Cryptocurrencies — Guide For Beginners
It’s no secret that cryptocurrency is the hottest topic in the tech and finance world right now. You probably know a thing or two about Bitcoin and how it is revolutionizing the financial industry. But there’s more to the crypto story.
In this post, we will answer your questions about cryptocurrency and cover all of the basics you need to know. Let’s start exploring.
What are cryptocurrencies?
Cryptocurrencies are digital currencies. They are a form of distributed digital cash that can be exchanged for other currencies or used to make purchases. Each of these currencies runs on a blockchain.
A blockchain is a type of distributed-ledger technology. Blockchain provides the architecture for managing digital currencies without the need for a central administrator. In other words, this technology enables cryptocurrencies to operate without the control of central authorities such as governments.
Who invented cryptocurrency?
Bitcoin was the first cryptocurrency to be invented in 2008. Satoshi Nakamoto is credited with inventing Bitcoin along with its blockchain technology, and the satoshi, the smallest unit of Bitcoin, is named after him. That said, to this day no one knows the real identity of this mysterious internet person.
Where can you find cryptocurrency?
There are several methods of acquiring cryptocurrencies. They include:
- Cryptocurrency software/mining
- Crypto exchanges
- Decentralized cryptocurrency exchanges
- Cryptocurrency ATMs
The method you use to acquire cryptocurrency will depend on various factors including:
- The amount of money and energy you are willing to spend.
- Whether you want to buy or mine cryptocurrency.
- Whether or not it is possible to buy your favorite cryptocurrency using fiat money, such as USD.
How do you buy cryptocurrency?
There are several ways of purchasing cryptocurrency. The most common method is to purchase through a cryptocurrency exchange, which is an online platform that allows you to buy or sell cryptocurrency.
It works like a stock exchange or currency exchange. You can exchange fiat money such as US dollars for a cryptocurrency such as Bitcoin, or you can exchange one type of cryptocurrency for another type. Crypto exchanges fall under the following major categories:
· Peer-to-peer platforms
Peer-to-peer platforms enable you to interact directly with the sellers. The price of the coin will be determined by the agreement between you and the seller. These platforms offer transaction mediation as well as escrow services.
· Crypto brokers
Brokers allow you to visit their site and buy cryptocurrency at a price they have set.
· Crypto ATMs
You can also buy from a cryptocurrency ATM. Bitcoin ATMs have been set up in different major cities, allowing you to get Bitcoin in exchange for cash.
· Trading platforms
Trading platforms work by letting you place a “buy” or “sell” order. You are not allowed to interact with other traders on the platform. The exchanges charge a fee for every completed transaction. Some of the most popular trading platforms include Binance, Poloniex, Bittrex, and Coinbase.
How do you choose the best exchange?
There are several factors to consider. The most important factor is security — are the website’s servers secure? Go for the most secure platform. Another factor to explore is the number of payment options available. Make sure the platform you choose has at least one payment method that you can access. You should also consider the exchange pairs, exchange fees, the exchanges volume and the quality of customer service.
Where do you store cryptocurrency?
Before buying any cryptocurrency, you will need a “wallet.” Cryptocurrency wallets are private keys and public keys that confirm that it is you who is buying cryptocurrency and, once confirmed, they link you to the blockchain.
There are several types of crypto wallets you can choose from. When making your decision, ensure that the wallet you opt for supports your desired cryptocurrency. Hardware wallets and paper wallets are among the safest choices.
Hardware wallets can be connected to your computer when you purchase cryptocurrency and then be stored offline. The only disadvantage of hardware wallets is they cost more than other types of wallets.
Paper wallets are simply public and private keys on paper. They do not connect online.
Software wallets are not as expensive as hardware and paper wallets, but they are more susceptible to risks such as hacks and computer crashes. However, you can significantly reduce the risks by using a reputable wallet on a malware-free computer. Most software wallets have a mobile app available for Android and iOS devices.
How can you use cryptocurrency?
You can use cryptocurrency to purchase things or make investments. Several online businesses and retail stores allow you to pay for purchases via Bitcoin and other crypto coins.
What about investing in cryptocurrency?
It is much easier to invest in cryptocurrency than it is to spend it. You simply buy some cryptocurrency and keep it.
Cryptocurrencies are very volatile. Investing in them, therefore, carries a significant amount of risk, just like any other financial vehicle. For example, Bitcoin hit about $20,000 in value in 2017, then plunged to way below that amount in 2018. You may want to seek professional advice on the best times to buy and sell cryptocurrencies.
You can also invest in cryptocurrency by investing in companies that deal with blockchain-related technology. Overstock, Nvidia, and AMD are some of the companies you can invest in.
What are some of the most popular cryptocurrencies?
Bitcoin is the leader in the crypto market due to its security, established reputation throughout the world, and the huge community base that powers it. It is currently valued at $96 billion, which is about 75% of the market. Other popular cryptocurrencies include:
Ethereum is second to Bitcoin. Besides being a currency, Ethereum has radically changed the way data is stored online. The Ethereum blockchain is well known for storing “smart contracts,” which allow feasible transactions to be performed without third parties. The cryptocurrency for the Ethereum platform is Ether.
Ripple and its currency XRP were created to help financial institutions. XRP gains its strength from its ability to minimize liquidity by being used in the middle of two transactions involving fiat currency. Ripple is known to have faster transaction speeds as compared to Bitcoin.
LiteCoin has a higher transaction speed and can support more transactions than Bitcoin. Cryptocurrency enthusiasts say that it can execute a global transaction in less than a second.
Zcash is meant to be used as a currency for private transactions. All blockchain transactions involving cryptocurrency are usually visible on a public ledger. However, Zcash allows entities making transactions to show their data selectively and hide certain details of the operation.
What are some of the key transactional properties of cryptocurrencies?
Transactions involving cryptocurrencies cannot be reversed. Once you confirm the transaction, it’s done! No one can undo it.
Cryptocurrency transactions and accounts are linked to addresses rather than real-world identities. Although it is possible to analyze the transaction flow, it is not possible to connect the identity of the users to the addresses.
- Global and instantaneous
Blockchain transactions are propagated instantly and confirmed in relatively short periods of time. These transactions happen in a multitude of computers distributed all over the globe, making them independent of your physical location.
Crypto addresses are very reliable. The funds are locked in a public key cryptography system. Only the owner of the private key can send cryptocurrency.
Anyone can use cryptocurrency. You just download a crypto wallet for free and get started. There are no special permissions required.
So, is cryptocurrency safe?
Cryptocurrency is still relatively new and widely misunderstood. As a result, it is common for people to fall into one scam or another.
But you can stay safe by exercising caution and getting all the facts you need to make wise choices. And start by keeping your computer updated and protected from malware.
You can also keep your wallet offline by using a paper wallet or an unplugged hardware wallet. Keeping your coins offline reduces the possibility of them being stolen in the event of a hack.
Finally, do thorough research before deciding on which cryptocurrency and exchange to use.
Did you find this guide helpful? Do you have any other question? What other topics would you like us to write about? Let us know your thoughts here at Cryptoflyy.com.
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