Beginners Guide To Cryptocurrencies
Interested in learning about or investing in cryptocurrencies but don’t know where to start? Don’t worry; we’ve got you covered. In this complete beginner’s guide to cryptocurrencies, you’ll discover everything you need to start investing in digital currencies safely or using them to purchase goods and services.
Here’s what to expect in this short yet comprehensive guide:
- What is a cryptocurrency, and how does it work?
- What are some of the existing cryptocurrencies?
- How can you invest in cryptocurrency safely?
So let’s dive right in!
What is Cryptocurrency?
Cryptocurrency is a digital payment system that doesn’t rely on a central authority like the government or banks to verify transactions. Instead, it banks on cryptography as a means of security and operates through a distributed or public ledger, spreading authority through its community. As such, the system empowers anyone anywhere to send and receive money and buy or sell goods and services.
Crypto transactions exist 100% as digital entries in a database that defines every payment made. Every cryptocurrency transfer gets recorded in a public ledger, while the owner stores their funds in a digital wallet. And the system uses peer-to-peer encryption to verify transactions. This means that next-level coding is leveraged in storing and transferring crypto data between digital wallets and public ledgers to maximize security and safety.
What are Some of the Existing Cryptocurrencies?
According to the most recent data, there are more than 10,000 cryptocurrencies traded publicly. However, only a handful have made it to the limelight and are known to the layman. Before we proceed to discuss some of the most common cryptos, it’s worth noting that all digital currencies fall into two primary categories:
Crypto coins are digital currencies that do not hold any intrinsic value in or for themselves. Instead, they serve as a medium of exchange, where the coins are securely recorded and stored in a computerized public ledger. Bitcoin is the leading and most popular crypto coin, but the market has since seen the emergence of alternative coins (altcoins), which refer to the alternatives to Bitcoin.
Some well-known altcoins include:
- Aurora coin
Unlike crypto coins, tokens are created and distributed via an Initial Coin Offering (ICO) – comparable to the initial public offering. Tokens are available in three sub-categories, including:
- Utility tokens. They serve specific purposes like powering businesses and other blockchain network functions.
- Security tokens. Investors use them to preserve their ownership stake in the distributed ledger.
- Value tokens. They represent an asset on their blockchain and can be used to make purchases, store value, or for investment purposes, e.g., Bitcoin and Ether.
How Do You Invest in Cryptocurrency Safely?
Having understood what cryptocurrency is and the types available in the market, the next goal is learning how you can safely invest in these digital currencies. There are several credible cryptocurrency exchanges that anyone can use to purchase or invest in the crypto of their choice. Peer-to-peer networks are also worthy alternatives.
But the big question is, how do you stay safe, smart, and on top of your game to ensure that your crypto investments bear returns? Here are some practicable tips for smart investments:
Conduct a Thorough Research on Exchanges
Cryptocurrency exchanges are platforms that provide a means for buying and selling cryptos. There are dozens of them out there, and not all of them offer what they claim to in terms of exchange fees, buy/trade options, security, availability, interests/rewards, etc. You want to conduct your background check, consult experienced investors, read reviews before making the big decision.
Diversification has never failed as a wise investment strategy. And it comes in handy when investing in cryptos as well. That you’ve heard of Bitcoin and its popularity doesn’t necessarily mean that you should throw all your money at it. There are countless other options, and it’s advisable that you analyze them and spread your investments all across.
Prepare for Volatility
The crypto market may be characterized by violent volatilities, and you need to prepare for dramatic price swings. That means having a solid and diversified investment portfolio and mental composure to handle the ups and downs of the market.
Over to You!
And that’s it for beginners’ guide to cryptocurrency! Basically, with the right market strategy and execution, crypto investment can be a great catch and bring enormous returns. However, it’s only fair that we warn you that it’s a highly speculative investment with potentially intense price swings, and we recommend you move with absolute caution.
Contact us today for more info on cryptocurrencies and other IT-related technologies.