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How Do Dividends Work?

Dividends are payments to stockholders that some companies make as a way of sharing their profits. They are one of the ways that investors can make money from stocks and build long-term wealth.

Dividends are usually cash payments that are paid on a regular basis. Investors can draw on these payments as income or reinvest them in the stock market. Here’s a closer look at how dividends work and how investors can take advantage of them.

What Are Dividends?

Dividends are shares in a company’s profits that are paid to stockholders in cash, and in some rare instances stock. They represent one of the most common ways investors can make money from stock aside from selling appreciated stock.

Dividends can generally be divided into two broad categories: regular and special dividends.

Regular Dividends

Regular dividends are those which the company expects to pay out on a recurring basis. Typically, a company will set regular dividends at a value they expect to be able to pay, even when times are tough.

Special Dividends

Special dividends are usually one-time payments that follow special circumstances. For example, if a company sells an asset and has no immediate need for the proceeds, they may use them to fund a special dividend.

Why Do Companies Pay Dividends?

When a company starts to earn more than it needs to cover operating expenses (one of many line items in a profit and loss statement) and reinvest in its own business, it may start paying out dividends. Typically, companies in this situation are mature and well-established, requiring little reinvestment of capital to grow.

Offering dividends can be a smart move on the company’s part. They can signal that the business is robust and financially healthy, drawing the attention of investors looking for income, which in turn may potentially drive up share prices.

How Do Dividends Get Paid Out?

Dividends are usually paid out quarterly—though some pay out monthly. They are paid on a per-share basis, typically in cash. So, for example, if a company is paying a dividend of $0.15 per share and you own 100 shares, you’ll receive $15.

Stock dividends are issued as a percentage of the shares you own. So if you receive a 5% stock dividend and you own 100 shares, you’ll receive five shares for a total of 105 shares.

Companies that pay dividends usually declare them a number of weeks before paying them out, when the board of directors makes an official announcement that a dividend will be paid. When it come to dividend payment, there are a number of important dates to be aware of:

Declaration date: The day the board of directors makes its official announcement that it has decided to make a future dividend payment.
Payment date: The date on which dividend payments are made to shareholders—either with a check in the mail or through money transferred to your brokerage account.
Record date: The date by which you must be an owner of the dividend-paying company’s stock in order to receive the declared dividend.
Ex-dividend date: The ex-dividend date is usually the day before the record date. On this day, stocks are trading without the dividend. In order to receive a declared dividend, you must have bought stock the day before the ex-dividend date, and you must be an official owner of the stock by the record date. Investors who purchase the stock on or after the ex-dividend date will not receive the upcoming dividend. Rather they will have to wait until the next dividend payment is announced.

Are Dividends Guaranteed?

Some investors like to structure their investments so that they can live off dividend income. However, it’s important to note that though dividend payments are usually paid on a regular basis, they are not guaranteed.

Rather they are paid at the discretion of the company board of directors, which can change the amount of the payment or cancel it altogether. If a company decides to cut dividends, there is a hierarchy of payment they will usually consider. They will typically pay bondholders first, followed by preferred stockholders. Common stockholders are paid last.

Which Companies Pay Dividends?

Generally speaking, large, mature companies that are not currently focused on fast growth offer dividends. For example, most companies in the S&P 500 Index, which represents the 500 largest U.S. companies by market capitalization, pay dividends.

Younger, fast-growing companies are unlikely to offer dividends. Instead they tend to focus on reinvesting earnings to grow their business, open more stores, build new facilities, or hire more employees.

How to Choose Dividend Stocks

When considering which dividend stocks to buy, investors may want to look at dividend yield, which measures how much income they will receive for every dollar invested in the stock. The higher the yield, the more income they can expect.

Investors may also want to consider the dividend payout ratio, the portion of a company’s income that goes toward paying dividends. As a rule of thumb, investors might want to look for a payout ratio of 80% or less. Any higher and the company may be in danger of being unable to make its dividend payments.

How Do Dividends Affect Stock Prices?

In the short-term, dividends can drive down the price of a stock a little bit. That’s because investors who buy the stock on or after the ex-dividend date don’t get to benefit from the upcoming round of dividends. So they may be reluctant to pay a premium for a reward in which they don’t get to take part. In fact, some specialists may mark down the price of a stock by the amount of the dividend on the ex-dividend date.

