Contents
Let's say you want to buy some cryptocurrency. You're might be looking for a return of dollars on an investment, or you're looking for a long-term hedge against the dollar's seemingly inevetable fall. This guide is for the latter. This is not financial advice. Everyone online says that as though it's a legal requirement. My financial advice: don't take financial advice from poor people, and there are better cryptocurrencies than bitcoin. In this guide, we're going to focus on Monero.
Why Monero?
While bitcoin was effectively anonymous many years ago, agencies interested in tracing any and all monetary transfers have made great progress in their ability to track bitcoin payments. Creating ("mining") new bitcoin requires an extraordinary amount of electricity. Beyond that, mining is beyond the scope of this tutorial. Most people wishing to obtain bitcoin or other cryptocurrencies purchase from an exchange.
In these United States, one must prove their identity to transact on a crypto exchange (we're "fighting terrorism" and such things as that.) By attaching one's identity to their exchange-purchased funds, various agencies can trace who purchased crypto, how much one purchased, and which address received the purchased amount. Tracing using these methods can be mitigated by using "tumblers" or "mixers," but such methods not foolproof and the legality is questionable. I am not an attorney and this is not legal advice. I think I actually have to say that.
Through various technical innovations related to the blockchain technology which gives rise to cryptocurrencies, the developers of monero have reinstaged the anonymity of cryptocurrency. The implementation and scope of these innovations is out of the scope of this article. Key takeaway: monero assures anonymity to a significantly higher degree than bitcoin.
Purchasing Monero from an Exchange
Kraken is the only major U.S. cryptocurrency exchange where one can purchase monero. As you register for Kraken, whether or not you have already done so, there is no time like the present to start using a password manager. It will make your life easier, and is a good security practice for anyone getting into crypto.
Using a Password Manager
Bitwarden is an excellent no-cost password manager. They have a how-to on getting started. Since you will be storing sensitive information in your password manager, using a secure password or phrase is essential. There is a link to Bitwarden's own password/passphrase generator in their how-to. Passphrases are more secure and easier to remember, thus highly recommended. I like to write down a passphrase on a piece of paper, thoroughly memorize it, then destroy the paper. Please note: you cannot recover a Bitwarden passphrase via email.
Getting Started with Kraken
The sign up process all U.S. cryptocurrency exchanges is somewhat involved. Kraken provides some good tutorials. You can use your laptop/desktop or mobile phone with the Kraken app. Their customer support is excellent and they will be able to help you if you get stuck. The basic steps, in chronological order:
- Create an account (use a password manager)
- Get verified
- Deposit funds (this step is optional, you can alternatively use a debit card)
- Buy crypto
Withdrawing Your Monero the Exchange
Now comes the tricky part.
After trading your dollars (or whichever currency you used) on the exchange for "monero," you do not properly posess monero. What you posses is Kraken exchange credits denominated in monero. There is a colloquialism in crypto: "not your keys, not your crypto." You need what we call a "wallet." Wallets do not store exchange credits; they store actual cryptocurrency.
Wallet Security
Before you set up your wallet, it is important that you have some proper cypbersecurity practices in place. When you set up a cryptocurrency wallet, you will be given a private key, a mnemonic seed, or both. A private key is typically long string of letters and numbers starting with 0x. A mnemonic seed is a series of words seperated by spaces. Mnemonic seeds are easier to hand write than private keys. Both types of string serve effectively the same purpose. Monero uses mnomonic seeds, so we will keep the focus of this article there.
How you store and secure mnemonic seed is of the utmost importance. If you lose a wallet's seed, you lose the money in that wallet. There is no means whatsoever of recovering a seed. Similarly, if your seed is compromised, your money is as good as stolen.
The best means of securing your wallet is writing the seed on a piece of paper, and then storing that paper in a fireproof box. You can also store your seed in a password manager, which is what I do.
Setting up a Wallet
In this guide, we'll use Cake Wallet. It works on basically all computers and phones. Get it at cakewallet.com. Installing software on your computer/phone is beyond the scope of this tutorial.
Once Cake Wallet is installed on your device of choice, it's time to create a wallet. Cake Labs has published some tutorials, including a guide to create your first wallet. In the process of creating your monero wallet, you'll set a PIN, which is different from your seed. In order to send funds with your wallet, you'll need access to both the device you're using and your PIN.
Personally, I like having all my digital stuff on all my devices. Setting up your wallet on a second device is fairly straghtforward. Instead of creating a new wallet, you'll want to "restore" your wallet. Again, Cake Labs has a guide.
Your Wallet Address
Here is where Cake Wallet and Kraken come together, and where we convert our exachange credits for actual monero. Your wallet has what's called an "address." We can think of this like a home address. Your traditional, dollars wallet also has an address. It is printed on your ID.
Using the address on your ID, someone can send you a check, but they can't withdraw money from your bank account. Going back to mnemonic seeds and continuing this address/check analogy, your seed is everything required to send a check (account number, routing number, and signature) rolled into a bunch of words.
Cryptocurrency addresses typically look like a bunch of garbled nonsense, and this is fine. It is safe copy and paste it, put it in an email, add it to someone's contact information in your phone, publish it on the web, etc. My monero address is 85q4zDPRvVeJ2vhwB3ZeAkGKwCAz3oxbnA4KbphWVNrsCHZCVUR7N6vSvzUSBqYdUvi3eH1Dpp4Z16nPZCpQ8EaUNNMvpHm.
Executing the Withdraw
Cake wallet has a guide on receiving funds, after following which you will have you monero wallet address. Kraken has a guide on withdrawing funds from your exchange account. Basically, you take the address from your Cake wallet, add it to Kraken, and click "Withdraw."
—Stephen Corya