InvestHL Archives | Page 59 of 67

Dec

2021

How to Invest in Bitcoin

By SoFi | Growing Wealth, invest, Investing | No Comments

In just over a dozen years, bitcoin (BTC) has gone from being a digital currency pioneer to being the granddaddy of all cryptocurrencies, with the longest track record and the highest valuation. The result: Investing in bitcoin has never been easier.

Investors today can buy and sell bitcoin, trading at about $57,600 per coin, as of Nov. 23, 2021, on numerous crypto exchanges and thousands of crypto ATMs.

But if bitcoin is the oldest and largest crypto, with a total market capitalization of nearly $1.1 trillion, that doesn’t mean investing in bitcoin, or any crypto, is risk free. Bitcoin is volatile and largely unregulated — as are many of the bitcoin-related products and services (like crypto exchanges) investors must use to trade bitcoin. If you’re interested in trading bitcoin, or buying and holding it as a long-term investment, here’s what you need to know.

Table of Contents

Quick Recap Before You Buy Bitcoin
What Kind of Investment Is Bitcoin?
How to Buy Bitcoin: 5 Things to Know
Alternate Ways to Invest in Bitcoin
Start Trading Bitcoin
The Takeaway

Quick Recap Before You Buy Bitcoin

Bitcoin, which turns 13 in January 2022, is truly the OG crypto. It was the first cryptocurrency to be created in 2009, and it remains the most popular and widely traded crypto by far. There are more than 18.86 million bitcoin tokens in circulation as of November 2021, against a capped limit of 21 million.

Also important for new bitcoin investors to know: Many of the features that established bitcoin as a pioneering form of crypto became the foundation for the thousands of different cryptocurrencies that have launched since then.

It’s Decentralized

Unlike fiat currencies like the dollar, bitcoin is not issued or monitored by a central authority like a government or central bank. Instead it relies on a distributed network of nodes, or computers, that validate transactions using a type of peer-to-peer review or consensus. This process of network-based checks and balances, so to say, helps to maintain bitcoin’s basic protocol (i.e. the rules that govern the bitcoin platform) and keep it secure.

It’s Digital

Like most forms of crypto, bitcoin is a digital-only currency. It’s traded on digital exchanges and stored in digital wallets (more on those below.)

That said, there are some physical bitcoins that have been produced — although whether these are legal forms of tender or just a type of collectible remains an open question (and a reflection of evolving crypto rules and regulations).

It’s Based on Blockchain Technology

Blockchain technology is central to the functioning of bitcoin and most cryptocurrencies, and you can’t invest in bitcoin without understanding how the two work together. Blockchain is a transparent ledger that enables blocks of transactions to be confirmed through a system of cryptography and peer-to-peer verification. All transactions, including investment trades, are logged permanently on the blockchain. Miners who verify the transactions are rewarded with more bitcoin. In the case of other types of crypto, blockchain technology may also support other innovations, like smart contracts, dApps, and more.

What Kind of Investment Is Bitcoin?

Is bitcoin a currency, a security, a commodity? These are good questions for would-be investors to ask. While many people consider bitcoin an investment, generally speaking, the Securities and Exchange Commission (SEC), which regulates the financial markets, ruled in 2019 that bitcoin does not meet the criteria for a security.

Although most people consider bitcoin a form of cryptocurrency, there is still a debate about whether bitcoin is truly a form of money that can be exchanged for goods and services. While the commercial use of bitcoin has been growing — and in June 2021, El Salvador became the first country to officially accept bitcoin as legal tender — for the most part bitcoin still isn’t widely used as a form of payment.

So, for the moment, bitcoin is considered a commodity, under the Commodity Exchange Act, because it acts as a store of value — similar to gold.

Other forms of crypto, particularly tokens that may generate returns for investors, may be labeled securities by SEC Chair Gary Gensler. This could have serious implications for how different types of crypto assets are traded, because they would be closely regulated by the SEC.

How to Buy Bitcoin: 5 Things to Know

While you may feel comfortable investing in stocks or ETFs, buying and selling a cryptocurrency like bitcoin requires a different process. Before you begin trading bitcoin, here are five key things to know.

1. You Need a Crypto Wallet

You can put dollars-and-cents money in a physical wallet. But bitcoin is digital and only lives on the blockchain and requires a crypto wallet if you want to buy and sell it. A crypto wallet isn’t a place to store your crypto, per se, but a type of software or hardware that protects the public and private keys that enable you to trade your bitcoin.