Stock prices may also fall when a company announces a reduction in their dividend, which could signal that they expect weak sales or lower profits due to other facts like higher operating costs. If investors think a company is headed for hard times, they may be tempted to sell, which would drive down the stock’s price.

On the flip side of that coin, when a company offers a higher dividend or a special dividend, investors may see it as a harbinger of financial health, which can make the stock more attractive to investors and drive up the price.

How Are Dividends Taxed?

If you receive dividends in a taxable brokerage account, they are considered taxable income and will be taxed at your regular income tax rate or as long-term capital gains. Dividends that are paid inside tax-advantaged savings accounts—such as traditional and Roth IRAs, 401(k)s, and Coverdell ESAs —are not taxed.

A dividend is eligible for the lower capital gains rate if it is a “qualified dividend.” To meet this standard, a dividend must me the following criteria:

•  It must be paid by a U.S. corporation or qualified foreign corporation.
•  It must be an ordinary dividend and not capital gains distributions or dividends from tax-exempt organizations.
•  You must have held the stock for more than 60 days in the 121-day period that begins 60 days before the ex-dividend date.

The Takeaway

Investing in stocks that offer dividends can be a good strategy for investors looking for income and to build their wealth potentially faster than with non-dividend stocks. The reasoning: Investors who reinvest their dividends can buy additional shares of stock, which in turn entitles them to more dividends in the future.

If you’re ready to add dividend-paying stocks to your portfolio, check out SoFi Invest®. The Active Investing platform lets investors choose from an array of stocks, ETFs or fractional shares. For a limited time, funding an account gives you the opportunity to win up to $1,000 in the stock of your choice. All you have to do is open and fund a SoFi Invest account.

Find out how to get started with SoFi Invest.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.


SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Claw Promotion: Customer must fund their Active Invest account with at least $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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What is the Double Spending Problem with Bitcoin?

Bitcoin’s Double Spending Problem: Definition, Solution, and Future Outlook

Manipulating money is a common problem in every economic system. Whether with fake gold, counterfeit dollar notes, replica coins, or double-spending of digital currency, bad actors seek to exploit or emulate existing currencies for personal financial gain.

As new forms of technology and money become publicly available, bad actors are often some of the earliest adopters because the asset is largely untested or unregulated and thus more easily manipulated. Bitcoin is no exception.

Bitcoin’s completely digital currency network is decentralized—it has no central authority, regulators, or governing bodies to police thieves and hackers. Though traditional security entities don’t monitor the Bitcoin network for double-spending, other network defenses have been implemented to combat attacks that would otherwise threaten the network’s consensus mechanism and ledger of transactions, providing confidence to those who invest in Bitcoin.

What Is the Double-Spending Problem?

The double spending problem is a phenomenon in which a single unit of currency is spent simultaneously more than once. This creates a disparity between the spending record and the amount of that currency available.

Imagine, for example, if someone walks into a clothing store with only $10 and buys a $10 shirt, then buys another $10 shirt with the same $10 already paid to the cashier. While this is difficult to do with physical money—in part because recent transactions and current owners can be easily verified in real-time—there’s more opportunity to do it with digital currency.

Double spending is most commonly associated with Bitcoin because digital information can be manipulated or reproduced more easily by skilled programmers familiar with how the blockchain protocol works. Bitcoin is also a target for thieves to double-spend because Bitcoin is a peer-to-peer medium of exchange that doesn’t pass through any intermediaries or institutions.

Recommended: What is Cryptocurrency? Crypto Guide for Beginners

How Does Double-Spending Bitcoin Work?

Fundamentally, a Bitcoin double spend consists of a bad actor sending a copy of one transaction to make the copy appear legitimate while retaining the original, or erasing the first transaction altogether. This is possible—and dangerous—for Bitcoin or any digital currency because digital information is more easily duplicated. There are a few different ways criminals attempt to double-spend Bitcoin.

Simultaneously Sending the Same Bitcoin Amount Twice (or More)

In this situation, an attacker will simultaneously send the same bitcoin to two (or more) different addresses. This type of attack attempts to exploit the Bitcoin network’s slow 10-minute block time, in which transactions are sent to the network and queued to be confirmed and verified by miners to be added to the blockchain. In sneaking an extra transaction onto the blockchain, thieves can give the illusion that the original bitcoin amount hasn’t been spent already, or manipulate the existing blockchain and laboriously re-mine blocks with fake transaction histories to support the desired future double spend.

