If I buy crypto, how do I know I have it?
Let's start with how I know I have traditional assets:
Physical assets: physical possession, reputable merchant, experiments e.g. gold– I know that I have it because I can physically possess it and I know that it's genuine by buying it from a reputable merchant. I can verify it's authenticity with another 3rd party vendor and/or with experiments.
Photo by Caleb Oquendo
Digital assets: usability e.g. subscriptions– I know that I have it because I can use it. If I buy an HBO Max subscription and I am able to use it I know that I have it.
Traditional currency: reputable merchant, wide acceptance by other merchants e.g. the dollar, I know that I have it because my reputable merchant (aka bank) tells me I have it and when I try to use the dollar from that bank I can make purchases.
How do I know that I have crypto?
Physical possession - you cannot physically possess crypto
Reputable merchant– Who are the reputable merchants? How do we know they are reputable?
Experiments– What experiments can I perform to verify authenticity?
Usability - you cannot use crypto like an HBO Max subscription to verify that you have it
Wide acceptance by other merchants - Not today, at least.
Open questions
Who are the reputable merchants? Coinbase and FTX have the most widely-known reputations. Is there a reason you shouldn’t buy from Coinbase or FTX?
Once I buy crypto is there an experiment I can perform to verify it’s authenticity? Ideas:
Make a small purchase
Verify it’s authenticity with a third party (does this exist?)
Math? Is there some sort of check digit equivalent for crypto?
Keep in mind that you can "hold" crypto as an encrypted digital string of data on your personal device. Or you can allow a custodian (like Coinbase) to hold it for you in a wallet. In the case that you allow a custodian to hold it for you, you are at risk of them being hacked and someone escaping with your funds. If you want crypto so you can use it for transactions, you're pretty much committed to a wallet with a custodian. If you want it as an investment (which I think is not a good idea) then you may be better keeping on your own devices.