• Software wallets. You can choose a mobile wallet or app, or a desktop wallet. These types of wallets, sometimes called hot wallets, are software based and you need a secure internet connection to access them. They’re convenient, and can make trading on exchanges simpler, but any kind of third-party software might be vulnerable to cyber attacks.

Some crypto exchanges (see below) typically provide a hot wallet as part of your account. For security reasons, you may want to keep a separate wallet.

• Hardware wallets. A cold wallet uses hardware, like a thumb drive, to download and secure the keys to your crypto. This type of wallet can be more complicated to use; you have to plug it into a device in order to make a transaction. But it can be more secure, and less vulnerable to hackers.

The biggest drawback is that you could lose a cold wallet, and with it the keys that give you access to your crypto.

2. Understand Public and Private Keys

Like most forms of crypto, bitcoin lives on the blockchain, the permanent digital ledger that records all bitcoin transactions. Bitcoin transactions are validated and added to the blockchain through a complex cryptographic process known as Proof of Work or PoW.

So when you buy, sell, send, or receive bitcoin, you need a public key (basically the digital address of your wallet). But you also need a private key, which gives you access to the bitcoin you own. If you lose, misplace, or forget that private key, you cannot access your bitcoin. And if the private key falls into the wrong hands, your bitcoin can be stolen.

3. Decide Where to Trade

With the exception of some new bitcoin-based investments, you generally can’t trade crypto on a traditional exchange like the NYSE. You need to buy and sell bitcoin on a crypto-based trading platform like an online exchange or app, or by using a traditional brokerage that offers crypto trading.

There are three main types of crypto exchanges: centralized, decentralized, and hybrid. Most crypto exchanges enable crypto-to-crypto trades, or fiat-to-crypto (meaning, you can use a traditional currency like dollars to buy and sell bitcoin and other cryptocurrencies).

• A centralized cryptocurrency exchange is a platform where cryptos are bought and sold, with the help of a third party to conduct these transactions.

• Decentralized exchanges (DEX) allow crypto investors to trade directly with each other, without the need for a middleman.

• Hybrid exchanges aim to combine features of both: e.g., the liquidity of a centralized exchange and the security and anonymity of a DEX.

You can also use P2P, or peer-to-peer, exchanges, which are more like open markets that allow people to trade crypto directly with each other. When choosing a P2P exchange, consider ease of use, whether your funds might be insured, and the types of crypto offered.

4. Personal Identification

To establish an account with an exchange or brokerage, you’ll have to provide your social security number and bank information to fund the account. If the platform adheres to standard KYC (Know Your Customer) rules, you’ll have to provide a government-issued picture ID.

If maintaining some degree of privacy is important to you when trading bitcoin, you may want to consider whether you use a brokerage, crypto exchange, P2P exchange or other method.

5. Fund Your Account

You can fund your trading account using a bank account, debit card, credit card, wire transfer or by using other forms of crypto. It depends where you plan to trade, and what types of currency the platform accepts for trading.

Although trading bitcoin in the U.S. is legal, some banks may flag or even bar deposits to crypto-related sites or exchanges, so be sure to check with your bank in advance.

Also be sure to research any fees associated with different payment options and on different exchanges. Credit cards, for example, charge a processing fee in addition to transaction costs, and may treat bitcoin purchases as cash advances. Crypto exchanges typically charge transaction fees as well, which might come in the form of a flat fee or a percentage of the trade.

Alternate Ways to Invest in Bitcoin

Those are some of the standard ways to buy bitcoin, but nothing stands still in the cryptoverse, and every day it seems there are new options for investors to consider.

• Crypto ATMs. There are now thousands of physical ATMs where you can purchase bitcoin around the country. Unlike a traditional ATM, though, you can’t withdraw cash from these machines; they make digital-only transactions via the blockchain.

• Payment processors. Depending on your state, you may be able to buy bitcoin directly from your PayPal or Venmo account. One drawback is that the crypto you buy on these platforms can’t be moved to your personal wallet or to another exchange.

• P2P exchanges. Unlike decentralized exchanges, which match buyers and sellers anonymously, peer-to-peer (P2P) services may provide a more direct connection between users, allowing users to post requests and shop around for the best trading terms.

• Bitcoin rewards cards. A relatively new option, the bitcoin rewards card operates similar to a credit card that allows you to build up points based on purchases, or get cash back. Here, though, you earn fractions of bitcoin.

