***Please be advised that I am not giving any financial or investing advice or telling you how to spend your money. This article is mainly just a guide and use at your own risk***
In this guide I will be explaining things that you can do with cryptocurrencies as well as some terms you may need to know in order to navigate through the world of crypto.
What is crypto?
Crypto is a digital currency which can be used to exchange for anything like the Pound Stirling. There's a variety of cryptocurrencies with Bitcoin being the most popular. Other notable cryptocurrencies include Dogecoin, Ripple
How to buy crypto?
Crypto uses a system called blockchain that acts like the bank recording and storing all crypto transactions. The blockchain is run by crypto miners who create crypto by running complex equations that creates code and encrypts
the software. This makes crypto transactions very secure with the codes generated making it difficult to hack. To get into crypto is as easy as finding a platform such as Coinbase or Crypto.com and using fiat(real-world currency) to
exchange for the cryptocurrency.
What can you do with crypto?
As cryptocurrency contains value, you can use crypto to buy nearly anything as long as the merchant is willing to accept it.
(Image credit: Articlesbase)
Cryptocurrencies can also act sort of like the stock market with the general idea being that the greater the demand, the greater the price per cryptocurrency as there's a finite amount of cryptocurrencies that can be mined with
Bitcoin being 21 million which can make crypto more appealing in countries where the local currency is in hyperinflation (Losses value rapidly). However investing in crypto is high risk due to the volatility of bitcoin. You may find
that Altcoins (Alternative coins such as Dogecoin) being more stable or vice versa.
Besides being just another form of money cryptocurrencies have other features unique to each one, here are the popular cryptos with their outlining features.
- Bitcoin - This is the first ever cryptocurrency that started all of this.
- Ethereum - A currency allowing developers to build apps and technologies that do not work with Bitcoin
- Ripple - Ripple does not use the Blockchain opting to using an ever growing agreement process which makes transactions faster than Bitcoin but makes it more vulnerable to hackers.
- Bitcoin Cash - A fork (Change of Protocol) of Bitcoin which is relatively new
- Litecoin - Crypto that is a fork of Bitcoin but can get generated four times faster and has four times the maximum number of coins.
(Image credit: Investopedia)
Mining is the basis of how the cryptocurrency network works. This works by using computing power to solve complicated algorithms which is used to confirm transactions and record it in the Blockchain. The general idea of crypto
is that the more popular a cryptocurrency is, the more people who try to mine it which also makes the algorithm more complicated.
Currently cryptos like Litecoin and Dogecoin are the most cost-effective to mine to maximise profits as electricity costs can be a major factor. Currently over 18 million Bitcoins have been mined with the rate of Bitcoin mined
per day being around 900. As time goes on, the rate will slowly decrease making each Bitcoin worth more.
How to store
(Image credit: Ledger)
Unlike the traditional currency, crypto is entirely digital which allows you to store using different approaches. This is because you technically dont store a unit of the cryptocurrency, instead it is a private key that is used
to sign transactions.
For the privacy focused person, you can opt to use a hardware wallet like the Ledger Wallet which acts like a usb flash drive. There are also cold (offline) wallets that can be stored on your device or online wallets affilated
with exchanges or independent platforms. Unfortunately this does mean that if you do not backup your wallet and if the data is all lost, you also lose all the cryptocurrency stored in the wallet which has caused about 20% of existing
Bitcoins to be 'lost'.
This guide was only a glimpse into the world of crypto, remember to do more of your research when getting into crypto as even though many people have made a fortune off Bitcoin, others have lost money due to its volatility. You
can look at Altcoins such as Litecoin or Dogecoin when investing or mining and make sure to look into fees that platforms more incur when buying crypto as these could quickly add up to the inexperienced person.