Cryptocurrency Exchanges & Digital Wallets

For many of us, it’s our first foray into digital wallets and cryptocurrency. This article guides you through key principles to help you navigate your way in this new age of banking.

(De)Centralised Banking

“Centralized organizations reserve decision-making authority for top management. Decentralized organizations disperse decision-making throughout the organization.”

There is no doubt about, our banking systems are changing. A question that often comes up, “Should banks be centralised to the point where they can even decide how and what we spend our money on, perhaps even to the extent of the food we eat, or clothes we buy?” Freedom is having a choice. Excitingly, cryptocurrency offers us an alternative where we can manage our own assets. But choosing to do that, we need to be aware of the risks, and take responsibility for our actions.

• Most banks and financial institutions are centralised, have strict measures in place and offer refunds/reversals when payments go wrong
• Bitcoin is a decentralised digital currency that utilizes cryptocurrency
• Cryptocurrency is the technology that acts as a medium for facilitating financial transactions which are safe and secure using Blockchain
• Blockchain is a distributed ledger that provides a low cost, safe and secure environment for peer-to-peer transactions to take place. This information is publicly available so that anyone can access and see the financial transaction that has taken place. NB: Transactions cannot be reversed! It’s our duty to ensure the wallet we send money to is correct.

Purchasing Bitcoin through Cryptocurrency Exchanges

Centralised, government-controlled Cryptocurrency Exchanges enable the buying and selling of Bitcoin and other cryptocurrencies with fiat currency (USD, EUR, GBP, etc).

Major crypto exchanges include Luno, Kraken, Coinbase, Binance and Crypto. Account creation normally takes 2-3 days for approval in a process called KYC or ‘Know Your Customer’.

For ease of use, we recommend Luno and Exodus because they offer both digital wallets and cryptocurrency exchange (purchasing/selling). Exodus’ desktop app is their digital wallet, and their mobile app allows BTC purchases via Ramp Network). Other payment systems offer crypto trading within their platform, but don’t allow it to be sent externally e.g. Revolut allows members to buy/sell/trade cryptocurrencies within their app, but they can’t send it other parties or to digital wallets.

Centralised financial institutions are responsible for what their customers spend their money on, and apply ‘KYC Limits’ (see resource below). For this reason, transactions with decentralised parties often get blocked. To make decentralised financial payments, one needs to transfer the cryptocurrency into a digital wallet first. It’s the same principle as drawing money from the ATM and paying in cash.

Digital Wallets

For newbie cryptocurrency holders, Exodus is easy-to-use software that you download onto your desktop/laptop and install their mobile app onto your phone.

DISCLAIMER: This information is provided for the reader’s interest only. Please consult your qualified financial advisor for the best information for you, your family and your situation.

Additional resources:

• Bitcoin.org: How it works
• Investopedia: Central bank and the Fed
• Exodus: What is DeFi (decentralised finance)
• Bitcoin.org: Secure your wallet
• Ramp Network: KYC limits and (re)verification
• Exodus: Transactions cannot be cancelled or reversed