https://blockgeeks.com/guides/paper-wallet-guide/

ICO

DEFINITION of 'Initial Coin Offering (ICO)

An unregulated means by which funds are raised for a new cryptocurrency venture. An Initial Coin Offering (ICO) is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, but usually for Bitcoin.

Also called an Initial Public Coin Offering (IPCO).

BREAKING DOWN 'Initial Coin Offering (ICO)

When a cryptocurrency startup firm wants to raise money through an Initial Coin Offering (ICO), it usually creates a plan on a whitepaper which states what the project is about, what need(s) the project will fulfill upon completion, how much money is needed to undertake the venture, how much of the virtual tokens the pioneers of the project will keep for themselves, what type of money is accepted, and how long the ICO campaign will run for.

During the ICO campaign, enthusiasts and supporters of the firm’s initiative buy some of the distributed cryptocoins with fiat or virtual currency. These coins are referred to as tokens and are similar to shares of a company sold to investors in an Initial Public Offering (IPO) transaction. If the money raised does not meet the minimum funds required by the firm, the money is returned to the backers and the ICO is deemed to be unsuccessful. If the funds requirements are met within the specified timeframe, the money raised is used to either initiate the new scheme or to complete it.

Early investors in the operation are usually motivated to buy the cryptocoins in the hope that the plan becomes successful after it launches which could translate to a higher cryptocoin value than what they purchased it for before the project was initiated.

An example of a successful ICO project that was profitable to early investors is the smart contracts platform called Ethereum which has Ethers as its coin tokens. In 2014, the Ethereum project was announced and its ICO raised $18 million in Bitcoins or $0.40 per Ether. The project went live in 2015 and in 2016 had an ether value that went up as high as $14 with a market capitalisation of over $1 billion.

ICOs are similar to IPOs and crowdfunding. Like IPOs, a stake of the startup or company is sold to raise money for the entity’s operations during an ICO operation. However, while IPOs deal with investors, ICOs deal with supporters that are keen to invest in a new project much like a crowdfunding event.

But ICOs differ from crowdfunding in that the backers of the former are motivated by a prospective return in their investments, while the funds raised in the latter campaign are basically donations. For these reasons, ICOs are referred to as crowdsales.

Although there are successful ICO transactions on record and ICOs are poised to be disruptive innovative tools in the digital era, investors are cautioned to be wary as some ICO or crowdsale campaigns are actually fraudulent. Because these fund-raising operatives are not regulated by financial authorities such as the Securities Exchange Commission (SEC), funds that are lost due to fraudulent initiatives may never be recovered.

In early September, 2017, the People's Bank of China officially banned ICOs, citing it as disruptive to economic and financial stability. The Central bank said tokens cannot be used as currency on the market and banks cannot offer services relating to ICOs. As a result, both bitcoin and ethereum tumbled, and it was viewed as a sign that regulations of cryptocurrencies are coming. The ban also penalizes offerings already completed.

UPDATE: Since then China has regulated ICO's and implemented policies that protect investors. Now ICO's are becoming regulated, but not all.

Summary:

When researching ICO's I look for total token supply, the lower the maximum supply the more valuable to token/ coin becomes. Cost per token has to be 1c to 5c max, this would allow for more tokens to be purchased for less Ethereum. Most ICO's utilise the Ethereum network for their token so be sure to set up an Ethereum wallet prior to purchasing from an ICO. Be sure that this wallet is not an exchange wallet. Some examples to use are My Ether Wallet, Metamask, Trezor or Nano Ledger. Finally research the ICO and what it is aiming to do, will it fulfil its promise, does it have a working solution in place already, does it have credibility among social networks and check reviews. The more popular an ICO is the more likely people will buy into the ICO. Lastly talk directly to the ICO using Telegram or any of the chat forums the ICO uses. Ask questions you want to know and find out if it is an ICO you want to invest in.

Interest & Loans with Crypto

Some cryptocurrencies pay out ongoing income similar to earning interest. It can be a great way to put otherwise passive capital to work. Keep in mind though that due to the volatile price of most cryptocurrencies, the returns may not make up for the initial investment.

Staking Tokens - Get paid to HODL

Staking cryptocurrencies will offer ongoing payouts to those who hold their cryptocurrencies in suitable wallets. These token balances will typically then perform important network security functions.

Essentially, they act as a tangible "weight" for securing a network, the same way a bitcoin miner's electricity consumption and mining gear acts as a tangible weight to secure bitcoin.

There are some factors to consider, though:

You will typically need to hold your funds in an online wallet.
The setup procedures may vary, and there might be ongoing costs involved such as staying online.
There will generally be a maturity period, where you will need to stake your tokens for a certain amount of time before you can start earning rewards.
Be aware of whether your rewards are being paid in a token other than the one you're staking. Sometimes these secondary tokens are much less valuable than the primary token.
Rewards may vary based on factors such as how much you're staking, or how long you've been continuously staking for.

Interest

Some cryptocurrencies will pay users to create value, much like how banks pay interest because by keeping your money there, you're helping create value for them.

The same principles are found in some cryptocurrencies, where you can lend out your crypto for profit, use it as collateral for your own cash loans, use it as a valuable voting tool and more.

