As you’re probably aware, cryptocurrency is a hot buzzword on the internet these days. Around the world, crypto fanatics are talking about how great it is to make money buying and selling cryptocurrency online. Our goal is to make a comprehensive beginners guide to cryptocurrency that will answer all of your questions.
You’ve probably heard of some of the more popular ones such as Bitcoin, Shiba Inu, or Ether. But what are they? How do they fit together? Stick around to find out!
What is Cryptocurrency?
Cryptocurrency is a subset of digital currencies. While the term “digital currency” is a broad one, it generally refers to a centralized fiat currency controlled by the government. Digital currency exists solely as data, with no need for a physical object to change hands. Cryptocurrencies, on the other hand, are digital currencies that are designed to be used in secure, peer-to-peer transactions.
While cryptocurrency is technically currency, it differs in many ways from regular currencies. For one, most cryptocurrencies are decentralized: there is no central authority maintaining them. They are stored in a wallet, which can be a physical device (like a USB drive), your computer, or online at an exchange.
For another, cryptocurrency is inherently encrypted (hence the “crypto” in the name). With encryption and security being major factors in the way cryptocurrencies are stored and transmitted, it has the possibility to be a much safer alternative to banks in the future.
How Do Cryptocurrencies Work?
Cryptocurrencies exist as a direct exchange between users, and use many different algorithms to secure the transactions. Transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain. This ledger is shared among all users, so everyone can see each transaction. An important thing to note is that there is no personally identifiable information in the transaction, so the sender and recipient remain completely anonymous.
The largest cryptocurrency, Bitcoin, uses peer-to-peer technology to operate with no central authority or banks. Transaction management and coin minting is carried out collectively by the network.
Individual nodes known as miner secure the network. Miners verify the validity of each transaction using specialized cryptography algorithms before recording it to the blockchain. They are then rewarded for processing transactions and adding to the security of the network by receiving a small amount of the “mined” coin.
Why They Are Getting So Popular?
Increasing in Value
Investing in cryptocurrency can be very lucrative as most of them increase in value year-over-year. When Bitcoin first started, it was valued at less than $1 USD, and at it’s peak in 2021, a single Bitcoin was worth around $64,000 USD. Other coins, such as Dogecoin and Shiba Inu, saw sudden price increases of over 10,000% in a very short amount of time.
While the price of the cryptocurrencies are very volatile and may have large changes, even during a single day, over the long term they all tend to increase in value. They can be a great vehicle towards financial independence
Low Conversion Fees
Conversion fees between different cryptocurrencies are often significantly lower than between fiat currencies. Traditional fiat currencies such as USD, EUR, GBP, and HKD typically have high conversion fees, which can range from a 1%-3% to more than 10% per transaction.
Fast Transactions
Traditional wire transfers typically take anywhere between a day to a week, while cryptocurrency transactions usually only take a few seconds to a few minutes.
High Anonymity
Cryptocurrency is anonymous. While the individual transactions in the blockchain are visible to anybody, the only visible information about the sender and recipient are the wallet IDs. These IDs are a randomly generated, unique key. Nothing in the transaction can tell others or the government what you own. This can be increased even further by using a hardware wallet that isn’t connected to internet.
No Restrictions on Where It’s Stored
Cryptocurrency is portable. You can store it on any computer, smartphone, online exchange, or hardware wallet.
No Restrictions on Spending
You can send cryptocurrency to anyone, anytime, anywhere. All you need is their wallet ID.
There are no borders
Cryptocurrencies are global. They can be used anywhere. They are also not legal in all countries, so make sure that you follow any applicable laws for any transactions you make.
Security
Transactions are encrypted and verified by multiple independent nodes to ensure authenticity.
Conclusion
The next big thing in finance and investment is here. The price of Bitcoin and other coins has risen astronomically, generating billions of dollars worth of profits for investors and speculators. We aim to take the mystery out of cryptocurrency for beginners so they can get a piece of the action too!
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