Start Trading Bitcoin

Once you have your funding source connected to the platform where you plan to trade bitcoin, and you understand the transaction fees involved, you can place an order.

This part may feel similar to the trading options you might see on a traditional exchange, or when making stock trades. Now most crypto exchanges give investors the option to place market orders, limit orders, stop-loss orders, and more.

In addition, you can buy bitcoin in fractional amounts by dollar-cost-averaging, i.e., investing small amounts on a recurring schedule over time.

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected]. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

SOIN19179

Dec

2021

What is a Security Token in Crypto? How Do They Work?

What is a Security Token in Cryptocurrency?

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

In traditional finance, a security is defined as a stake of ownership in a publicly-traded corporation (like shares of stock), a creditor relationship with a public entity (such as a bond), or in the case of options contracts, a right to ownership.

Security tokens are tokenized securities. They are digital forms of traditional securities that live on a blockchain. These tokens could represent ownership of a fraction of any valuable asset, like a car, real estate, or corporate stock.

Why do these tokens exist, how do they work, and what are the benefits? We’ll answer those questions and more.

Crypto Refresher: Tokens vs Coins

First, a distinction needs to be made between tokens and coins. The term “cryptocurrency” is sometimes used to broadly refer to anything that moves along a blockchain.

But coins or currencies are those crypto assets that represent value on their own. Bitcoin (BTC), Litecoin (LTC), and Ether (the native currency of the Ethereum network) are all considered coins. Their main use case is to store value and act as a medium of exchange.

Crypto tokens, however, serve a specific function of some kind. There are different types of tokens, like utility tokens or security tokens. Utility tokens are backed by a project and company that has developed a use case for the token.

An example of a utility token is Brave’s Basic Attention Token (BAT). This token is given to users of the Brave browser in exchange for opting in to view advertisements. Brave users can then use the tokens to tip their favorite content creators. BAT exists as an ERC-20 token running atop the Ethereum network.

What is a Security Token?

Security tokens don’t need to have a utility. A security token represents some kind of ownership, most commonly a share of the company issuing the token. The concept is the same as buying shares of stock on a traditional stock exchange. For this reason, security tokens are sometimes referred to as equity tokens.

Security tokens are regarded as securities by financial regulatory authorities. This makes a security token subject to regulations, just like ordinary stocks and bonds.

Some investors in the crypto space — which has so far been largely unregulated or left to stand in legal gray areas — might see this as a negative. On the other hand, investors who come from the world of traditional finance might celebrate the fact that security tokens offer all the legal protections and regulatory clarity they are accustomed to.

The Howey Test

In the United States, anything that meets the definition of a “security” falls under the regulatory purview of the Securities and Exchange Commission (SEC). This includes security tokens. While this seems straightforward, there are still quite a few tokens that have characteristics of securities while also being utility tokens, leaving their future uncertain.

The SEC uses something called “the Howey Test” to determine whether or not something qualifies as being a security. The test has a four-part parameter:

1. Investment of money… meaning that someone has invested in goods or services

2. In a “common enterprise”… meaning that investor’s funds are either interwoven (horizontal commonality) or there’s a direct correlation between the promotion of the investment and its success or failure (vertical commonality)

3. With an “expectation of profit”… an expectation of profits can be either from fixed returns or capital appreciation

4. “Solely on the efforts of others”… meaning that if any profit involved stems from the efforts of the people who promoted the investment, it fulfills the fourth part of the Howey Test

It boils down to this: when someone invests money into something in the hopes of profiting from the efforts of another person, that investment can be considered a security.

How Do Security Tokens Work?

Most companies create security tokens in the same way. A company will issue a security token that represents a claim of ownership in the business. Then they establish a whitelist of crypto wallet addresses of the investors who will be permitted to buy those tokens.

To be put on the whitelist, potential investors have to be able to prove that they are compliant with any restrictions and regulations put on that security. This involves, at a bare minimum, compliance with know your customer (KYC) and anti-money laundering (AML) laws. While it’s not possible for a security token to incorporate all the regulations of numerous jurisdictions around the globe into its protocol, companies can comply with most regulations by restricting who can buy and hold the token.

While trading through a counterparty that is whitelisted, most people can trade security tokens just about however they like. Open Finance, Blocktrade, and tZero are some of the first exchanges designed for this type of activity.

How Are Security Tokens Used?

