Getting From Money in your Bank Account to Crypto in your Wallet

When it comes to first time cryptocurrency purchases, centralized exchanges are often preferred for their familiarity as the user experience is most similar to Web2 products like traditional interfaces.

But what are the steps we need to take during our first purchase of cryptocurrency from an exchange using fiat money in our bank account?

1. Setting Up a Crypto Exchange Account

First, you need to choose a reputable cryptocurrency exchange. For the sake of today’s example we will use Coinbase which is a centralized exchange (CEX). Other popular choices include Binance, Kraken, Kucoin, and Crypto.com. These centralized exchanges provide a secure environment with user friendly interfaces for getting started with your first experience going from money from your bank account to crypto in your wallet.

Step-by-Step Process:

1. Visit the exchange website and click on the “Sign Up” button.

Select “Individual”, unless you are creating a business account.

2. Fill in your personal information (name, email, password). Make sure to keep your password safe!

3. Verify your email address and telephone number.

4. Complete the KYC (Know Your Customer) process by uploading identification documents. Note: keep an ID, Passport, or Driver’s license ready. For ID cards, you will be asked to upload a picture of the front and back of your ID

5. Congratulations! Now you can log in to your Coinbase account and deposit funds!

2. Depositing Funds

Once your account is set up and verified, you’ll be able to log in using your credentials and view your dashboard.

Next, link your bank account to the exchange to deposit funds using the following steps:

Step-by-Step Process:

1. Navigate to the “Add a Payment Method”.

2. Select your bank and enter the required details.

3. Initiate the transfer from your bank account to the exchange.

3. Buying Cryptocurrency

Congratulations, once your deposit is completed you can navigate back into the Trade tab (left hand side column), input the amount you’d like to spend (300 Euro example) and buy one of the crypto currencies available on your chosen exchange.

Step-by-Step Process:

1. Go to the “Trade” tab of your chosen exchange.

2. Select the cryptocurrency you want to buy (e.g., Bitcoin, Ethereum, Tether, BNB, Solana)

3. Enter the amount you wish to purchase (in the field which displays 300 Euro as an example) and confirm the transaction.

4. Congratulations, you made your first crypto purchase using money from your bank account!

Your crypto is now stored on the crypto exchange which you purchased it from. In this case, coinbase has custody of your assets. We call this a custodial wallet. For extra security, setting up a non-custodial wallet is recommended. This process requires you to set up your own crypto wallet. While setting up your own non-custodial crypto wallet offers added security, it also comes with extra responsibility.

4. Setting Up a Crypto Wallet

After purchasing crypto, you may choose to move it to a secure (non-custodial) wallet if you want the safest storage for your digital assets. Wallets can be hot (software-based) or cold (hardware-based)

A software wallet such as Metamask runs on your browser which makes your funds easier to access and move. However, this also means your funds are more vulnerable to hacks, scams, and phishing links.

The safest option for storing your crypto is using a cold storage option, also known as a hardware wallet. Popular hardware wallet providers are Ledger and Trezor. These options offer ease of use and portability, but there are many options available on the market for different user needs. For instance, for hardware wallets where security is the primary focus over portability, the Lattice1 by Grid Plus might be worth considering.

Still need help deciding where to store your crypto? Read on!

Hot wallet vs. Cold wallet

Hot Wallets

What are Hot Wallets?
- Hot wallets are digital wallets (software) that are connected to the internet, making them easily accessible for online transactions.
Why are they called ‘Hot’ wallets?
- Software wallet options like Metamask and Phantom are called hot wallets, because they are easily accessible directly via your browser.
When should I use a hot wallet?
- These wallets are ideal for frequent transactions and trading because they can be accessed directly via browsers or mobile apps.
How Secure is a Hot Wallet?
- While convenient, hot wallets are more vulnerable to online threats like hacking and phishing attacks due to their constant internet connection.

Cold Wallets

What are Cold Wallets?
- Cold wallets are physical devices that store private keys offline to significantly reduce the risk of online hacks.
Why are they called Cold Wallets?
- Hardware wallets like Trezor, Ledger, and the Lattice 1 by GridPlus are called cold wallets, because they offer added security measures and require a physical device to access your funds. This makes them a little slower to access than a ‘hot’ wallet.
When should I use a Cold wallet?
- Cold wallets are best suited for storing large amounts of crypto or for long-term storage where frequent access is not required.
How Secure is a Cold Wallet?
- Cold wallets offer enhanced security measures as they are not connected to the internet. They protect the private keys from online threats and are therefore considered more secure than Hot wallets.

To learn more about custodial vs. non-custodial wallets and learn how to set up your software or hardware wallets, visit Securely Storing your Crypto for step by step guides on both!

Glossary

Crypto Exchange: A platform for buying, selling, and trading cryptocurrencies.
KYC (Know Your Customer): A process for verifying the identity of users.
Hot Wallet: A software-based wallet connected to the internet.
Cold Wallet: A hardware-based wallet stored offline for security.
Private Key: An alphanumeric secret code that allows access to your crypto funds.
Seed Phrase: A series of words used to recover your crypto wallet.
Two-Factor Authentication (2FA): An additional security layer requiring two forms of identification.
DeFi (Decentralized Finance): Financial services using blockchain without intermediaries.
Transaction Fees: Costs paid to process transactions on a blockchain. On the Ethereum network, this is called Gas fee and measured in Gwei.