Reverse an already-sent transaction

Another way to attempt a Bitcoin double-spend is by reversing a transaction after receiving the counterparty’s assets or services, thus keeping both the received goods and the sent bitcoin. The attacker sends multiple packets (units of data) to the network to reverse the transactions, to give the illusion they never happened.

Blockchain Concerns with Double Spending

Some methods employed by hackers to circumvent the Bitcoin verification process consist of out-computing the blockchain security mechanism or double-spending by sending a fake transaction log to a seller and a different log to the network.

Perhaps the greatest risk for double-spending Bitcoin is a 51% attack, a network disruption where a user (or users) control more than 50% of the computing power that maintains the blockchain’s distributed ledger of transactions. If a bad actor gains majority control of the blockchain, they can modify the network’s ledger to transfer bitcoin to their digital wallet multiple times as if the original transactions had not yet previously occurred.

Another concern is the potential double-spending problem on decentralized exchanges as crypto continues to migrate to decentralized exchanges (DEX) and platforms. With no central authority or intermediary, the growth and adoption of DEXs will depend on their security and proven ability to prevent double-spending.

Despite a variety of attempts to successfully double spend Bitcoin, the majority of bitcoin thefts have not been the result of double-counting or double-spend attacks but rather users not properly securing their bitcoin.

How Does Bitcoin Prevent Double Spending?

Bitcoin’s network prevents double-spending by combining complementary security features of the blockchain network and its decentralized network of miners to verify transactions before they are added to the blockchain. Here’s an example of that security in action:

Person A and Person B go to a store with only one collective BTC to spend. Person A buys a TV costing exactly 1 BTC. Person B buys a motorcycle that also costs exactly one BTC.

Both transactions go into a pool of unconfirmed transactions, but only the first transaction gets confirmations (blocks containing transactions from preceding blocks and new transactions) and is verified by miners in the next block.

The second transaction gets pulled from the network because it didn’t get enough confirmations after the miners determined it was invalid.

Security measure 1: Whichever transaction gets the maximum number of network confirmations (typically a minimum of six) will be included in the blockchain, while others are discarded

Security measure 2: Once confirmations and transactions are put on the blockchain they are time-stamped, rendering them irreversible and impossible to alter

Once a merchant receives the minimum number of block confirmations, they can be sure a transaction was valid and not a double spend.

Bitcoin’s proof-of-work consensus model is inherently resistant to double-spending because of its block time. Proof-of-work requires miners on the network, or validator nodes, to solve complex algorithms that require a significant amount of computing power, or “hash power.” This process makes any attempt to duplicate or falsify the blockchain significantly more difficult to execute, because the attacker would have to go back and re-mine every single block with the new fraudulent transaction(s) on it.

This process compounds over time, preserving previous transactions while recording new transactions. Reaching consensus through proof-of-work mining provides the network accountability by verifying Bitcoin ownership in each transaction and preventing double-counting and other subtle forms of fraud.

While it is technically possible for a group of individuals to initiate a 51% attack on the Bitcoin network, combining mining power and disrupting the network for their benefit, it is unlikely and difficult as it would require collusion by a tremendous amount of miners or a single miner with over 50% of the network’s hash power. Successfully executing a 51% attack has only gotten more difficult over time, for a few reasons: the difficulty of mining Bitcoin increases with every Bitcoin halving; mining hardware is prohibitively expensive at that scale; and a massive amount of electricity would be required to power such a massive mining operation.

The Takeaway

Double spending of Bitcoin is a concern, since it’s a digital currency with no central authority to verify its spending records. This leaves some to question the network’s security and legitimacy of Bitcoin’s network, validators, and monetary supply. However, the network’s distributed ledger of transactions, the blockchain, autonomously records and verifies each transaction’s authenticity and prevents double counting.

Though the blockchain can’t solely prevent double-spending, it is a line of self-defense before an army of decentralized validator nodes solve complex mathematical problems to confirm and verify new transactions are not double spent before they’re permanently added to the network’s permanent ledger.

Cryptocurrencies like Bitcoin can be volatile investments and prices change quickly due to news flow and other factors. Yet it’s that potential for highly fluctuating price changes that compels some people to seek out crypto as an investment.


Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount Bonus Payout
Low High
$50 $99.99 $10
$100 $499.99 $15
$500 $4,999.99 $50
$5,000+ $100

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bitcoin vault

How Safe is Blockchain? Blockchain Security Guide

How safe is blockchain technology? It has proven to be a powerful technology for protecting the integrity of vital information. But that doesn’t mean it’s entirely safe.

The technology has become increasingly prevalent in recent years as the cryptocurrency markets have moved toward center stage. One reason for its rapid adoption is that blockchain is designed to offer unparalleled security to digital information.

In its short life, blockchain—also known as distributed ledger technology—and the cryptocurrencies it powers has seen its share of successes and failures. And as its applications spread, blockchain security has become more important—and not just for cryptocurrency investors.

How Blockchain Works

In some ways, blockchain technology is like the internet, which relies on a decentralized network rather than just a single server.

Blockchain uses a decentralized, or distributed, ledger that exists on a host of independent computers, often called nodes, to track, announce, and coordinate synchronized transactions. This differs from traditional trading models that rely on a clearinghouse or exchange which tracks everything in a central ledger.

Each node in the decentralized blockchain constantly organizes new data into blocks, and chains them together in an “append only” mode. This append-only structure is an important part of blockchain security. No one on any node can alter or delete the data on earlier blocks—they can only add to the chain. That the chain can only be added to is one of the core security features of blockchain.

By referring to the chain, participants can confirm transactions. It cuts out the need for a central clearing authority.

Blockchain Security Basics

Blockchain is not immune to hacking, but being decentralized gives blockchain a better line of defense. To alter a chain, a hacker or criminal would need control of more than half of all the computers in the same distributed ledger (it’s unlikely, but possible—more on that later).

The largest and best-known blockchain networks, such as Bitcoin and Ethereum, are public, and allow anyone with a computer and an internet connection to participate. Instead of creating a security crisis, having more people on a blockchain network tends to increase security. More participating nodes means that more people are checking one another’s work and calling out bad actors.

That’s one reason why, paradoxically, private blockchain networks that require an invitation to participate can actually be more vulnerable to attack and manipulation.

Permissioned vs. Permissionless Blockchains

As the names imply, permissioned or private blockchains are closed systems that require an invitation to join. This can be useful for businesses like companies and banks, which may want more control over data and thus would restrict outsiders from joining. Ripple, which was created by the banking industry as a way to make low-cost transactions, is an example of permissioned blockchains.

Permissionless blockchains are public—anyone can transact on these blockchains, with no one in control. The data is copied and stored on nodes worldwide, and individuals can remain more or less anonymous. Bitcoin, Ethereum, and Litecoin are all examples of permissionless blockchains.

The Role of Miners in Blockchain Security

As Bitcoin and other forms of crypto have grown in popularity, so has the process of mining. For speculators, cryptocurrency mining is a way to receive crypto coins or tokens. For the cryptocurrencies themselves, mining contributes to blockchain security, as it’s a way to ensure the integrity of the underlying blockchain of their currencies.

Miners verify the transactions to make sure that they are valid and in line with the blockchain code. For popular crypto currencies like Bitcoin and Litecoin, they submit their proof of work (POW) algorithmic evidence supporting or denying each transaction, and receive payment in the form of coins.

How Blockchain Security Prevents Double Spending

For payments and money transfers, blockchain is useful in preventing “double-spending” attacks. These attacks are a core concern for cryptocurrencies. In a double-spending attack, a user will spend their cryptocurrency more than once. It’s an issue that doesn’t arise with cash. If you spend $5 on a sandwich, then you no longer have the $5 to spend. But with crypto, there’s a risk that a user will spend the crypto multiple times before the network finds out.

Blockchain helps prevent this. Within the blockchain of a given cryptocurrency, the entire network needs to reach consensus on the transaction order, to confirm the latest transaction, and to post them publicly.

Bitcoin was the first form of crypto to solve the problem of double spending. And it serves as an example of how blockchain helps preserve the integrity not just of currency, but of records as a whole. If someone wanted to spend the exact same bitcoin in two places by sending it to two recipients simultaneously, then the two transactions would first go into a pool of unconfirmed transactions.

The first transaction to be confirmed would be added to the coin’s blockchain as the next data block in its transaction history. The second transaction—being connected with the block in the chain that had already been added to—wouldn’t fit into the chain, and the transaction would fail.