Security tokens differ from other cryptocurrencies in that they can be digital, liquid contracts for ownership of a part of an asset.

There are many potential applications for a token of this type. Real estate investment trusts (REITs) could issue shares of stock on a blockchain, and those security tokens would amount to owning a piece of real estate.

Companies could go public on security token (STO) platforms, giving access to a wider range of investors than those who would traditionally be eligible to invest in a company before its initial public offering (IPO) on a major stock exchange.

Benefits of Security Tokens

Security tokens bring all the benefits of blockchain with none of the friction, delays, or fees associated with traditional capital markets. At the same time, a security token can fractionalize any asset that already exists in the traditional market, no matter how big that market might be.

As security tokens are issued on a blockchain, investors can have full confidence that their ownership stake will be preserved on a public ledger. There’s little to no opportunity for market manipulation, corporate deception, or misunderstandings about how many shares there are or who owns them.

Investors may also have the peace of mind that comes from knowing that the tokens are classified as securities by regulators, eliminating any uncertainty surrounding what laws apply to the purchase, sale, or ownership of security tokens.

How to Invest in Security Tokens

For individuals who want to invest in security tokens, one place to start is with an STO platform. These exchanges host these digital assets, allowing investors to buy and sell tokens as they would stocks or any other investment.

Projects like The Elephant, Funderbeam, and Causam Exchange are working to merge traditional and crypto markets, utilizing blockchain infrastructure to bring access to capital markets to a wider audience in a more accessible way than was once possible.

The Takeaway

Security tokens are like little pieces of an asset that live on a blockchain. They have properties of both traditional financial instruments and crypto assets. Some enthusiasts hope that security tokens can one day improve financial markets for the world by allowing a greater number of people access to investments.

Photo credit: iStock/LightFieldStudios

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.

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.

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.

SOIN0921401

Dec

2021

Basic Attention Token (BAT) Guide: Definition, History, & Investing Today

Basic Attention Token (BAT): What It Is, How It Works, & Investing Today

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

The world of cryptocurrency is much wider than Bitcoin. While Bitcoin and its descendants and offshoots are focused on payments and transferring value, other coins and cryptos are based on the Ethereum blockchain, which is designed for software-based contracts and provides a platform for coding. One such crypto is the Basic Attention Token (BAT).

Here is your guide to crypto for BAT.

What is the Basic Attention Token (BAT) Coin?

The Basic Attention Token (BAT) is the native cryptocurrency of the Brave browser. Brave is a privacy-focused web browser based on Chromium, the open-source version of Google Chrome. The browser provides an ad-free experience thanks to its built-in “shields” feature that blocks most ads and tracking cookies. But this begs the question: how do websites and content creators make money if there are no ads? That’s where BAT comes in.

The Basic Attention Token is an ERC-20 token built atop the Ethereum network. The cryptocurrency falls into the category of “utility tokens,” those cryptocurrency types that are intended to be used for a specific purpose. BAT crypto enables a brand-new advertising revenue model that preserves user privacy and freedom of choice.

People browsing the web on Brave can earn BAT coin by choosing to click on the non-intrusive ads that periodically appear. Users can then use this BAT to send tips to their favorite content creators. Or, they could buy BAT from an exchange and deposit it to the wallet stored in their browser, giving them a larger supply of tokens to use for tipping.

BAT Price

At the time of writing in late November 2021, the Basic Attention Token price was $1.59. The BAT token price was only $0.20 per coin at the start of 2021, meaning the coin has more than tripled in value.

The all-time high BAT token price was $1.76, reached on November 26, 2021. The all-time low BAT coin price was $0.06, reached on July 16, 2017.

How Does BAT Crypto Work?

BAT coin powers the Brave browser (though Brave users can opt out of the BAT coin advertising model entirely and not even touch the BAT crypto wallet if they choose). Brave users periodically receive advertisements in the form of push notifications on their screen while browsing the internet. The notification contains a snippet of the ad. Users can choose whether or not they want to click on the notification and see the full advertisement.

If they do click on the ad, they will be rewarded with some BAT. The coins get deposited into a wallet hosted by Uphold, a company that creates wallets for both fiat and crypto.

The Brave browser also has a BAT wallet. If a user enjoys the content created by a certain website, they can choose to send a tip in the form of BAT. This can either be done manually, one tip at a time, or automatically, with users choosing to regularly contribute a set amount of BAT.

