The question arises as I browse Twitter and fine a thread along the lines of “to have Bitcoin you need a wallet vs a Bank you need tons of ID, Paperwork, Initial deposit Ect.” So I thought I would take a moment to go over what it takes to get into crypto vs just saving in a bank account.
General Bank Account Setup
Ok, most of us have a bank account and know it’s not the hardest thing to set up but let’s go over what it takes to get a checking/savings account at most banks. First, you need ID and a Social Security Number. Next, you need to pick a bank, most people pick one either based on benefits, reputation, or initial deposit. I personally choose a credit union because it’s only $5 to have an account and you get that back if you ever close the account. Plus, who doesn’t have $5? Ok, so you choose a bank and drive there (some banks can be done online but not many), and wait until a rep can speak with you. Then, you hand them your ID, they photocopy, you fill out paperwork and hand them initial deposit which ranges anywhere from $5-$500 depending on the bank. From there you can start depositing but what are some drawbacks?
General Banking Drawbacks.
- You have to have a minimum deposit typically to open an account
- The bank can hold your deposits for any reason for almost any amount of time.
- The bank can impose limits on how much you use your debit/atm card and the federal government only allows 8 free atm savings withdrawals a month.
- Banks can cancel payments if they think it’s fraudulent
- Banks can limit the amount of cash you pull out.
- Banks can also decide not to take you based on credit history effectively making it so those with bad credit can not save properly.
- Banks can limit where you send your money and it is typically slow.
How Do You Get Started With Crypto?
This is the real question after all. How do you start? Is it easy?
The great thing about crypto is it can be super easy or super hard so let’s take a brief look at a few methods to get started in crypto.
The first option is peer to peer which most agree is the best way to get started. You download a wallet, store the backup key in a safe location, and a friend sells or gives you some of their crypto and bam, it’s in your wallet that easy. Depending on your wallet you may need to put in a 2fa key or a password but some are as easy as load the QR code and scan. From there, your wallet, your money, you can do what you want with it.
The second option is to use an exchange to buy some for yourself. Let’s be perfectly honest here. This option is just as bad as setting up a bank account without driving anywhere. You need to sign up on the exchange, do KYC which usually involves a picture of you and a copy of your ID and then you need to link a bank or card to buy the crypto. From there it is stored in their web-based wallet or a wallet located on your dashboard. There are major downsides to this as they have almost the same power if not more as to what you can do with your funds although typically don’t limit you. From there, like cash, you can send to your own wallet that you manage and spend as you please.
Your last option to get crypto is to mine it. You can use an ASIC (application-specific integrated circuit – or in other words, a device used only for mining crypto) or a GPU. With this method, you are solving mathematical problems with your processing power to gain crypto. From there you can deposit into your own wallet that you control.
Advantages/Disadvantages with Crypto
- Borderless, you can send to anyone, anywhere as long as you have their wallet address.
- Fast, banks take 3-5days for local transfers and weeks for international where crypto can be seconds to hours depending on the cryptocurrency used.
- No one can tell you what to do with your money and it can not be seized as you are the only person who should know your backup keys. (assuming you’re not holding on an exchange)
- Fees are cheap. Banks typically charge around 5% for card fees were depending on the cryptocurrency can be under 1%.
- Early, adoption is slow and thus not a lot of places accept crypto yet.
- Price fluctuates. There are stable coins to solve this problem but most currencies fluctuate minute by minute, even fiat.
- Lost keys mean no way to recover assets where a bank could restore your account.
- Most on-ramps such as Coinbase still want KYC to purchase crypto.
So to conclude, getting into crypto is really easy but buying, storing, and keeping a large amount can be difficult for those who are technologically challenged. There are far fewer limitations with crypto for what you can do with your funds and how you can store your funds. We may never see KYC go away but with crypto, we can control our money better and use it faster with no one putting a freeze on our funds or assets. Crypto has a long way to go but it is solving many of the issues the banking industry has created and basic setup is simpler than with a bank.