How to use crypto

Short answers to common questions about using crypto

TLDR stands for Too Long, Didn't Read. This section is for anyone who just wants short, simple and straight forward answers to common questions about using crypto.

16 Common questions about using crypto

What do I need to store crypto?

To store your cryptocurrency you need to choose how and where.


  1. Look after crypto yourself; aka non-custodial; crypto version of a safe
  2. Trust someone else to look after it; aka custodial service; crypto version of a bank


If you choose to look after your crypto yourself you need to look for Non-Custodial options where you are responsible for something called a Seed, providing ultimate access to the funds. Options include:

  • Mobile Wallets - Just search non-custodial crypto wallets on Playstore or App Store
  • Browser Wallets - Like MetaMask
  • Hard Wallet (Physical USB device) with a dashboard software - Ledger or Tresor are the most popular

As part of the set-up process the wallet will generate the Seed which is a collection of 12-24 unique phrases that you need to store somewhere safely offline.

If you choose to let someone else look after your crypto, this is known as Custodial option, where the you rely on someone else to look after the Seed. Custodial options  include:

  • Mobile Wallets -  Just search custodial crypto wallets on Playstore or App Store
  • Web Apps - Available as part of service like earning interest on crypto
  • Exchange Wallet - Created when you register with an Exchange to buy/trade crypto

As with any online service you’ll need to create an account and ensure password details are strong; you should definitely use two-factor authentication and biometrics.

Read a more detailed explanation of crypto storage in our Knowledge Base:

What do I need to send & receive crypto?

To send/receive crypto you’ll first need a crypto wallet. Within the wallet there are simple send/receive functions, similar to a banking app, or other popular money transfer services like Paypal or Venmo.

Rather than sending to from bank account numbers, crypto is sent to and from addresses - long unique strings of letters and numbers. Your crypto wallet will automatically generate addresses for you for free.

To send, you’ll need the destination address, which you can either scan as a QR code using your mobile crypto wallet, or copy/paste the address into your wallet if using a desktop service/hard wallet. 

To receive, you’ll need to provide your own address to whoever is sending you crypto, either as a QR code, or copy/paste the long string of letters/numbers.

When you send cryptocurrency there will be a transaction fee, the amount depends on the crypto being sent. Bitcoin and Ethereum are the most expensive, but there are services that will estimate the current fees, and most wallets will let you choose the fee rate.

Read a more detailed explanation of Sending/Receiving crypto in our Knowledge Base:

Where can I buy crypto & what do I need?

Buying cryptocurrency is just like buying foreign currency. It is just an exchange of one currency for another at an agreed rate - e.g Euros for BTC (the currency symbol for bitcoin). This is why the most common place to buy cryptocurrency is called an Exchange. They list cryptocurrencies for exchange between major fiat currencies e.g USD, EUR, JPY and the current Spot rate. Spot meaning the price you’ll pay on the spot.

These are the main things you can did with a cryptocurrency exchange account:

  • Buy cryptocurrency with your local currency; you don’t have to buy a whole coin.
  • Convert one crypto for another
  • Sell your cryptocurrency, converting it back into your local currency
  • Withdraw local currency funds back to your bank account
  • Send your cryptocurrency to an external wallet

This is what you need to set up a cryptocurrency exchange account:

  • Create an account - providing standard credentials.
  • Provide proof of identity & address (aka KYC) this mean passport, driving license, documents
  • Connect a funding method e.g your bank account (ACH, SEPA etc) or a debit/credit card
  • Deposit funds then choose the crypto you want to exchange your local currency for
  • Make sure your account is secure

Read a more detailed explanation of how exchanges works, and buying/selling crypto in our Knowledge Base:

How do I sell crypto & what do I need?

If you want to sell your cryptocurrency and get fiat in return - local currency like Euros, or Dollars - in exchange, you’ll need an account with an exchange.

Assuming you purchased your crypto from an exchange, the simplest option is to follow the buying process in reverse.

For example, if you bought using a EUR/BTC pair, you simply sell using a BTC/EUR pair, which will quote the current Bitcoin price in Euros. If you accept the rate you can then withdraw the proceeds.

Be warned that most exchanges will not allow you to withdraw funds to a card, so you will need to connect a bank account, which must be denominated in the currency you are withdrawing.

Check with your exchange whether there are fees involved.