For example, if you visit Twitter in the Brave browser, you can press a button that says “Tip” and send BAT directly to a Twitter user. Similar functionality exists for Twitch streamers and YouTube creators.

This idea may be catching on: Brave claims some 22.2 million users every month employing BAT within the Brave browser, and over 7 million doing so every day.

Websites that have verified themselves as Brave content creators will have the coins deposited into their wallets. Websites that have yet to verify will have the coins held in a wallet for them until such time as they do decide to get verified.

Understanding the Brave Browser

The mission of the Brave browser is to provide a better advertising experience that doesn’t invade users’ privacy and gives them something for their trouble.

In some sense, it’s “free” to see ads on a typical browser on a typical website with no paywall. A given webpage may be littered with display ads, pop-ups, and autoplay videos. The way Brave and BAT see it, these ads aren’t really free at all. The “publisher” — i.e. the website — is selling your attention, your time, your energy to an advertiser, who pays for the right to dominate your sense and mental capacity.

Brave is designed around privacy and blocks trackers to prevent typical advertiser surveillance on websites, blocking some ads entirely. Brave also claims it doesn’t collect private browsing data, unlike other popular web browsers.

Additionally, when users download the Brave browser, they can sign up for “Brave Rewards” . Brave will track (on your device’s local storage only) “the attention you spend on sites you visit.” You can earn BAT crypto when you change your settings to view ads (delivered to your browser-based wallet), and you can tip content creators you like with BAT from your wallet.

History of BAT Cryptocurrency

The Brave browser and its BAT coin were created by Brendan Eich and Brian Bondy, who both had esteemed careers in the software industry long before Brave was born.

Brendan Eich is the CEO of Brave’s parent company, Brave Software, Inc., founded in May 2015. Before being a part of the Brave team, Eich was the founder and CTO of Mozilla and invented Javascript in 1995. He helped launch Mozilla Firefox in 2004, which has become one of the world’s most popular web browsers.

Brian Bondy is the CTO of Brave Software Inc., and he also has a long history as a software engineer.

BAT crypto first came to be after its “initial coin offering” (ICO) in May 2017, selling 6,400 BAT per 1 ETH. ICOs can raise money for an enterprise or project while also giving potential future customers the tools to participate in the project. This ICO raised about $36 million worth of Ethereum in around 30 seconds, indicating the excitement for the project and credentials that Eich brought to the crypto world.

What Can You Use BAT Coin for?

BAT can be used to tip content creators. At present, the tips can be sent to individual users on Twitter or to individual websites. Brave browser users also receive BAT as a reward for opting in to advertisements.

Traders can use BAT for speculative purposes, trying to buy low with the hope of selling later at a higher price.

Is BAT Crypto a Good Investment?

While BAT and Brave do not encourage trading or speculating in the tokens — explicitly stating in its whitepaper that BAT tokens are not “securities or for speculation” — it moves up and down in price with Ethereum, with which it has a fixed exchange rate of 6400 BAT per ETH.

Altcoins are generally considered to be speculative investments that carry high risk. There are few other investments available to the average person that carry greater risk and volatility.

If an investor has done all the research necessary to understand what the BAT cryptocurrency is, how it works, and what it was designed for, then those with the necessary capital and risk tolerance could choose to take a chance on BAT. It’s common investment advice to never risk more than you can afford to lose.

How and Where to Buy and Sell BAT Coin

Acquiring BAT doesn’t have to involve an exchange. Anyone can download the Brave browser and earn BAT over time by clicking on the ads that pop up. This would be a slow process for anyone looking to accumulate large amounts of BAT, however. In that case, an exchange might be the best way to go.

Basic Attention Token (BAT) trades on many popular exchanges like Coinbase, Binance, Huobi Global, and Upbit. Big exchanges like these can generally be trusted to follow all crypto regulations, of course.

Buying BAT is not unlike buying most other cryptocurrencies. Here are the basic steps involved, beyond learning the investing in crypto basics and how crypto exchanges work.

1. The first thing required is an exchange account. Make sure the exchange provides trading for the Basic Attention Token cryptocurrency.

2. After creating an account, a user can then deposit either some bitcoin, dollars (or other local fiat currency), or a stablecoin, depending on what trading pairs the exchange currently trades. Buying crypto directly with a credit card might also be an option, but doing so often involves higher fees (not only might the exchange charge additional fees, but credit cards often treat crypto purchases as a cash advance, which comes with even more fees).

