[PDF]The 'get it done in an hour' guide to cryptocurrencies

THE

"GET IT P ONE
IN AN HOUR ”

GUIDE TO


CRYPTO

CURRENCIES



Step-by-step guides to understanding,
buying and storing popular cryptocurrencies


NICK KING



Copyright © 2018 Nick King


First published in September 2018.

All rights reserved. No part of this publication may be reproduced, distributed or
transmitted in any form or by any means, including photocopying, recording or
other electronic or mechanical methods, without the prior written permission of
the publisher, except in the case of brief quotations embodied in critical reviews
and certain other noncommercial uses permitted by copyright law.

Disclaimer

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND IN THIS
BOOK. The author is not registered as an investment adviser either with the U.S. Securities
and Exchange Commission (the “SEC") or with the U.K. Financial Conduct Authority
(FCA). The author is neither licensed nor qualified to provide investment advice.

This book is not and should not be interpreted as investment advice, a recommendation
regarding a course of action or as an endorsement of crypto currency or any specific
provider, service or offering. It is not a recommendation to trade. This book is for
informational purposes only, you should not construe any such information or other
material as legal, tax, investment, financial, or other advice.

Nothing in this book constitutes professional and/or financial advice, nor a
comprehensive or complete statement of the matters discussed or the law relating thereto.
You alone assume the sole responsibility of evaluating the merits and risks associated
with the use of any information or other content in this book before making any decisions
based on such information or other content. In acting on any information contained
in this book, you agree not to hold the author, Nick King, its affiliates or any third party
service provider liable for any possible claim for damages arising from any decision you
make based on information or other content made available to you through this book.

The information in this book has been obtained from or is based on sources believed to
be accurate and complete. Although reasonable care has been taken, the author cannot
guarantee the accuracy or completeness of any information in this book. Any opinions in
this book may be wrong and may change at any time. You should always carry out your
own independent verification of facts and data before making any investment decisions.

Cryptocurrencies are speculative and complex, and they involve significant risks—they are
highly volatile and sensitive to secondary activity. Performance is unpredictable, and past
performance is no guarantee of future performance. Loss of principal is possible.

Consider your own circumstances and obtain your own advice. 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.

The author may have holdings in the cryptocurrencies discussed.

All product names, trademarks, brands, photographs and logos
are the property of their respective owners.


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Contents


So what's crypto?

A new type of investment
Good habits of a smart investor
Buying your first cryptocurrency
Storing your crypto
Setting up a Bitcoin wallet
Setting up an Ethereum wallet
Finding more coins to invest in
Research in action
Buying altcoins
Monitoring your investment
Selling your coins
Tax implications


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So what's crypto?

The concepts and technologies behind crypto are
complex: this explanation isn't.


You've heard of Bitcoin.

It’s that computery currency that people began talking about as its
price seemed to explode overnight, turning a bunch of geeks into
instant millionaires.

Depending on whom you ask, Bitcoin is either the beginning of
a technological revolution, a Ponzi scheme, the key to financial
freedom from banks or history's greatest scam.

Amid the technobabble, the sensationalist headlines and the
idealism of crypto fanatics, it might seem like Bitcoin defies
reasonable description.

It doesn’t.

Bitcoin, along with most other cryptocurrencies, can be
summarized in just one simple sentence:

A cryptocurrency is a digital asset stored on a decentralized and
cryptographically secure blockchain.


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Okay, I'll admit it's not that simple, and it's stuffed with buzzwords
you’ve never bothered to google.

So let's break it down.

An asset is an item owned by a person. Like a spoon.

A cryptocurrency coin is an asset. But unlike a spoon, it isn't
physical—there are no real-world coins to jingle in your pocket.

A cryptocurrency coin is formed of information stored on a
computer—making it digital.

This digital information, which details the owner of every coin
and the transactions they have made, is stored in a special kind of
database called a blockchain.

Database | Structured data held on

It's similar to how your bank manages a com P uter -

your bank account: when you deposit

money, your bank updates a database to show a transfer to your
account and updates your balance to reflect it.

A blockchain works the same way: when you buy a cryptocurrency
coin, your account on the blockchain (commonly referred to as a
wallet) will show a transfer into it, and will update your balance
accordingly.