Exchange Dividend cryptocurrencies

Many cryptocurrency exchanges will run systems where holders of exchange tokens are rewarded based on traders using the exchange.

Rewards are most commonly based on the exchange's trading volume, as they take the form of a share of the trading fees earned by the exchange.
By using the exchange whose tokens you are staking, you may earn minor "cashbacks" on trades you make.
Exchange tokens that pay dividends will often have additional benefits beyond that, such as offering fee discounts.

NEXO, Celsius and KuCoin are some of the platforms that offer this service and that I currently use.

Risks

It's possible to make money from staking, taking advantage of airdrops and more, but there are also risks.

One of the main risks is the chance of buying a low-quality cryptocurrency because it pays dividends, not because it's a high-quality project that pays dividends.

Staking income and similar benefits are typically paid in the same cryptocurrency, so if its price drops to zero, the passive income won't be worth anything.

There are some other risks associated with trying to earn passive income, including:

Risks of user error. Sometimes the steps for setting up staking wallets or using a cryptocurrency dividend function are complicated. Doing them wrong may result in a loss of funds.
Lockup periods. There may be lockup periods for staking tokens. In some cases, you might not be able to withdraw your funds and sell them off even if markets are plummeting.
Risks associated with staking wallets. Sometimes you'll have to keep your funds in an online "hot" wallet to stake them, which is riskier than keeping funds in cold storage.
Increased exposure to scams. If you're trying to play a hard fork or set up for an airdrop you need to be especially aware of scams, because these occasions will often bring them out of the woodwork. There are also risks associated with fake staking wallets, on top of all the usual hazards of cryptocurrency.

Loans

Different platforms work in different ways, but the general principle is that of peer-to-peer lending. Borrowers use their cryptocurrency as collateral to get loans, while lenders deposit cryptocurrency, which is used to fund the loans.

Most platforms screen borrowers and issue the loans themselves, then simply share the profits with the lenders. This creates an experience similar to the way banks offer loans and pay interest to savings account holders.

Others act as marketplaces where borrowers and lenders can come together and browse each other's offers.

In many cases, a platform will have its own native token, which can be optionally used to get preferable rates, discounts or other bonuses.

One of the most important features of these platforms, and one of the reasons they can offer relatively high earnings for lenders, is the fact that they use cryptocurrency as collateral with a typical LTV ratio of around 50%.

This means that there's plenty of collateral to go around, even in the event of a crypto market drop. If a borrower drops below their agreed LTV ratio, their collateral can be quickly and easily liquidated. As an added bonus, it can almost always be sold incrementally as needed, at fair market rates, without any kind of depreciation beyond the price change.

This helps reduce, and theoretically completely eliminate, the risk of default from borrowers. It's essentially just using one type of money as collateral for a loan of a smaller amount of another type of money. This safety means that these types of platforms don't necessarily have to spend as much time and money conducting credit checks, screening borrowers, hiring debt collectors, chasing defaulted loans, setting up payment plans and doing all the other things lenders have to do.

Risks and pitfalls of cryptocurrency lending

Some of the risks to be aware of when using cryptocurrency lending platforms, as either a lender or a borrower, include:

Using an unregulated or loosely-regulated platform, which may leave you with no recourse if something goes wrong
The chance of your chosen platform being a scam, getting hacked or otherwise losing your money
The risk of sudden cryptocurrency price drops that may leave borrowers under-collateralised, and lenders unable to sell if their cryptocurrency has been locked into a loan
The potential for technical errors or bugs causing unexpected outcomes
The risks inherent to holding whichever cryptocurrency you are choosing to borrow or lend, such as volatility or the counterparty risk associated with some stablecoins

The nature of these risks means there's a chance of losing all the funds you commit to a platform, no matter how reputable and reliable. It's important to be aware of this, and to avoid over-committing.

Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision

Credit: Information available through Coin Market Cap.

Crypto News

The best way to invest in crypto currency is to do your research and keep on top of global news and trends to help you decide on where and when to invest.

There are many crypto news sites that you can use and follow, also try Google.

The following websites I use personally and follow, to keep updated.

COINDESK https://www.coindesk.com

MEDIUM https://medium.com/

TELEGRAM APP https://telegram.org

BLOCKCHAIN NEWS http://www.the-blockchain.com

COINTELEGRAPH https://cointelegraph.com

BITCOIN NEWS https://news.bitcoin.com

CRYPTOCURRENCY NEWS (AU) https://cryptocurrencies.com.au

TWITTER https://twitter.com (follow different coins and get up to date info)

FACEBOOK https://facebook.com (follow different coins, join crypto groups and get up to date info)

NEWS BTC http://www.newsbtc.com

YOUTUBE - I follow Nuggets News, an Australian who shares information he has learned from investing himself

https://www.youtube.com/user/australiaalex/about

In summary, do your research and only invest what you are willing to lose. This will take the emotion out of what you are doing and will allow you to make logical decisions based on facts and research.

Support

If you want to ask a question and find out more information I have a Facebook group that I use to communicate.

FACEBOOK GROUP

Crypto Currency Investing Australia

https://www.facebook.com/groups/CryptoCurrencyInvestingAustralia/

We are on Twitter also at:

https://twitter.com/parsonsonline