This is part five of a six-part Welcome to Crypto series, which will cover everything from the advantages of digital assets and how to buy crypto to how to read cryptocurrency price charts, and why they matter.
Part 4: A Guide to Crypto Wallet Types
Since Bitcoin launched in January 2009, cryptocurrency has presented an increasingly viable alternative to traditional, government-issued money. But adoption of digital money has been slow. While there are many different types of cryptocurrencies, most, including Bitcoin, are speculative assets known for their price volatility (huge spikes and drops in value). Consequently, such cryptocurrencies are far too risky and not practical to use in the same ways as fiat currency.
But with the introduction of stablecoins—digital currencies that are pegged to a trusted fiat currency or even to a group of trusted assets—the once impractical has become sensible and beneficial. As a result, more and more people are learning how to buy cryptocurrency, including MakerDAO’s decentralized stablecoin Dai, and taking the first step toward discovering decentralized finance (DeFi) and the many advantages of digital money.
Learn How to Buy Crypto to Use Dai and Other Stablecoins
Stablecoins changed the crypto game. Because they eliminate the worry of significant price volatility, stablecoins can be used as payment for goods and services, for remittances, held as savings, and exchanged freely between users. especially in economically troubled regions, such as Argentina and Venezuela. Obtaining stablecoins is a big part of the crypto journey, and it typically begins with buying other types of cryptocurrencies first.
First, the Basics
The simplest, most direct, and most common way to buy, sell, and store cryptocurrency is to use Coinbase, a very popular, centralized, and fee-charging digital currency exchange based in San Francisco, CA. (If Coinbase isn’t available in your region, you can find alternative Dai marketplaces here.) Coinbase accepts fiat currencies (e.g., USD, EUR, GBP, and others) via several methods, including bank and wire transfer, and debit and credit card payment. However, payment options offered to you on the platform will depend on your country of residence.
Since cryptocurrencies are regulated differently around the world, not all can be bought with fiat money. For example, in many locations, Dai can’t be bought directly using USD. So, many people start by purchasing Ethereum (ETH) or Bitcoin (BTC), and then exchanging it for Dai.
Another important consideration for newcomers is that while Coinbase acts as a currency custodian, it is a centralized platform. That means it partners with central banks and other third parties to service users. So, if you intend to interact with a decentralized application (dapp), such as Dai, that runs on blockchain technology and does not rely on third parties, you will need a crypto wallet to manage transactions. There are many different types of wallets that support dapps, including one offered by Coinbase (Coinbase Wallet).
Once you understand the basics and have chosen the best wallet for your needs, you can learn to buy, sell, and trade crypto.
How to Open a Coinbase Account to Buy Cryptocurrency
Opening a Coinbase account is simple. Follow these five steps:
- Go to Coinbase.com and register an account. To do so, you will be required to verify your identity, so expect to be asked to provide your name, address, and other personal information.
- Once registered, click the “Trade” button. You will be prompted to enter payment information, such as a debit or credit card, and to choose a cryptocurrency to buy (see animated gif below). Remember, the options shown will depend on your location.
- After you’ve made your choice, click “Preview purchase” and then confirm.
- From there, you can review your account balances and, if desired, transfer crypto to your wallet.
- Don’t forget to log out, and always keep your login info and account password safe!
Location Matters: How to Exchange ETH for Dai on Coinbase
As noted above, location really matters when buying crypto, because cryptocurrencies are regulated differently around the globe. So, if you live in a region where you are unable to directly purchase a decentralized cryptocurrency like Dai using fiat money, you will first need to buy ETH (as illustrated in the animated gif above), and then convert it. The process takes only seconds.
Take the following steps to convert ETH to Dai:
- Log in to your Coinbase account.
- Click the “Trade” button to activate the transaction interface.
- Click the “Convert’ button at the top of the box.
- In the “From” box, select ETH; in the “To” box select Dai.
- Click “Convert Ethereum,” and then preview the conversion information provided.
- Click “Convert now” and then view your completed transaction.
Storing and Using Dai
With Dai now in your Coinbase account, you can transfer it to your wallet of choice or even to a prepaid debit card like Wirex, and then use it for everyday transactions, such as buying goods and services.
Learning How to Buy Cryptocurrencies Will Unlock Their Benefits
Decentralized cryptocurrencies, such as Dai, level the playing field for users since they do not rely on any centralized party or financial intermediary, and because they make it possible for individuals to transact autonomously, peer-to-peer. Easy-to-use exchange platforms make getting started with crypto easy, and helpful dapps open the door to a truly global financial system.
Next up in the six-part Welcome to Crypto series: How to Read Cryptocurrency Price Charts, and Why They Matter