If you want to convert crypto to fiat but don’t have an exchange account, you’ll need to:

  • Create an exchange account & pass their KYC process
  •  Send your crypto to your exchange wallet using the address provided
  •  Connect your bank account to your exchange account
  • Make the exchange then withdraw the funds

Before opening an exchange account check in advance that:

  • The exchange supports the crypto you want to sell
  • Your local fiat currency
  • Your bank and banking region

If you want to exchange an obscure cryptocurrency - not listed on main exchanges - for fiat, you’ll need to go through a few hops:

  • Search for the coin on coinmarketcap
  • Click on the ‘Market’ tab to see a list of exchanges that support the coin
  • Research each option based on liquidity & fees
  • It is likely to be a DEX, in which case no KYC is required, but the fee will be significant

If you hold the coin in a browser wallet like MetaMask, and it is ERC20 compliant, it can perform the swap for you, but again, with a hefty fee.

Read a more detailed explanation in our Knowledge Base:

How do I convert one cryptocurrency for another & what do I need?

Centralised and regulated cryptocurrency exchanges like Coinbase - often abbreviated to CEX - offer a range of cryptocurrencies against a set of base currencies, which general include:

  • Major fiat currencies e.g EUR, JPY, USD
  • Major Stablecoins e.g USDT, USDC
  • Major cryptocurrencies e.g BTC & ETH

So if you want to use a CEX to convert to or from a cryptocurrency which isn't one of those base currencies you'll need to break the exchange into two separate transactions, which will double the trading fee.

So for example exchanging DOGE for ADA:

  1. Exchange DOGE for USDT
  2. Exchange USDT for ADA

The alternative is to use a DEX - Decentralised Exchange - where liquidity providers facilitate a far wider range of conversion pairs, but the downside is that this uses smart contracts which are far more expensive. It will only make sense to take the DEX route if the sum you are converting is significant.

Read a more detailed explanation in our Knowledge Base:

What things should I do to keep my cryptocurrency safe?

Keeping your crypto safe will depend on whether you:

A - Trust someone else to look after it; aka custodial service; crypto version of a bank

B - Look after your crypto yourself; aka non-custodial; crypto version of a safe

For option A

  • Create an email address with an encrypted service like Protonmail and use it only for crypto activity
  • Use a very strong password; make sure it is unique to the service
  • Use two-factor authentication (2FA), a secondary layer of access detail from a separate source, normally your mobile phone. The two most common 2FA providers are Google Authenticator or Authy.
  • Avoid text-based 2FA - this is vulnerable to SIM swapping
  • Create an anti-phishing codes if offered
  • Set-up biometrics
  • Join the relevant sub Reddit; they’re a great source of information

For option B

  • Always back-up your Private Keys or Seed - obviously taking appropriate security measures and storing in a separate location, ideally offline. Don’t use something perishable, like paper, or anything corruptible.
  • If you use a Mobile Wallet, have a recovery plan, just in case it gets lost or stolen.
  • Never, ever share your Private Keys or Seed; you will never be asked to provide them except by a Scammer
  • Consider a multi-signature storage service like Keys.Casa

Read a more detailed explanation of security best practice in our Knowledge Base:

What is a Seed & what do I need to do with it?

A Seed is a string of between 12 and 24 unique phrases, which act like a complex password giving control of funds within a non-custodial cryptocurrency wallet. Non custodial means that you are in complete control of your funds.

There are also custodial wallets, when a central service has ultimate control over your funds, but grants access via a familiar login/password arrangement.

You may also see a Seed referred to as a Recovery Phrase or Backup Phrase

When you set up your non-custodial cryptocurrency wallet you’ll be given your Seed, asked to make a secure back-up and confirm it by inputting a random selection of the phrases that make up your seed.

Think very carefully about how/where you back-up your seed. Funds cannot be recovered without it, but equally, anyone with access to it, can also access your funds.

Seeds are a function of what are called Hierarchical Deterministic wallets - HD Wallets for short. They are a way to derive the Private Key associated with every single cryptocurrency address from a single start point.

A Private Key is what is needed to prove ownership of an address and move funds. A Private Key contains 64 characters and it is not uncommon for one wallet to have multiple addresses, in the same way you might have multiple bank accounts with different details.

So it is hugely inconvenient to remember/store each Private Key separately; a Seed solves this by acting as master key for all addresses within a wallet, which means that in reality you're very unlikely to ever have to use a Private key.