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*Customer must fund their Active Invest account with at least $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

Blockchain Security Risks

But even with the security provided by the very nature of blockchain itself in addition to a global network of nodes and miners constantly confirming and protecting the integrity of a blockchain, there are still risks.

No Human Safeguards

One risk is also a supposed benefit: blockchain creates a seamless way to execute transactions. There’s no manual intervention required to send or receive money, which eliminates some of the more human safeguards that have evolved over time. While the technology has benefits for ensuring the integrity of the assets identity, or information involved, it is completely agnostic about the sender and receiver. This is one area where a central clearinghouse can exercise valuable discretion.

While this doesn’t pose a direct risk to any crypto assets an investor may hold at the moment, it could lead to issues later. Many critics of bitcoin and other forms of crypto point to its growing use by criminal and terrorist groups to circumvent money-laundering and other bank regulators. The anonymity that crypto allows also made it popular on the Silk Road online bazaar of illegal goods and services that flourished between 2011 and 2013.

That criticism has led to increased interest from regulators in the US and abroad, which could ultimately lead to new laws about how blockchain can and can’t be used.

High Costs

Other critics point to the high cost of maintaining the networks that make blockchain function. The process of mining these coins, which is vital to their integrity and survival as a working currency, consumes vast amounts of energy. The total energy consumption of the bitcoin network is equal to the electricity needs of 2 million U.S. homes, according to Morgan Stanley.

Because miners are paid in coins, that creates a real risk. If the price of the coins go down low enough, or the price of electricity rises high enough, then people may decide the game isn’t worth the candle.

Hacker Activity

While the very nature of how blockchain works—using decentralization, consensus, and cryptography—ensures that transactions are basically tamper-proof, hackers have still found ways to defraud the system over the years. In 2019 alone, twelve crypto exchanges were hacked.

These are a few ways the system is vulnerable to hackers.

•  Phishing is one problem, in which scammers send bogus emails in an attempt to get wallet key credentials from crypto users. (Securely storing your cryptocurrencies isn’t enough—it’s also essential to stay vigilant about protecting sensitive information.)
•  There’s also a chance that one miner or a large enough group of miners could eventually gain control of more than 50% of a network’s mining power. In that case, they’d gain control over the ledger.
•  In other situations, hackers can access real-time data as it’s being routed between internet service providers.

How to Choose a Secure Blockchain Network

There are a few things a user can do to make sure the crypto exchange they select is secure. Here’s a checklist to use when choosing an exchange:

•  Does the exchange engage auditors to look for flaws in the system?
•  Does the exchange store assets in “cold storage” (someplace without an internet connection—think of a paper wallet with a private key)
•  Do they offer security options like alerts for suspicious transactions? Two-factor authentication? Multi-signature transactions?

The Takeaway

For Blockchain, security is both a strength and a concern. Cryptocurrency transactions—including paying with crypto, investing in crypto, and crypto lending—is anonymous and protected in part by the very way blockchain technology is built. But as with most other technologies, it’s not completely immune to tampering.

That said, users can protect themselves by securely storing their private keys and not falling prey to phishing emails looking for personal information in order to hack your account.


SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount Bonus Payout
Low High
$50 $99.99 $10
$100 $499.99 $15
$500 $4,999.99 $50
$5,000+ $100

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5 Easy Steps to Invest in Litecoin

5 Easy Steps to Invest in Litecoin

When anyone mentions crypto, the first name that usually comes to mind is Bitcoin. However, there are hundreds more cryptocurrencies that have been around nearly as long as the first cryptocurrency but at a fraction of the price, such as Litecoin.

If Bitcoin is digital gold, then Litecoin is digital silver; it is faster and more abundant. (N.B.: Both are risky investments.) Casual investors can invest in this virtual coin in just a few steps.

Understanding the Litecoin Basics

Litecoin (LTC) is a peer-to-peer cryptocurrency and open-source software project like Bitcoin, designed for cheap and fast transactions. It was created in 2011 through a soft fork of the Bitcoin blockchain and was one of the first Bitcoin spinoffs or “altcoins.”

One of Litecoin’s lead premises was to provide faster transactions by confirming a new block on the Litecoin Network every 2.5 minutes as opposed to Bitcoin’s 10 minutes. Like Bitcoin, Litecoin can be purchased and sold through online platforms such as digital currency exchanges and alternatively, be mined with specialized computer hardware through a version similar to Bitcoin’s Proof of Work mechanism.