But there's a key difference between your bank's database and a
blockchain. Your bank might go off-line because a freak storm cuts
power to its data center, or a hacker shuts down its systems.

A blockchain is stored on thousands of computers across the
world, all connected by the internet, making it extremely resistant
to failure. This is called decentralization.

But having a database spread across the world sounds pretty
insecure, right? What if someone decides to hack it and give
themselves a zillion coins?

That's where cryptography comes into play.


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Cryptography means disguising and revealing (encrypting and
decrypting) information using complex mathematics.

Mind-boggling, I know, but all we need to understand is that
cryptography makes it virtually impossible for the information
entered on to a blockchain to be falsified. That decentralized
database is hellishly secure.

So far, cryptocurrencies sound neat but why bother with them?
Cash and bank accounts work fine, right?

To offer some perspective as to why cryptocurrencies were even
conceived of and the problems they aim to solve, let's take a dip
into recent history.

In the 2000's, bankers were so hungry for commission that they
issued mortgages to people who couldn't really afford to pay them
back, and then resold packages of those mortgages as securities to
investors and other banks.

This house of cards stood fine while the price of property was
going up, but by 2008 the property bubble had popped and
those mortgages and securities went bad, triggering a worldwide
recession that forced millions of people into unemployment.

Banks started going bankrupt and the

i i • . r . . i Recession IA period of economic

world s entire financial system was on decline,
the verge of collapse.

Central bank | A national bank that
issues a country's currency.

Unfortunately, instead of addressing
and dealing with the fraud and

corruption in the world’s financial institutions that brought about
this disaster, central banks instead chose to expand their balance
sheets, otherwise known as 'money printing! to bail the banks out
of their debt problems.

There wasn’t any actual physical money printed—it was simply
numbers added to and shuffled between databases. The banks


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were loaned this new money and used it to ride out the crisis, while
ordinary people suffered from the economic fallout.

With this inequality in mind, a man (or group of people, since
it's still a mystery) named Satoshi Nakamoto conceived of an
experiment—to create a currency free from central-bank meddling.
A currency free from self-enriching manipulation.

The first and most famous of cryptocurrencies, Bitcoin, was born.

Bitcoin needs no central authority or bank to operate, instead
relying on peer-to-peer technology to manage transactions and
issue coins. What this means in action is that no one has control
over your coins but yourself. There's
no need to trust a third party (e.g.
a bank that can go bust) with your
money.

Nobody owns or controls Bitcoin, and
the open-source code that powers it is
available for anyone to view and audit.

But don’t start to think Bitcoin is a
perfect or finished product. It has
technical challenges to overcome so
that it can scale for its growing user
base and have speedy transactions. To that end, the Bitcoin code is
being actively worked on by hundreds of developers, dedicated to
improving its features, security and speed.

The growing popularity of Bitcoin has given rise to the creation of
more cryptocurrencies, referred to as 'altcoins'.

Most altcoins embrace the following principles:

■ Security through blockchain and decentralization

Each and every transaction of a cryptocurrency gets stored


Peer-to-peer | A network of
computers that allow shared access
to files without the need for a
central server.

Open-source | Software for which
the source code is made freely
available to everyone.

Code | The instructions that power a
computer program.

Altcoin | Alternative
cryptocurrencies launched after
the success of Bitcoin.


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on thousands of servers around the world, creating a robust,
decentralized system.

■ Openness and transparency

Open-source code provides trust in the system. People can be
corrupted, but code obeys cold, hard logic.

■ Immutability

Security and transparency combine to make it effectively
impossible for someone to hack the transaction history of a
cryptocurrency.

■ Accessibility

All that's required to send and receive cryptocurrencies, anywhere
in the world, is a device capable of accessing the internet.

■ Speed

Bank transfers can take days. Cryptocurrency transfers can be
instantaneous or take minutes, depending on the currency used.

■ Cost

If you've ever sent money to someone in another country, you
know that you have to pay a fee to convert it from one currency to
another.

Sending cryptocurrencies to another country requires no
conversion fee. It’s all done across the internet, and the internet
doesn’t care about countries and borders.


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A new type of
investment.

What cryptocurrencies are,
and what they're not.


