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Canada is one of the many countries that has embraced the actual and potential value of digital currencies.

Buying cryptocurrencies, like Bitcoin, in Canada is legal and straightforward. Canada is one of the many countries that has embraced the actual and potential value of digital currencies. Increasingly, more business takes place using remittance tokens such as Ripple's XRP. Although the Bank of Canada has no current plans to build a digital currency, the deputy governor, Timothy Lane, has alluded to the possibility of a stablecoin in the future.

Decentralized Digital Currency and Centralized Digital Currency

Bitcoin was the originator, but there are now several different kinds of digital currencies. For the most part, all share a similar technological architecture, which is blockchain. Blockchain is a kind of encryption that uses digital signatures that are nearly impossible to duplicate or forge. The technology is so secure because, within a specific blockchain, each piece of encryption is linked to the other. That is where it gets its name from. A blockchain is a linked set of lines of encryption.

Once Bitcoin's unknown creators solved the technological problem of creating a secure digital currency, thousands of other cryptocurrencies followed. There are now several different classes of digital coins or tokens. Let's distinguish between three kinds



●Digital tokens

For starters, Bitcoin is a decentralized digital currency, which makes it a true cryptocurrency. That means that it works in a trustless environment that relies only on the functionality of the technology. To function, Bitcoin relies on a global network of computers that approves each valid transaction. As such, no one entity or bank controls Bitcoin. Instead, a community of users maintains the integrity of the coin. Hence it is decentralized.

Stablecoins are not fully decentralized coins because a real asset backs their value. A popular example is Tether (UST). UST is pegged to the US dollar at a 1:1 ratio. There is also a Tether Euro and Yen Tether, pegged to the Euro and the Yen, respectively. Like the digital yen, stablecoins are managed by a central authority or private organization.

Digital tokens can refer to all kinds of digital currencies or cryptocurrencies. The terms can be used somewhat interchangeably. But what distinguishes digital tokens from others is that they can also refer to digital fiat currency, such as the digital Japanese yen. A digital token can also represent an asset. Sometimes Ether is referred to as a digital token because ETH is not just traded on the market, but it functions much more like a share in the project or an IPO (initial public offering).

in Canada, it's a good idea to use a Canadian cryptocurrency exchange such as Coinsmart. Photo by Ewan Kennedy on Unsplash

Buying Bitcoin and Digital Tokens

If you have a Canadian bank account, the easiest way to buy Bitcoin is to use a managed exchange. The benefit to using a managed exchange is that there are multiple ways to buy cryptocurrencies, like Bitcoin. If you are in Canada, it's a good idea to use a Canadian cryptocurrency exchange such as Coinsmart. Exchanges like these allow users to buy cryptocurrency using credit cards, debit cards, e-transfers, wire transfers, and other cryptocurrencies.

Managed exchanges work much like traditional exchanges, except that they buy and sell cryptocurrency. Exchanges set the price of all of the cryptocurrencies they sell based on market value. It is worth checking several different exchanges because you may get a better price on one, as prices are determined based on multiple factors.

Another benefit of using managed Canadian exchanges is that they are approved financial institutions and are legally registered with FINTRAC to sell cryptocurrencies in Canada. And, as of 2021, cryptocurrency exchanges with Canadian operations must be registered to do so. Before you purchase any cryptocurrencies on managed exchanges, users must create accounts and verify their identity. This requires some kind of proof of identity or residence, such as a Canadian driver's license or bank account.

Other Exchanges and Places to Buy Crypto

The second most accessible way to buy cryptocurrency is through a decentralized exchange, such as Bisq, 1inch, or Uniswap. Functionally, decentralized exchanges work the same way that managed exchanges do. The main difference with decentralized exchanges is that there is no personal information or identity verification required. These exchanges do not have centralized management, but like Bitcoin, they also run with a collective network. Those who prefer to use decentralized exchanges often value anonymity more than anything and would prefer to let the technology and the community do the work.

One limitation for new investors is that many decentralized exchanges do not accept fiat currency as payment. Instead, most decentralized exchanges only accept the other cryptocurrencies that they sell on the exchange. To start trading with decentralized exchanges, you must acquire cryptocurrencies another way.

However, 1inch, for example, accepts USD, and many decentralized exchanges accept XPR or UST. The details vary from one exchange to the next. It is important to compare exchanges and to see which one provides for your needs best.

What You Need to Get Started

First, you need to decide on an exchange and create an account. Creating an account is free and easy. It may take up to a day for your account to be verified.

Next, add money to your account. Each exchange is slightly different, but most Canadian exchanges allow users to fund accounts with e-transfers and credit or debit cards. Once you have added funds to your account, you can begin to buy and trade cryptocurrency.

You may want a digital wallet such as MetaMask. These are a lot like email accounts that hold your cryptocurrencies. Having a separate digital wallet for your cryptocurrency lets, you buy and sell on more than one exchange. There are many options for digital wallets. The important thing is to get a wallet that is compatible with the cryptocurrency you want. Not all wallets function with all cryptocurrencies.

After you have amassed some cryptocurrency, you may want to store it on a hardware wallet. Hardware wallets are external wallets that keep your cryptocurrency secret keys safely stored offline. Trezor or KeepKey are two popular examples of hardware wallets.

Lastly, all exchanges charge fees for their transactions. With several Canadian exchanges, such as BitBuy, CoinSmart, and Coinberry, you can fund your account for free with e-transfers. And each exchange charges a fee to withdraw funds in CAD. Fees typically range between 0.01-0.04% for withdrawals. Of course, the details will vary depending on what exchange you use. Be sure to understand the fee structure of any exchange you use so that there are no surprises.

keywords: Bitcoin, cryptocurrency, digital wallet, Canadian exchanges, Stablecoins, Digital tokens, Blockchain


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