Litecoin’s price is generally correlated to Bitcoin’s price movements, rising when Bitcoin rallies and falling when Bitcoin declines. Due to Litecoin’s faster transaction speeds and lower fees, some merchants, vendors, and blockchain applications have introduced Litecoin payment processors.

This demand has also contributed to many major global cryptocurrency exchanges to list Litecoin, making buying cryptocurrency more accessible around the world.

Buy Litecoin in 5 Steps

1. Get a Litecoin Wallet

The first step to buying Litecoin is having somewhere to store it. There are several ways to store Litecoin depending on convenience or security needs. Though cryptocurrency exchanges and investing platforms offer custody services to hold cryptocurrency, investors typically only use exchanges and investing platforms to purchase Litecoin and then withdraw the coins to a Litecoin wallet.

The first step is to determine which type of cryptocurrency wallet better fits investing needs, of which there are two distinctly different types.

Hot Wallet

A “hot wallet” is an easy and free way to store Litecoin through a service connected to the internet. Hot wallets are popular and typically accessed through websites, browser extensions, or desktop applications.

Hot wallets are also convenient for users because they are always online and can be accessed from a different device if an old device becomes inoperable. However, it’s because hot wallets are connected to the internet that they can be more vulnerable to hacks and theft. When creating a wallet, the user is provided with three important components to be safely stored for future use:

•  Public Key Address: The wallet’s public address that is shared with others in order to receive Litecoin. This will need to be readily accessible to withdraw funds to the wallet.
•  Private Key: Private password consisting of an arbitrary string of letters and numbers required to access the wallet’s funds.
•  Seed Recovery Phrase: A backup login method in case the private key gets lost, which consists of a list of random words in a sequential order. Some wallet providers may offer different length seed phrases but typically contain 12, 18, or 24 random words.

Coinbase, the largest U.S. cryptocurrency exchange, also provides hot wallet services. Mycelium, Exodus and Electrum are other examples of some hot wallet providers.

Cold Wallet

Another option for investors concerned about online safety is a “cold wallet,” a physical device that must be purchased and is only ever connected to a computer to send or receive cryptocurrency as needed. Otherwise, it is safely stored by the individual owner where it remains offline and disconnected from any computer or internet connection.

This security measure creates an “air gap” between potential malicious parties and any form of online or local area network (LAN) access to Litecoin in storage. While individual cryptocurrency owners tend to self-custody and store cold wallets at home, it is not unheard of for investors to take further measures and store a cold wallet in a bank-protected vault. Trezor and Ledger are examples of cold wallet makers.

2. Create Account on Cryptocurrency Exchange

The safest method for buying cryptocurrency is through a reputable digital currency exchange, an investing platform exclusively for buying and selling digital currencies.

Coinbase is the largest cryptocurrency exchange in the U.S. by crypto volume. Binance, Gemini, Kraken, Cash App and Bisq are other well-known, popular markets.

The first step to invest in Litecoin is to create an account on a digital currency exchange or investing platform that sells Litecoin. This starts by registering a username, complex password, and storing them in a safe place offline.

Next, new users will be required to verify their identity by providing basic personal information such as date of birth, address, nationality, and providing a form of personal identification such as a valid government-issued driver’s license or passport.

Financial companies are required to comply with SEC-mandated Know Your Customer and Anti-Money Laundering (KYC/AML) cryptocurrency regulations to prevent fraud and provide an assurance of customer due diligence. This process is subject to approval and may take a couple days before being approved to continue funding the account and using it to trade.

3. Deposit Funds Into Cryptocurrency Account

Once the account is created, a funding method must be linked to the account to transfer money into the account. Bank accounts are typically used to fund accounts but some platforms may also allow other third party payment providers or wire transfers.

The user may be asked to provide the bank account number and routing number in order to link a bank account, after which a series of microtransactions may be initiated to confirm a successful connection.

After an account is successfully connected, funds may be transferred from the funding account to the investing account, which can then be used to buy Litecoin. Funds may be deposited up to a certain dollar amount and will then be available to trade. Prices of Litecoin have soared since the end of 2019, rising more than 300% to $174.48 near the beginning of February 2021.

4. Submit Buy Order

Once the account is funded, it’s time to buy Litecoin. It may be possible to pick from two options: a market order or limit order.