Cryptocurrencies are unlike any other asset class that's come
before, and their unique characteristics have led to confusion and
misconceptions about just what these digital assets represent.

■ Cryptocurrencies are not stocks or shares

Buying a stock or share is like buying a tiny part of a company
and usually entitles you to a dividend and voting rights over a
company's plans.

Dividend | A sum of money paid

Buying a cryptocurrency doesn't regularly by a company to its

, i . i p i i , shareholders.

entitle you to either of these things.

For instance, owning a Bitcoin won’t earn you any future
Bitcoin dividends, and it doesn't give you any say over how the
development of the coin proceeds.

■ Cryptocurrencies are a speculative investment

The popularity of cryptocurrencies maybe exploding, but they are


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not yet ready for mainstream adoption.

Solutions to technical challenges, such as how to scale the
technology to keep it stable as its use grows, are still being
researched and developed.

The technology holds great promise, but it's still a risky,
speculative investment.

■ Cryptocurrency values are unpredictable

Imagine a gold coin. It just sits there, a small, shiny circle of inert
metal. You can’t eat it, you can't drink it, you can’t do much at all
with it. So why would anyone assign value to it? Why is it worth
anything?

Because of our collective belief that it is worth something.

So if we all believe a gold coin is worth something,
how much is it worth?

As much as someone is willing to pay for it.

It's the same with cryptocurrency. A Bitcoin is worth something
only because of the market's collective belief that it has value. And
it's worth exactly what someone at that moment is willing to pay
for it. The price goes up when more people want to buy, and down
when more people want to sell.

This means the price of cryptocurrencies can be volatile, changing
from moment to moment for seemingly no reason. In the course of
the same day, it can go to the moon and to the floor.

It's vital to be aware and respectful of this unpredictability.

■ Cryptocurrencies are not anonymous

One of the misconceptions that dog Bitcoin is the belief that it


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allows for anonymous transactions.

This just isn't true.

Sure, you can set up an anonymous Bitcoin wallet and receive a
coin from a stranger, and to an outside observer it would appear to
be untraceable.

But that transaction will be recorded on the blockchain—and
anyone can see it. Specialist companies can follow the trail of
Bitcoin transactions using analysis software and other online,
public clues, which can enable them to link transactions to real
identities.

There are privacy cryptocurrencies, such as Monera and Zcash,
that use special technology to anonymize a user's transactions. But
they're still vulnerable to someone matching transaction time-
stamps to real-world events, such as buying something online or
selling coins for cash, which in turn can reveal a user's identity.

■ Cryptocurrencies are wot regulated (sort of)

Loose and sometimes non-existent regulation of cryptocurrency
markets has led some people to refer to them as the ‘Wild West'
of investments.

Different countries have different laws and different attitudes
towards crypto. Japan and South Korea have embraced
cryptocurrency trading by drafting laws to regulate the market.
Countries such as China and India have swung in the opposite
direction, all but banning their citizens from (legally) investing
in cryptocurrencies.

Only one thing's for sure: more regulation is coming.

The sheer rise in value of the crypto markets will force governments
to create new laws to regulate it—in part to protect investors, in
part to make sure they get their slice of the pie.


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Good habits of a
smart investor.

Invest smart, invest safe.


This might be your first time investing in anything that isn’t a
savings account, or you might already be a savvy buyer of bonds
and stocks.

Either way, now is a good time for some basic pointers on how to
be sure your crypto investing is done in a smart and secure way.

■ Don't be tempted to overinvest

The smart investor's golden rule is:

Never invest what you can't afford to lose.

As tempting as it is to dream of the future riches a large investment
in your favorite coin could net you, also consider the worst-case
scenario: the price of your coin crashes to nothing.

How will your life be affected? Will you laugh and write it off as
a lesson learned? Will you find it mentally difficult to cope with
losing that sum of money? Will you struggle to pay your rent?


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Write it on a piece of paper and stick it to your fridge. Chant it to
yourself in the bathroom mirror. Whatever it takes, just make sure
to follow the golden rule:

Never invest what you can’t afford to lose.

■ Don't borrow to invest

It's a terrible idea to borrow money to invest in anything, even if
you're convinced the price is about to shoot up.

Because what's worse than making a bad investment?

Making a bad investment and being in debt because of it.
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