3. At this point, a user can buy BAT. Simply select the trading pair that includes BAT and the currency deposited during step number two. For example, if a user had bitcoin and wanted to buy BAT, they would select the pair called “BTC/BAT.” If they had dollars, it might be “USD/BAT.” For a stablecoin like USDC, it might be “USDC/BAT.” Enter a buy order for the desired amount of coins at a desired price. Remember that selling crypto can result in crypto taxes being due the following year.

After buying BAT tokens, some users may want to consider moving their crypto off of an exchange and into a hardware wallet that supports BAT. This method of crypto storage could provide extra security, as the coins can be taken offline and put into cold storage where they should be inaccessible to hackers.

The Takeaway

Basic Attention Token is a method of payment used between users, advertisers, and content creators on the open-source Brave browser. BAT is built on Ethereum’s blockchain technology and while its creators did not intend for it to be traded, it is currently available on some crypto exchanges.

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.

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.

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.

SOIN0521219

Nov

2021

What Is Encryption and What Is Its Impact on Cryptocurrency?

What Is Encryption in Blockchain and Its Impact on Cryptocurrency?

By Samuel Becker | Growing Wealth, invest, Investing | Comments Off

Encryption is the technical process that prevents sensitive or private information from falling into the wrong hands. When it comes to cryptocurrency messages and transactions, encryption and decryption between two parties means that a third party can’t make sense of it or misuse it.

When it comes to blockchain technology, however, encryption is a bit more complicated than password-protecting a file, or adding two-factor authentication to a platform. Encryption is one of the features that makes blockchain such an exciting technology for different types of users.

Encryption is an important part of crypto transactions, and it’s helpful to have a basic understanding of how it works. Here’s what you need to know:

How Is Encryption Used in Crypto?

You may have noticed that the words “encryption” and “crypto” share a common root: “Crypt.” Instead, it relates to cryptography, or the practice of anonymizing and protecting sensitive data.

Broadly speaking, cryptocurrencies use encryption methods to make transactions anonymous and secure. Proponents of crypto cite its security as one of its major benefits.

Using blockchain cryptography, two parties can complete a transaction without sharing their own information or having to use a middle man such as a bank or government. Different types of cryptocurrencies use different types of encryption.

Recommended: A Brief History of Cryptography

What Type of Encryption Does Blockchain Use?

There are a few ways that a system might encrypt data: Symmetric encryption, asymmetric encryption, and hashing.

Symmetric Encryption

If the users employ the same key for both encrypting and decrypting the data then the system uses symmetric encryption. This is also sometimes referred to as “secret-key encryption.”

The key used in this sort of cryptographic system may be called a “common key,” as it’s used to both encrypt and decrypt data. Such a system, however, has greater potential for a security breach.

Asymmetric Encryption

Conversely, an asymmetric system uses two keys — a public key, and a private key. The Bitcoin network is an asymmetric system, since it issues users a private key which then generates a public key. It may also be called “public-key encryption.”

The way that an asymmetric encryption system would work then, is that the public key can be used for encrypting or encoding data, but the users would need a private key to decrypt or decode the data. In other words, the public key turns plaintext into ciphertext, but a user’s private key turns the ciphertext back into plaintext.

Hashing

Hashing does not utilize keys at all. Instead it uses an algorithm that generates a “hash value” based on the plaintext input. Hash functions are very secure, and the hash value generated often makes it difficult, if not impossible, for users to recover the plaintext to once encrypted.

The actual technical process behind hashing is fairly complicated, and because of that, can be used as a method of mining for some cryptocurrencies. The computational resources being expended on a network to contribute to the hashing process is referred to as the hash rate, and a good hash rate generally means that the network is secure.

The Importance of Plaintext and Ciphertext in Blockchain Encryption

Blockchain encryption is the process of securing and obscuring data, systems, or networks, making it difficult for unauthorized parties to gain access. The technical process behind encrypting data usually requires a crypto algorithm to convert “plaintext” into “ciphertext.”

What Is Plaintext?

Plaintext is what you type into your phone when you send a text or even the words that you’re reading right now. Plaintext is found everywhere and can contain sensitive information — like the password to your crypto wallet.

What Is Ciphertext?

Ciphertext is encrypted text. The encryption process converts into ciphertext — it’s turned into a code, in other words — by a program or algorithm called a cipher. In order to decrypt a message in ciphertext, a second party needs an algorithm or cipher to turn ciphertext back into plaintext. Decrypting is the opposite of encrypting.

