By now, the amount of talk about cryptocurrency must have aroused your curiosity. With everyone else around sounding so knowledgeable, conversations can become quite awkward if you’ve nothing to say. News outlets are talking of cryptocurrency investing and exchanges, which is sure to spike anyone’s interest. If that’s you, this guide provides the basics of cryptocurrency and the crypto market to help you keep up with the buzz.
What Is Cryptocurrency?
Cryptocurrency is a type of digital currency formed from two words; crypto, meaning data encryption, and currency, which is the simple term referring to a medium of exchange. It’s, therefore, a medium of exchange, but it only exists in the digital world and has no physical form. The currency is stored in the form of random numbers in your user account. You can use it in accepted organizations to pay for goods and services. You can also trade it or exchange it for fiat money on a cryptocurrency exchange -this will be elaborated further in the article.
Cryptocurrency is decentralized, which means that a central authority does not control the currency. The cryptography and blockchain technology used in developing cryptocurrencies offers a robust security system. Among the things that distinguish it from fiat money are anonymity, security, transparency, and decentralization.
Types of Cryptocurrencies
The first cryptocurrency ever developed was Bitcoin in 2009, and since then, the number has risen to more than 6,700, and the number is still growing. This has effectively resulted in increased crypto exchange development companies, crypto exchanges, crypto wallets, and many other developments regarding cryptocurrency.
Cryptocurrencies raise money through Initial Coin Offering (ICO) that works similarly to Initial Public Offerings (IPO) but without legal rights and protections. The scale of community involvement determines the value of ICOs and cryptocurrency. These are things such as demand and supply (scarcity) and coins usability. As of May 2021, the combined value of all cryptocurrencies is estimated to be $2.48 trillion. Bitcoin takes the lion’s share in the market.
How to Invest in Cryptocurrency
To invest in any cryptocurrency, you need two things; a crypto wallet and a crypto exchange. The crypto wallet is a digital storage that shows proof of your digital assets. It’s only proof as the currency has no physical form. If you want to start investing in Ethereum, for instance, you’ll need the Ethereum coins, which require you to have an Ethereum wallet. However, you can also use other wallets, such as the blockchain wallet, to store, send, and receive different types of cryptocurrencies.
In addition, you need a crypto exchange platform where you can buy or sell your coins. Some exchanges also come with built-in wallets enabling you to store and trade your cryptocurrency on a single platform. Notably, the crypto market is quite volatile, and you need to research well and keep up with cryptocurrency news. However, blockchain and crypto exchange developers are continually innovating ways to help investors trade smart by offering Blockchain as a Service (Baas) with automated stop-limit order to reduce the risks of losses.
Initially, crypto mining was a common way of getting cryptocurrency, mainly Bitcoins. Mining is creating cryptocurrency yourself by solving dedicated computer codes, and it requires dedicated computer equipment. When bitcoins first came to be, mining was easy as only a few people were aware of it. With its growth, the mining process has become more complex and expensive. That’s why most people today only invest in already mined coins rather than mining their own.
What has Made Cryptocurrency Popular?
Cryptocurrency is decentralized in that it’s not controlled by any central authority, which many people find to be an appealing quality. It’s also gaining acceptance with major corporations accepting payment in bitcoins and other cryptocurrencies. Besides, the blockchain technology under which cryptocurrency is built is considered more secure than the other existing payment modes.
Are Cryptocurrencies Legal?
The legality of cryptocurrencies depends on where you are. While some countries have embraced a cryptocurrency future, some want nothing to do with it. Only recently, China banned crypto mining while some countries accept it as legal tender. This makes it either easy or hard to invest, depending on where you are based.
Capitalizing on Cryptocurrency
The hype surrounding cryptocurrency is not going anywhere any time soon. This is only the tip of the iceberg. There’s a lot more to learn about cryptocurrency and how you can invest and earn from it. Ensure to research and seek reviews on platforms and coins you intend to trade to avoid getting scammed.