After a buy order executes, the required funds will be debited from the account’s balance and the purchased coins will appear in the account. The newly-purchased Litecoin is immediately available for spending, trading, or transfer.

Market Order

Market orders are more common for even simple investing platforms. A market order simply buys the designated amount of Litecoin at the current market price. This can result in some price slippage especially during volatility, but guarantees that a buy order is executed immediately.

Limit Order

Limit orders allow for some flexibility and precision in buying only at certain prices. An investor can determine at what price they want to buy and nothing higher. If the price is never met, the trade doesn’t execute. A limit order can be set for the day or in some cases for a couple months.

5. Withdraw Litecoin

After purchasing Litecoin, the next step is to withdraw it from the investing platform and send it to a private and secure wallet. This process is completed as follows:

•  Initiate a withdrawal request
•  Input the desired token withdrawal amount
•  Copy and paste the newly created wallet’s public address
•  Submit the withdrawal request

The request should initiate immediately and place the withdrawal order into a queue on the Litecoin network. Because Litecoin’s transaction speed is multiple times as fast as Bitcoin’s, it should only be a matter of minutes before the requested withdrawal amount appears in the designated wallet’s balance.

Is Litecoin a Good Investment?

Litecoin is one of the oldest cryptocurrencies having been around since 2011. It has maintained its position as one of the most popular cryptos, consistently being a top-five cryptocurrency based on token price and market cap.

While there are many different types of cryptocurrency, some of which are not yet actively functioning or as time-tested, Litecoin’s network has been among the fastest transaction speeds in cryptocurrency for years. Litecoin is easily accessible on many global digital currency exchanges and investing platforms, providing the token with high liquidity and global market penetration.

After initially trading for a few cents in late 2011, Litecoin has seen exponential growth over time. Litecoin also has a total maximum supply of 84 million compared with Bitcoin’s maximum supply of 21 million, making Litecoin four times as abundant as Bitcoin but more scarce than many other large cryptocurrencies such as Ripple and Ethereum.

The Takeaway

Proponents of cryptocurrencies say the market is here to stay and disrupt the traditional financial sector. Retail investors have immediate access to investing in disruptive cryptocurrency projects like Litecoin alongside accredited investors.

As the cryptocurrency asset class transitions from one market cycle to another, some investors argue that it can continue to provide outsized investment opportunities.

In addition to Bitcoin, investors have other investment options in cryptocurrency including Litecoin. With the option of buying whole or fractional coins, Litecoin is a user-friendly investment option that allows users to buy as much or as little Litecoin as desired and transfer it quickly.


Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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What is Binance (BNB) Crypto? BNB Price & How to Buy BNB

Binance (BNB) is a cryptocurrency token that was created to be used as a medium of exchange on Binance, one of the world’s largest cryptocurrency exchanges.

Traders who hold BNB tokens get discounts when using BNB to pay for trading fees on Binance. As of 2020, BNB users received a 6.25% rebate on trading fees. Binance Coin also serves as the native token for Binance’s decentralized exchange (DEX).

What Is Binance?

Binance is one of the world’s biggest cryptocurrency exchanges. Based in Malta, the exchange was founded in 2017 and follows all standard cryptocurrency regulations. Binance offers a variety of features, including:

•  Crypto-to-crypto trading of many different currency pairs (over 150)
•  Fiat-to-crypto trading
•  The ability to buy crypto with a credit card
•  Futures and leveraged trading for advanced traders
•  The option to choose between a basic interface for beginners or an advanced interface for experienced traders

Binance has one the highest liquidity of any crypto exchange in the world, according to data from CoinMarketCap. That means more crypto can trade hands on the exchange than anywhere else during a given period of time, making Binance a desirable place for day traders who thrive on liquid assets, which makes it easier and faster to execute trades. The exchange also has low fees, so users can make more trades for less cost.

Binance derives its name from a combination of the words “finance” and “binary.” The exchange claims to have high levels of security and is capable of processing about 1.4 million orders each second.

Eleven days before Binance went live, BNB was created through an initial coin offering. While the coin was first issued as an ERC-20 token running on the Ethereum network, these same coins were later swapped with BEP2 BNB coins in April 2019 when the Binance Chain mainnet launched (Binance’s own blockchain network). BNB can be used as “gas” payments–fees paid for computing power–to fuel transactions on the DEX.

Is Binance Coin Worth Buying?

