Cryptocurrency refers to any type of digital or virtual currency that uses cryptography to secure transactions. Cryptocurrencies lack a central issuing or regulating authority. Instead, they rely on a decentralized system to record transactions and issue new units. We have put together this guide to simplify cryptocurrency for beginners. Read on to know more!
What is Cryptocurrency?
If you are here, you already know that Cryptocurrency is the future of finance.
Simply put, crypto is a digital currency. Traditional payment options are managed by authorities like the government. They have rigid rules and regulations. Unlike them, cryptocurrency is a payment system that is not reliant on any central authority for verification. The currency is designed to function as a medium of exchange through a computer network. It allows anyone to receive and send money from anywhere across the world. Crypto payments records are maintained by a decentralized system. They exist as digital entries only. The encryption used to verify transactions in this process is known as cryptography. Advanced coding is needed to store and transmit crypto data between wallets and public ledgers. The encryption of this virtual currency makes it almost impossible to counterfeit or double-spend.
Blockchain and its relation with the cryptocurrency market
The terms blockchain and cryptocurrency are frequently used together. While they are two distinct technologies, they are also inextricably linked to one another.
Blockchain is essentially a digitalized, decentralized, public ledger. Think of it as a collection of digital information, or blocks, stored across a network of computers to form a database. When verifiable transactions occur, the information is stored in blocks. These blocks are added to the chain when they are full.
As a decentralized, digital system, cryptocurrency too operates via the blockchain. Crypto, which is a virtual currency, employs cryptography for security. It is not controlled by any single authority.
Bitcoin may have been the first on the block, but today there are over 10,000 cryptocurrencies available. It is interesting to note that blockchain technology gained popularity as the foundation for Bitcoin. Alternatively, cryptocurrencies rely on blockchain networks to exist. Blockchain, however, extends much beyond its applications in crypto. It is not just limited to the financial sector. The technology provides a variety of solutions that have already disrupted and will continue to disrupt a variety of markets in the coming years.
How to purchase and fill your crypto wallet
You may be wondering how to buy cryptocurrency safely. The process is easy and secure. Here’s how you can start playing the crypto market:
1. Choose a method to buy cryptocurrency
The first step is to decide on a platform. You can find brokers online who help you sell and purchase cryptocurrency and other financial assets. Such middlemen may offer lower trading costs. On the downside, only a limited number of crypto features are available.
There are numerous cryptocurrency exchanges to choose from. A cryptocurrency exchange is an online marketplace which helps users buy, sell, and trade cryptocurrency. Binance and Coinbase are some of the most well-known exchanges.
Each has its own set of cryptocurrencies and other features. Asset-based fees are charged by many exchanges.
2. Fund your cryptocurrency account
The next step involves funding your account so you can start trading. Most crypto exchanges allow users to buy crypto with government-issued currencies via debit or credit card. This may vary from platform to platform. Some platforms accept ACH and wire transfers as well. Fees are another important consideration.
3. Let the trading begin!
Now, you can place an order through the web or mobile platform of your broker or exchange. If you want to buy cryptocurrencies, select “buy,”. Then select the order type and enter the amount of cryptocurrencies you want to buy. Confirm the order, and voila! The same procedure is followed if you wish to “sell” crypto. Payment services such as PayPal, Cash App, and Venmo allow users to buy, sell, or hold cryptocurrencies.
How to store crypto
Once you’ve purchased cryptocurrency, you must keep it safe to avoid hacks or theft. Cryptocurrency is typically stored in crypto wallets. These are physical devices or online software that securely store the private keys to your cryptocurrencies. Some exchanges offer wallet services, allowing you to store directly through the platform.
Typically, crypto wallets are of two types. Hot wallets use online software to protect your assets’ private keys. MetaMask is the most-used renowned hotwallet. It is primarily used for storing the Ethereum blockchain. Users can access their wallet through a mobile app or extension in the browser.
On the other hand, cold wallets, or hardware wallets store your private keys on offline electronic devices. Ledger Nano X is the most widely used cold wallet. It is essentially a USB cable that connects the wallet to your computer. The Bluetooth technology in the device also allows connection to Android and iOS mobile devices. Cold wallets typically charge fees, whereas hot wallets do not.
Investing in cryptocurrency? Here are your best options!
As cryptocurrencies gain traction worldwide, an increasing number of options become available. There are over 10,000 cryptocurrencies currently available for investment or trading. This makes selecting the best cryptocurrency options extremely difficult, especially if you are a beginner. Here are some of your best options:
1. Bitcoin (BTC)
Bitcoin isn’t going away anytime soon, seeing its market cap and popularity. It remains synonymous with cryptocurrency. For traders, Bitcoin has become the go-to cryptocurrency. No new coins will be created after 21 million bitcoins have been mined. Long-term investors stand to benefit from the resulting supply/demand equation. The largest private owner of bitcoin is Block. one, a Chinese corporation. They own 140,000 BTC or 0.667 percent of the total supply.
2. Ethereum (ETH)
Ethereum is a decentralized software platform. It allows smart contracts and decentralized applications to be built and run. This process is carried out without the involvement of a third party. Their ultimate aim is to create a decentralized suite of financial products that anyone in the world, regardless of nationality, ethnicity, or faith, can freely access. Ethereum is highly favored in nations where state infrastructure and identification are lacking.
3. Litecoin (LTC)
Litecoin was one of the first cryptocurrencies to follow in the footsteps of Bitcoin. It is based on an open-source global payment network that is not centralized. It has a fast block generation rate. Thus, the rate of transaction confirmation time is faster compared to Bitcoin.