Read a more detailed explanation of keys and seeds in our Knowledge Base:

What is a Private Key & what do I need to do with it?

You can think of a non-custodial cryptocurrency wallet - where you are in ultimate control of the funds - like a secure safe that is transparent and has a one way slot for depositing funds. 

If you own the safe you can happily tell anyone where the safe is -  its Public address aka Public Key - where they can see how much is in it, and if they want, add funds.

The safe can only be unlocked with one key - the Private Key - which enables the holder to spend what is inside. 

So in terms of cryptocurrency, a Private Key gives ultimate access to unspent funds associated with a Public cryptocurrency address, which gives anyone visibility of funds but no access (asymmetrical privilege). This is why it is so important to protect Private Keys; they are what protects your funds.

In practice, Private Keys are never really used since remembering/storing a 64 character string for every address (safe) that holds funds is unrealistic. Instead, crypto wallets are able to derive any number of Private Keys from one Seed (a collection of unique phrases, usual 12-24). So looking after your Seed becomes fundamental to protecting your cryptocurrency, but understanding what a Private Key is and does is still essential knowledge.

You don’t need to use your Seed every time you want to send your cryptocurrency as there are standard layers of access for wallets - biometrics, pins, passwords etc. However, if you lose those credentials, or your phone/hard wallet, your Seed is the ultimate proof of ownership and can be used to restore funds through a new wallet. Without it, your funds are lost forever.

Read a more detailed explanation of Private Keys in our Knowledge Base:

What information does a Bitcoin transaction contain?

The following data is contained in every Bitcoin transaction. Notice there is no personal detail, as Bitcoin is designed to be anonymous but information can be derived based on the association of anonymous Bitcoin addresses with other entities that contain personal details, such as a regulated exchange.

Time/Date - When the transaction occurred

Status - Whether the transaction is Confirmed (Green) or Unconfirmed (Red). Confirmed status means that the transaction has been included in at least six blocks. 

Transaction Hash - All the data within the transaction is hashed cryptographically so it can be referenced within a block in a uniform alphanumeric string

Received time - The time and date the funds were received.

Size - The amount of data the transaction represents, measured in bytes. A bitcoin block has a maximum size of 1mb.
Weight - This is a unit of measurement used to compare the sizes of different transactions. Weight measurements are relative to the maximum size of a block. Included in block - the block number in the chain that the transaction has been added to.
Confirmations - the number of blocks  the transaction has been added and therefore considered as valid.  Since this transaction happened in 2010, and a new block is confirmed every 10 minutes, there are a lot of confirmations.
Total input - the total funds sent including fees.
Total output - the total funds received.
Fees - the amount of fees that were paid to the miner to include this transaction in a new block and add that to the Bitcoin blockchain.
Fee per Byte - The fee relative to the size of the transaction
Fee per weight unit - The fee relative to the weight of the transaction
Value when transacted - value (at the time of the transaction) of the transacted BTC represented in USD.

Read a more detailed explanation of Bitcoin transactions in our Knowledge Base:

Where can I spend crypto?

You can spend cryptocurrency with any online or physical retailer set-up to process crypto payments; they'll display the logo of coins they accept.

There are a growing number of companies making it easier for retailers to do this. The Lightning Network makes Bitcoin transactions cheap and instant; the network is growing all the time.

Here’s a list of the most well known:

In truth the options for spending your crypto natively are quite limited, but as ever the market is producing clever alternatives :

  • Debit cards that spend from crypto funds and convert into fiat. 
  • Pre-paid debit cards you fund in fiat but get cashback in crypto.
  • Hybrid cards that generate a loan for every transaction against crypto collateral

The key things to consider with these options are:

  • Fees charged - for currency conversion, holding the card, funding the card
  • Depending on local tax laws spending crypto might be considered taxable events.

You may have heard that Paypal is enabled for crypto. True, but only for buying, selling and holding it - not spending it just yet.

What do I need to get started with DEFI?

To get started with crypto the first thing you’ll need is a crypto wallet, such as MetaMask, that can connect seamlessly to DEFI protocols. You’ll also need to add funds, but this will be dependent on the strategies adopted (see below).

MetaMask will connect by default to Ethereum based protocols, but you can always add networks manually, such as Binance Smart Chain, which is increasingly popular. 