This question might not have a single, objective answer. It depends on the individual. Someone who wants to use Binance’s decentralized exchange (DEX) might think BNB crypto is worth buying. The Binance DEX first went live in April 2019.

Traders who make a lot of trades on Binance on a regular basis might benefit from the discounts that BNB provides. They could wind up saving them a lot of money.

And finally, some cryptocurrency traders might speculate, as opposed to invest, that BNB has a promising future. These people might see BNB as a good coin to hold for some time, in hopes that the price will continue to rise. BNB crypto has risen over 34,000% since inception and over 41,000% since its all-time low.

What is Binance Coin Used For?

As far as different types of cryptocurrencies go, Binance Coin might be one of the most unique. As mentioned, BNB serves two main purposes:

•  To provide discounts to traders who use BNB on Binance, and
•  To function as “gas” for transactions on Binance’s decentralized exchange (DEX).

When someone places a trade on Binance, they are charged a 0.5% trading fee. This fee can either be paid in the form of the cryptocurrency being traded at the time or in the form of Binance Coin. When paid using BNB, a discount is applied.

Beyond that, altcoins like Binance Coin are also used for speculative purposes. Traders buy coins at a low price with the hopes of selling them later at a higher price to make a profit.

How to Buy BNB

Binance Coin can be purchased on the Binance crypto exchange. There are three primary trading pairs:

•  BNB/USDT (Binance-Tether stablecoin)
•  BNB/BTC (Binance-Bitcoin)
•  BNB/BUSD (Binance-U.S. dollar)

While BNB crypto was created by and for Binance, traders can buy BNB tokens on other exchanges as well. As of the time of writing, BNB can be traded on dozens of different exchanges.

Users who already hold some Bitcoin might find it easiest to deposit Bitcoin to an exchange that trades the BNB/BTC pair and then trade their bitcoin for BNB. Those who don’t hold Bitcoin could consider creating an account on Binance and funding it using either a stablecoin like Tether or U.S. dollars directly.

Binance Coin Price

At the time of writing, the BNB price was $40.39 or 0.001076 Bitcoin.

In July 2017, when the coin was first created, the price was closer to $0.10, with the all-time low being $0.096. The all-time high, as of January 2021, was $45.16, reached on Jan. 10, 2021.

BNB is currently ranked as the eleventh largest cryptocurrency, according to CoinMarketCap data, with a market cap of over $5.7 billion. The 24-hour trading volume on Jan. 14, 2021 was $548.3 million.

BNB crypto has a circulating supply of 142,406,561 BNB and a maximum supply of 174,152,673 coins.

Is Binance Better Than Coinbase?

Some users might compare Binance to other prominent exchanges, including Coinbase. The comparison is, however, largely subjective. For those new to crypto seeking ease-of-use and simplicity, Coinbase might be a good option. They allow for purchases and sales of many of the top cryptocurrencies.

Coinbase also has a cold storage, multi-signature feature called “vaults.” Vaults provide a more secure way to hold crypto for the long-term. To access funds held in a vault, a user must verify a withdrawal request from two different email addresses and wait through a 48-hour processing period.

On the other hand, for more active traders seeking a wider variety of tokens to choose from and higher liquidity, Binance could be preferable. At Binance, investors and traders also have the option to use a more advanced interface with detailed charts.

Is Crypto Safe On Binance?

The answer to this question depends on an individual’s definition of “safe” and how much money is in question.

Generally speaking, it might be safe to keep small amounts of crypto on a secure exchange like Binance for a short period of time. Binance boasts some of the strongest security in the industry. For larger balances to be held over longer time-frames, however, holding coins on any exchange is widely regarded as not being very secure.

Over the years, many exchanges have been hacked. This creates the most obvious security risk involved with “hot wallets,” or cryptocurrency wallets that are actively online at all times. Another risk that comes from exchanges is theft. Employees of the company could conspire to steal user funds and blame the event on outside malicious actors.

The Takeaway

Binance (BNB) coins were created to be used on the Binance cryptocurrency exchange. BNB users on BNB can get trading discounts. However, BNB has become more popular in recent years, experiencing a tremendous increase in price, and now, cryptocurrency traders and investors can find it on many other exchanges.

With SoFi Invest®, investors can buy cryptocurrencies like Bitcoin, Ethereum and Litecoin, while following the prices of others like XRP and BNB. They can also invest in stocks or exchange-traded funds (ETFs).

Get started today.



Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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