4. Ripple (XRP)
XRP is a useful token that offers low transaction fees and quick transactions. Ripple is more than just a currency exchange. It contributes to the efficiency of cross-border financial transactions. Ripple lowers currency exchange rates and provides real-time exchange rates. This is done by collaborating with financial institutions. Dozens of banks use Ripple’s technology to facilitate global transactions.
Simply put, NFT is a type of cryptocurrency. A non-fungible token is a type of financial security made up of digital data. It is stored in a blockchain (a form of distributed ledger). The ownership of an NFT, like other cryptos, is recorded in the blockchain. It is also transferable, allowing NFTs to be traded.
While some call the NFT boom a “bubble,” it shows no signs of abating. These tokens can take numerous forms. An increase in the number of platforms to showcase and handle them is expected. A decrease in investment is highly unlikely.
Best games to earn cryptocurrency
In the game-fi NFT world, NFT games have grown in popularity as a way to earn money. You can sell your in-game NFTs to other collectors and players. You can also earn tokens through play-to-earn models. Game-Fi effectively merges the worlds of finance and gaming. This allows players to earn money while playing. You don’t have to rely solely on the chance of winning, discovering, or breeding a rare collectible worth thousands of dollars.
Apart from collectible animals, you can now try out different gaming models in a variety of themes. Most games require a small fee before you can begin playing. Nevertheless, free NFT games are also available on the market.
Play-to-earn NFT games are steadily establishing a strong presence in the cryptocurrency landscape. It enables users to earn money simply by playing games. A player is typically rewarded with tokens and, on occasion, NFTs. Rewards are based on the length of time they play, the longer they play earning more.
Real-time uses of Cryptocurrency
At the time of its introduction, Bitcoin was launched to be a medium for daily transactions. That hasn’t happened yet. While the number of institutions accepting cryptocurrencies is increasing, large transactions involving them are uncommon. Nonetheless, crypto can be used to purchase a wide range of products from e-commerce websites. More and more luxury and car brands are now accepting crypto as payment.
Metaverse and its relation with Crypto
The metaverse and cryptocurrency appear to be complementary concepts – a virtual world where you can spend virtual money.
Both are essential components of what is being referred to as “web3” – the third generation of the internet. This version of the internet will be more immersive and engaging. It incorporates virtual and augmented reality (VR/AR) to create immersive 3D environments.
Traditional money necessitates a vast infrastructure of banks and regulators acting as middlemen. Alternatively, transacting in cryptocurrency only necessitates the use of software that runs on standard computers.
Cryptocurrency will become the primary medium of exchange for people buying and selling in the metaverse. Eventually, users will become more accustomed to methods of acquiring, handling, and storing it. This means it will be used more frequently outside of the metaverse as well. International transactions can often incur high fees (if at all possible) with traditional currency. Crypto will solve this problem.
How can you learn more about playing the crypto market?
The cryptocurrency market is constantly changing. New technologies are implemented every day. The ecosystem as a whole is very complicated. It involves a lot of dedicated learning if you wish to become a smart investor.
There are a plethora of articles, guides, videos, news, apps, and websites dedicated to educating people about cryptocurrencies. There is no set way of learning about crypto, due to varying regulations surrounding each company and country. There are some courses available where experts guide you on investment plans, cryptocurrency mining techniques, and various methods of using these coins. However, learning on your own is the best option. It may also be a good idea to seek expert advice before venturing out on your own.
How safe is cryptocurrency?
Blockchain describes how transactions are time-stamped and recorded into “blocks.” It’s a fairly complex and technical process. But the result is a digital ledger of cryptocurrency transactions. Hackers find this complex technology extremely difficult to manipulate. While security measures are in place, this does not mean that cryptocurrencies are impenetrable.
In contrast to government-backed money, the value of virtual currencies is entirely determined by supply and demand. This can result in wild swings that result in significant gains or losses for investors. Furthermore, cryptocurrency investments have far less regulatory protection than traditional financial products.
Tips to keep your cryptocurrency exchanges safe
All investments are subject to market risk. If you are planning to invest in cryptocurrencies, here are some tips to keep in mind:
- There are over 500 cryptocurrency exchanges. Before you zero in on one, read reviews and consult experienced investors.
- Investigate the best choices available. Store your cryptocurrency in a safe and secure location.
- All good investment strategies rely on diversification. Invest across different currencies after thorough research.
- The cryptocurrency market witnesses dramatic swings in price. Take into consideration all the stakes before investing, and start slow.
What does the future of finance look like amidst fluctuating crypto prices?
2021 has seen all-time highs, followed by unprecedented drops.
Meanwhile, interest in cryptocurrency has skyrocketed. It’s a hot topic not only among investors but also in popular culture. However, the industry is still in its infancy and is constantly evolving. Lawmakers all over the world are debating how to create laws and guidelines that will make cryptocurrency safer for investors. Regulation, like most aspects of cryptocurrency, is fraught with difficulties. The new regulations may also make it easier for investors to report crypto transactions. In already volatile markets, regulatory announcements can have an impact on cryptocurrency prices.
We can speculate about the value of cryptocurrency for investors in the coming times. However, the truth is that it is still a new and speculative investment with little history on which to base predictions. Nobody knows for sure, no matter what an expert thinks or says. That is why it is critical to only invest what you are willing to lose. It is advisable to stick to more traditional investments for long-term wealth building.