Litecoin is a peer-to-peer (P2P) cryptocurrency and open-source blockchain project launched in October 2011. The creation and transfer of coins are based on an open-source cryptographic protocol and is not controlled by any central authority, which means the blockchain is decentralized.
If you consider investing in Litecoin, there are a few things you need to consider when buying the crypto coin. In this article, we’re discussing five of these things you have to think of before purchasing Litecoin.
Choose Your Deposit Method
The first thing you need to consider before joining a Litecoin exchange is what payment methods the platform supports. Most exchange platforms now allow a range of payment methods, such as buying cryptocurrency with a debit card or credit card, e-wallet (such as PayPal), or local bank transfer.
The other option you have in the funding segment is that of a crypto-to-crypto exchange. This means you swap an alternative digital currency like Bitcoin or Ethereum for Litecoin. This method helps you avoid fees linked to fiat money deposits.
KYC
Even though most Litecoin exchanges make it possible to trade cryptocurrencies anonymously, this won’t be the case if you want to use a platform that supports fiat currency. This means that the exchange will be able and will verify your identity to make sure it respects anti-money laundering laws.
To do this, a process called KYC (Know Your Customer) will ask you to upload some verification documents before you can purchase Litecoin. This will include a copy of your government-issued ID and a document to verify your home address, such as a bank statement.
Buying Litecoin vs. Trading CFDs
Although most people will be looking to buy Litecoin and store it externally in a private wallet, you should also consider the benefits of CFD (contract for difference). This is a popular financial technique that allows you to speculate on an asset’s price without owning it.
In the case of Litecoin, you can invest in the currency’s price at a regulated CFD broker, which means you don’t need to concern yourself regarding storage. Still, if you’re looking to own Litecoin outright and keep it safely in a private wallet, then you need to purchase it from a cryptocurrency exchange before withdrawing the coins.
Do You Need a Wallet?
The next thing to consider is that you need a wallet to store the coins. If you choose the CFD route when purchasing Litecoin, you don’t need to worry about this. However, in case you want to buy Litecoin in its truest form, you’ll need to keep it in a private wallet.
Even though third-party cryptocurrency exchanges enable you to keep your digital assets in their wallet, it is safer to withdraw them to a private wallet. Therefore, make sure that the Litecoin exchange you chose allows you to take out the coins.
Compare Fees
Like the traditional investment sector, you need to look at what kind of fees the cryptocurrency exchange will charge you to buy Litecoin.
Firstly, if you want to use a standard payment method such as debit or credit card, you’ll probably pay around 4 to 5 percent per transaction. Bank account transfers are cheaper, but the process is slower. It would be best if you also analyze what trading fees the exchange charges. The transactions will be charged by percentage, according to the size of the purchase.
Conclusion
You now have an idea of some of the factors you need to consider before you buy Litecoin. There are more other things to look into, but for starters, these five tips are useful enough to help you enter the cryptocurrency world with confidence.