In my first article I explained the importance of Blockchain technology in the Internet of Value (important to understand the difference between public and private blockchain). Now I will explain how and where these new investment assets are purchased.
So the next question that is usually posed, once known the operation of the public blockchains and the potential value of these cryptocurrencies in the Internet of Value, is usually: how do I buy or acquire cryptocurrencies like bitcoin?
There are three main ways to acquire cryptocurrencies and I will explain each of them starting with the simplest form and ending with the most complicated one. These are:
- Buying bitcoins or cryptocurrencies in an exchange house or specialized exchange.
- Receiving a salary or payment for services in cryptocurrencies or bitcoins.
- Mining cryptocurrencies.
Buy cryptocurrencies or bitcoins in a house of exchange
Buying cryptocurrencies or bitcoins in an exchange house is, by far, the easiest way to obtain cryptocurrencies or bitcoins. Some of the most recognized exchange houses, at this moment, to obtain bitcoins are Bitstamp.net, Kraken.com, Coinbase.com or Xapo.com.
Within the exchange houses we must differentiate between those in which bitcoins or other cryptocurrencies can be exchanged for euros or dollars and the exchange houses in which the ‘currency’ of reference is bitcoin. In this last case, you have to own bitcoins to be able to exchange them for the other cryptocurrencies.
All the serious exchange houses that offer the exchange of a cryptocurrency for legal tender money (ie dollars, euros, etc.) operate with a customer identification procedure (known as Know Your Customer-KYC) that obligates new users to identify themselves with a series of documents and procedures to comply with the legal provisions related to the prevention of money laundering (Antimoney Laundering-AML).
Opening an account with an Exchange is the closest thing to opening a bank account, even if they are not banks, and can sometimes be frustrating due to the administrative processes imposed to operate with large volumes of purchase and sale. For the vast majority of customers it is not usually a problem because they circumscribe their operations to small amounts.
Bitstamp is based in Europe and, at this time, you can exchange dollars and euros for bitcoins or Ripple (a token known as XRP) and even withdraw the deposit in the account for gold bars.
Coinbase is the American leader and a mix of online purse and exchange site for bitcoins. It also has its own exchange house – GDAX.com – which offers the exchange of euros and dollars with bitcoins, Ethereum ethers and litecoins. The latter was created by its technical director, Charlie Lee, who had been asking for his cryptocurrency to be included in Coinbase for years.
Kraken, based in San Francisco, is the leader in trading volume in euros and offers the exchange in dollars and euros with 11 cryptocurrencies. Some of the best known are bitcoin, ether, litecoin and Z-Cash.
Finally, we quote Xapo, who also operates as an online purse and house of exchange for bitcoins and which is an initiative of a well-known group of Argentine entrepreneurs. The visible face of this group is Wences Casares, known by some in Silicon Valley as the trigger for many millionaires buying bitcoins. A circumstance that according to some analysts made it possible to place the price above 200 dollars during the deposit crisis in Cyprus a few years ago. Xapo has a distributed team that operates in different countries.
Other exchange houses are dedicated to offering only the exchange of cryptocurrencies using bitcoin as a reference currency because it is the most liquid and important, at the moment, of all cryptocurrencies. With this operation, one of the best known is Poloniex.com.
The challenge for all exchange houses is to survive the many frauds or robberies perpetrated by hackers in recent years. Hence, currently only the most effective have survived, reducing the list of exchanges. But none is vaccinated for life. Bitstamp was robbed of 5 million dollars two years ago and we do not know if there have been robberies in the other important houses that still operate today. And at this point it is necessary to remind Mt.Gox, the most famous and mediatic case, victims of a fraud that affected customers with deposits in bitcoins.
But vulnerability to these attacks is not exclusive to cryptocurrency exchanges. A recent report by SWIFT states that a fifth of attempts to steal hackers from financial institutions are successful. The best known of these is the robbery of the Central Bank of Bangladesh in its account with the Federal Reserve (the Central Bank of the United States).
Obtain cryptocurrencies or bitcoins as salary or services
Some companies pay their employees with cryptocurrencies. Coinbase is an example and also other startups such as Buffer.
A startup that has created a system to remunerate the contributions of the research built on machine learning (automatic learning) is Numerai. The company allows the use of the Numerai hedge fund data but does not give access to the content of the transactions.
In this way, Numerai repays the contributions received, paying with bitcoins, but without needing to know the identity of the researchers. Numerai has received in a round A led by Union Square Ventures 3 million dollars to explore this business model, totally innovative, last week.
Other companies in the online security sector use the same operation to remunerate with bitcoins the participants of their platforms such as Cobalt.io. So researchers around the world receive their gratification, regardless of the country in which they live.
As we can see, for now, technicians and developers are the most likely to receive payment for their services in bitcoins or other cryptocurrencies, but it is presumable that as it is established and consolidates the use of cryptocurrencies in the economy this situation will spread in other sectors and workers.
Get cryptocurrencies or bitcoins by mining
In Bitcoin and other cryptocurrencies it is possible to obtain bitcoins by mining. The mining process is performed for cryptocurrencies that have a Proof of Work system that ensures the transactions of a cryptocurrency thanks to the computing capacity of a computer or computer farm.
Cryptocurrency mining has been professionalized in recent years, so much so that for a person who does not have the technical capacity and capital to make large investments is usually not profitable. Currently, and for the most popular cryptocurrencies, making money by mining is complicated.
I hope this summary of a vision of the possibilities to buy cryptocurrencies as part of the possibilities of the Internet of Value.