The Role of Blockchain Encryption Algorithms and Keys

As mentioned, systems and networks that incorporate encryption use algorithms, and sometimes keys to do it. For instance, the Bitcoin encryption issues users a private key or a seed phrase, which generates a public key, too. That public key is like a Bitcoin address, and anyone can access it. It is what you would give to other people in order to execute a Bitcoin transaction.

Recommended: What Is a Bitcoin Seed Phrase?

Many cryptocurrencies use asymmetric encryption to ensure that the transactions on their network are secure. So, those “keys” are a user’s encryption tool — they can encode or decode encrypted data. Again, a network (like Bitcoin) may incorporate both public and private keys, so that transactions can occur, and so that users can ensure that their holdings remain secure (by never sharing their private key).

Algorithms do the actual encrypting and decrypting. There are several methods through which this can occur, but on a basic level, cryptographic algorithms scramble data or information, turning plaintext into ciphertext. Users then employ keys to turn unreadable or scrambled data back into something readable.

The Takeaway

The technical side of cryptocurrency networks — including encryption and security — can be a lot to digest. There are numerous methods to encrypt data, and different blockchain networks may incorporate different types of cryptography, which are more or less secure than others.

Photo credit: iStock/Olemedia

Nov

2021

Virtual Asset Service Providers (VASP): What Are They?

By Samuel Becker | Growing Wealth, invest, Investing | Comments Off

We live in a world of service providers: health service providers, cloud service providers, internet service providers — the list goes on. And when we’re talking about cryptocurrency, virtual asset service providers (VASP) are inevitably part of the conversation.

Just what exactly is a VASP? And why should you know about them if you’re interested in cryptocurrency? This article will cover everything you need to know.

What are Virtual Assets (VAs)?

Most, if not all, cryptocurrencies and digital tokens are virtual assets. As outlined by the Financial Action Task Force (FATF) , a virtual asset fits the following criteria:

• It’s a digital store or representation of value.

• It can be digitally traded or transacted, or used for payment or investment.

• It doesn’t include a digital representation of fiat currency or securities.

Virtual assets that can be traded or exchanged require a medium upon which those trades can be executed. That’s where VASPs come into play.

What is a Virtual Asset Service Provider (VASP)?

A VASP is a platform used to buy, sell, exchange, or otherwise interact with the cryptocurrency market. In other words, VASPs are crypto exchanges — or, at least the framework and theory behind a digital currency exchange.

The acronym “VASP” was coined by the FATF, which is an intergovernmental, international body that shores up standards and regulations — or promotes the use of them — in an effort to curb money laundering and stop the financing of terrorism.

Given that different types of virtual currency can and may be used for illicit or illegal activities, the FATF is stepping in to create some rules and frameworks for entities in the crypto space to operate within. Just as many cryptocurrency platforms must abide by existing regulations and compliance protocols, they may also be subject to additional guidelines and scrutiny from the FATF.

What Makes VASPs Unique?

In order for an organization to be classified as a VASP, it must tick certain boxes. In guidance issued in June 2019, the FATF asserted that a VASP is a business that conducts at least one of the following activities:

• Acts as an exchange for virtual assets or fiat currencies

• Acts as an exchange between one or more types of virtual assets

• Acts as a medium of transfer for virtual assets

• Provides safekeeping or administration of instruments that allow entities to control virtual assets

• Participates in or provides financial services related to an offer or sale of a virtual asset

What Are Some VASP Types?

The FATF guidelines clearly describe crypto exchanges, as well as other participants in the crypto markets, including:

• Mining pools

• Investment vehicles

• Digital wallet providers

• Companies offering escrow services (transferring digital assets between two parties, ensuring a transaction goes down smoothly). And yes, companies providing these services may be classified as VASPs, after the FATF expanded and clarified its definition of a VASP in.

In an early 2021 update , the FATF also stated that decentralized exchanges, decentralized platforms, and DApps may also be considered VASPs, as well as platforms that facilitate peer-to-peer crypto transactions.

Recommended: What is a dApp?

What Businesses are Not VASPs?

There are numerous types of crypto-related entities that are not VASPs, including but not limited to:

• Individual crypto miners

• Individuals participating in a Bitcoin mining pool

• Individual traders

• Central banks

In short, if you’re just a regular Joe who’s trading or otherwise participating in the crypto markets or validating a blockchain network, you’re not a VASP.