You then need to choose how much you intend to invest and a DEFI investment strategy. The general categories are: 

  • Deposit crypto and earn APY
  • Stake crypto for a specific period of time
  • Provide Liquidity and earn fees

The Defi sub reddit is really useful in highlighting opportunities, as is DefPulse. You may be dreaming of huge APYs - often quoted in the 1,000s - but please be aware of the risks. The rates change quickly, and a lot of the return is based on the value of the associated tokens.

Every DEFI application runs on a different blockchain. Ethereum is by far the most popular, but that popularity comes at the cost of executing transactions. Other blockchains offer much lower fees, but you have to trade off

You can check fees in advance using sites like:


If you apply your funds in multiple DEFI applications you can track them in one single Dashboard such as Ape Finance.

Reliable Defi services.

Compound - With over $15bn in assets earning interest Compound is a great place to start. You can use the service directly or through other services that are integrated with Compound, like Binance, Zapper or Exodus.

Aave - Another of the main DEFi protocols with close to $20bn in managed assets.

Yearn - Slightly less user-friendly than Compound or Aave, but another of the respected DEFI protocols.

Read a more detailed explanation of how DEFI works in our Knowledge Base:

What is the Lightning Network & how do I use it?

The Lightning Network is a solution to the problem of scaling Bitcoin for fast/low value transactions, as it can only process between 2 -7 transactions per second on-chain while Visa processes thousands.

In crypto speak, on-chain transactions happen on the blockchains, with a required process of confirmation and validation. This is what takes time and comes at a cost. Lightning functions off-chain, so removed from that restriction. On-chain and off-chain are also described as layer 1 and layer 2.

Blockchains are literally blocks of transaction data chained together cryptographically. New blocks get added through a consensus mechanism, a way of agreeing on the accuracy of transactions and unspent balances. 

With Bitcoin the consensus mechanism is called Proof of Work, which is done by Miners, and is regulated so that a new block of transactions is added to the chain every 10 mins. This approach sacrifices speed for security and decentralisation (ensuring there is no one point of failure), which is why it isn't convenient for micropayments.

Lightning takes the burden of small transactions off the Bitcoin blockchain (layer one) and instead uses micropayment channels to move funds back and forth almost instantly. Both parties have to agree to changes to balances held in channels, and payments can be routed via hubs, creating network effects.

Lightning only ever connects to the actual Bitcoin blockchain to add open a channel, and add funds, or close a channel and send remaining funds to an on-chain address.

What you need to use the Lightning Network:

  • A Lightning supported wallet. They are available as custodial or non-custodial.
  • You need to fund your wallet with Bitcoin.
  • You then need to find vendors supporting Lightning and open channels with them.
  • You send to Lightning addresses by scanning QR codes or copy/past address string.
  • You receive by creating an Invoice, which is generated as a QR code.

Read these articles for a more detailed explanation of the Lightning Network:

What is a Smart Contract & how do I use one?

A Smart Contract is an agreement between two parties expressed in code that is executed by a blockchain rather than some central authority - people at desks in an office somewhere.

If, for example, you take out a loan with a bank you’ll sign a contract agreeing to the terms of the loan. The application process will be slow and go through various stages of approval; once agreed, it will be actively managed by someone in the bank’s loans team. If you cannot make your regular payments, or want to repay the loan early, there will be a process and conversations with that team.

A Smart Contract removes the needs for any of those interactions. The agreement between you as a borrower and whoever is providing the funds is expressed as code within the contract and executes automatically. This approach to finance is called Defi (decentralised finance); the removal of all that bureaucracy is why Defi is generating so much interest and investment.

As with everything in life, there are catches:

  • With our loan example, you’ll need collateral greater than the loan amount to access funds.
  • Smart Contracts are ‘executed’ on blockchains that charge fees for the process, in the case of Ethereum, these can be significant.
  • If the terms of the Smart Contract are poorly drafted they can be vulnerable to exploits that might put funds at risk.

Use case include:

  • Trading on Decentralised exchanges - where no KYC is needed
  • DEFI - lending/borrowing; staking; providing liquidity in return for yield
  • NFTs - Minting, Buying & Selling

What do you need to interact with Smart Contracts?

  • You need to connect a supported wallet to the service running the Smart Contract. This might be a browser wallet like Meta Mask connected to a Defi platform like Uni Swap, or an NFT site like Rarible.
  • Funds to pay for Smart Contract execution & connection; if the contract is executed on the Ethereum Mainnet, you'll need ETH. 