Other Key Terms to Know When Talking About VASPs

In order to get a full picture of VASPs, it’s important to understand a couple of other terms: Digital Asset Entity (DAE), and Digital Asset Customer (DAC).

The distinction between these specific types of entities — which may exist in more than one type of classification (an entity could be both a DAE and a VASP, for instance) — can have an impact on how the entity is regulated.

What is a Digital Asset Entity (DAE)?

A Digital Asset Entity refers to some of the various businesses and organizations in the digital transaction space. For example, a VASP is a DAE. But the DAE umbrella includes many other types of organizations, such as gambling platforms, that may not necessarily be labeled as traditional financial institutions.

What is a Digital Asset Customer (DAC)?

A Digital Asset Customer is an entity that makes use of the services of a DAE. You or anyone else can be a DAC, as you may utilize a financial institution’s services to engage with the cryptocurrency markets.

What Are Some Examples of VASPs?

There are several different types of businesses or platforms that can fit the description of a VASP, or that may take some role in the transaction process. Those can include centralized and decentralized exchanges, mining pools, investment vehicles, and more.

Here are some examples of companies or platforms that fit the description of a VASP:

• Centralized exchange: These exchanges that act as a third party between crypto buyers and sellers. Examples include Coinbase and Kraken .

• Decentralized exchange: These exchanges eliminate the need for a third-party middleman to execute trades or transactions. Examples include Uniswap and Venus .

• Escrow service: There are also a lot of companies that provide escrow services (many exchanges offer the service, too) for digital asset transactions, such as Escaroo or Bitrated .

• Investment vehicles: Crypto-tied investment vehicles, which may take the form of securities like crypto ETFs, are becoming more common and mainstream. One example: BITO , a Bitcoin-linked ETF that hit stock exchanges in October 2021.

The Takeaway

VASPs are businesses or companies that facilitate the exchange of virtual assets. Virtual assets can include things like cryptocurrency (Bitcoin, for example), non-fungible tokens (NFTs), or utility tokens.

Photo credit: iStock/Yuri_Arcurs

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.

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.

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.

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.

SOIN1021416

How to Invest in Bitcoin

Quick Recap Before You Buy Bitcoin

It’s Decentralized

It’s Digital

It’s Based on Blockchain Technology

What Kind of Investment Is Bitcoin?

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, auto investing, IRAs, and more. Get started in just a few minutes.

How to Buy Bitcoin: 5 Things to Know

1. You Need a Crypto Wallet

2. Understand Public and Private Keys

3. Decide Where to Trade

4. Personal Identification

5. Fund Your Account

Alternate Ways to Invest in Bitcoin

Start Trading Bitcoin

What is a Security Token in Cryptocurrency?

Crypto Refresher: Tokens vs Coins

What is a Security Token?

The Howey Test

How Do Security Tokens Work?

How Are Security Tokens Used?

Benefits of Security Tokens

How to Invest in Security Tokens

The Takeaway

Basic Attention Token (BAT): What It Is, How It Works, & Investing Today

What is the Basic Attention Token (BAT) Coin?

BAT Price

How Does BAT Crypto Work?

Understanding the Brave Browser

History of BAT Cryptocurrency

What Can You Use BAT Coin for?

Is BAT Crypto a Good Investment?

How and Where to Buy and Sell BAT Coin

The Takeaway

What Is Encryption in Blockchain and Its Impact on Cryptocurrency?

How Is Encryption Used in Crypto?

What Type of Encryption Does Blockchain Use?

Symmetric Encryption

Asymmetric Encryption

Hashing

The Importance of Plaintext and Ciphertext in Blockchain Encryption

What Is Plaintext?

What Is Ciphertext?

The Role of Blockchain Encryption Algorithms and Keys

The Takeaway

Virtual Asset Service Providers (VASP): What Are They?

What are Virtual Assets (VAs)?

What is a Virtual Asset Service Provider (VASP)?

What Makes VASPs Unique?

What Are Some VASP Types?

What Businesses are Not VASPs?

Other Key Terms to Know When Talking About VASPs

What is a Digital Asset Entity (DAE)?

What is a Digital Asset Customer (DAC)?

What Are Some Examples of VASPs?

The Takeaway

CATEGORIES

JOIN THE COMMUNITY

Student Loan Refinancing

Personal Loans

Online Investments

Other

Student Loan
Refinancing

Personal
Loans

Online
Investments