Read a more detailed explanation of Smart Contracts in our Knowledge Base:

Is using crypto anonymous?

Cryptocurrency is anonymous, but far more transparent than cash. Though no personal details are required, every transaction ever made using a cryptocurrency can be seen by anyone with an internet connection by exploring the blockchain that supports it. 

Think of a Blockchain explorer like a search engine, but instead of searching for keywords you are searching using either a transaction ID, block height or address. 

No personal data is needed to use crypto, so what you’ll see is details of how much crypto was transacted, when, what address it came from and where it moved to.

As blockchains are open source there are now a large number of blockchain analytics firms using data science to monitor transactions and identify known addresses to create transaction flow maps.

At the point that someone might want to cash out their crypto with a regulated service, the address will be connected to a real world identity, as regulated services require KYC - Proof of Identity and Residence. This means that the anonymity of crypto only applies within its ecosystem.

Law enforcement around the world are using these services, or in-house teams to track illicit funds from hacks, ransomware and dark markets and identify criminals as they attempt to cash out.

As a counterbalance there are so-called privacy coins which are designed to hide transaction data - e.g Monero or Zcash - and mixing/tumbling services that intermix funds in such a way as to make it hard to establish their origin.

Read a more detailed explanation of what digital footprint crypto leaves in our Knowledge Base:

Do I have to pay tax on profits made from crypto?

Whether you are liable to pay tax on any crypto profits will depend entirely on where you are resident for tax purposes, and whether you are trading/investing in a personal or business capacity.

The approach each authority takes will differ in how they classify crypto, which in turn will determine what taxes are due. The main classifications include:

  • Foreign Currency - Examples being Israel and Bulgaria
  • Property - the most common distinction, making it liable for what is known as Capital Gains. The case in the USA, UK and Canada.
  • Private Money - Some countries, such as Germany, consider cryptocurrency to be ‘private money’
  • Legal Tender - El Salvador became the first country to make Bitcoin a legally acceptable currency, therefore exempt from capital gains taxation.

Depending on how your tax authority classifies crypto you maybe liable for Capital Gains - literally a tax on increased value of your crypto; and/or Income Tax, where you are considered to have generated an Income from your crypto.

Each authority will apply specific rates to each, usually with allowances which exempt any activity below a certain thresholds.

Be aware that almost all crypto related activities - mining, airdrops, purchases, forks - are likely to be considered as taxable events, though in some cases - given how fast crypto innovates - there may not be clear guidance on how to make the calculations.

There are several countries notable for a progressive approach to crypto taxation, such as Portugal and Singapore. If you don’t live in one of those, there are a growing number of crypto tax services out there.

Read a more detailed explanation in our Knowledge Base but please refer to your local tax authority for official guidance:

How do I open a crypto bank account & earn interest?

Opening a crypto bank account aka CEFI (Centralised Finance) is similar to registering for any online service. The money is very different - crypto - but the processes are very similar to traditional finance.

You are dealing with a regular business, so will have to follow familiar processes to create an account, then move your crypto over and set-up account access. This will include:

  • Downloading an App
  • Creating an account
  • Providing proof of your identity & address (KYC)
  • Setting-up security - 2FA, Biometrics, Anti-Phishing codes
  • Transferring your crypto over; always send a small test first
  • Setting-up safe withdrawal addresses
  • Setting any preferences in terms of how interest is paid & how your are notified of interest received

You’ll need to research the available services and choose based on your preference. Any credible service will have active Subreddits, Twitter accounts or Discord channels which are great way to review their credibility. Things to consider:

  • The rates of interest offered - bear in mind promotional periods
  • The range of cryptocurrencies for which interest is offered
  • Whether you need to stake funds to earn interest - like putting down a deposit
  • The additional services/benefits offered - like cashback pre-paid cards
  • The Usability of the service - is there both a mobile and desktop/web App?
  • Trust & security - what are reviews like? Have they suffered hacks?
  • Customer Service - how quick & effective are they at dealing with issues?
  • Do they operate their own token? Should you accept interest in that token?

These are some of the popular CEFI services offering interest bearing crypto accounts, along with other services like loans.

  • Nexus
  • Voyager
  • Celsius
  • BlockFi

Read a more detailed explanation of how CEFI works in our Knowledge Base:

This is not investment advice.