Do you have these questions in your mind?
- What is Cryptocurrency?
- Is Cryptocurrency a good investment?
- What is Cryptocurrency, and how it works?
- Which is the best Cryptocurrency to invest in?
- How to buy Cryptocurrency?
- Is Cryptocurrency a safe investment?
- What are Bitcoin and Ethereum?
In this article you will find answers to all your questions. So grab a cup of coffee and let’s get started.
Table of Contents
What is Cryptocurrency?
Bitcoin, Ethereum, Blockchain, Mining, Crypto Investment…
Do you want to ride the Cryptocurrency wave as a GenX investor but need clarification about all this jargon?
Crypto is secure digital money used on the internet; it can circulate without a central monetary authority such as a bank or government. Instead, Cryptocurrency operates through distributed ledger technology, known as a blockchain.
- Individual units of crypto are referred to as coins or tokens.
- Cryptocurrencies are created using secure cryptographic techniques, making the exchanges highly safe.
- It is decentralized, unlike traditional currencies, which are managed and controlled by a central authority.
- Several cryptocurrencies use blockchain for handling verifying, and recording transactions.
What is Cryptography?
It is the technique of securing your important data from unauthorized access using various security protocols, complex computational algorithms, encryption & decryption using a public key and a hidden digital signature private key.
What is Blockchain?
A blockchain is a decentralized ledger of all transactions across a peer-to-peer network (Peer-to-peer computing or networking is a distributed application architecture that partitions tasks or workloads between peers). Using blockchain, contributors can confirm all dealings (transactions) without needing any central clearing authority like a bank.
These transactions include fund transfers, managing trades, and many other matters.
What is Crypto Mining?
Mining is the process by which crypto transactions are validated verify digitally (by solving complex cryptographic hash puzzles to blocks of transactions) on the coin network, updated, and added to the decentralized blockchain ledger.
The solution provided (miner) is rewarded with a cryptocurrency for solving these complex functions and recording data to a blockchain.
Crypto Coins, Altcoins, and Tokens
A digital coin is formed on its own blockchain and works like traditional money. However, Crypto coins are usually used for one purpose (payments.. payments.. payments); they store information about the business exchange between the two parties.
Example: Bitcoin and Litecoin
An altcoin (combination of the two words “alternative” and “coin.”), it is any cryptocurrency other than Bitcoin (the original first Cryptocurrency).
Example: Ethereum and The Sandbox
Tokens are generated on top of an existing blockchain and on having far more uses than just digital money, like granting access to an app, verifying identity, and tracking products moving through a supply chain).
A Token can be used to access various products or services via Payment tokens, Utility tokens, Security tokens, Crypto rewards tokens, Asset tokens, and so on.
Example: Non-fungible tokens (NFTs) and Tether.
Note: Although coins, altcoins, and tokens are somewhat related, they are separate entities.
How many cryptocurrencies are there?
As per CoinMarketCap’s official website, currently, there are 20,000+ cryptocurrencies. Currently (July 2022), the market cap of Bitcoin is around $350 billion (it was about to touch 1 Trillion before the dip).
The market capitalization of the second-largest cryptocurrency, Ethereum, is less than $125 billion (it was about to touch 500 Billion before the dip).
As there is no official data source like a share market, it isn’t easy to estimate the total market size of all 2000+ cryptocurrencies. However, the cryptocurrency market’s full size is around $1 trillion.
Here are some of the top Cryptocurrencies:
- Bitcoin BTC
- Ethereum ETH
- Tether USDT
- USD Coin USDC
- BNB BNB
- Binance USD BUSD
- XRP XRP
- Cardano ADA
- Solana SOL
- Dogecoin DOGE
Pros and cons of Cryptocurrency
Cryptocurrencies have already become a worldwide phenomenon for nextGen investors. Will the cashless society replace the mainstream currency? Let’s see some pros and cons of Cryptocurrency to make an assumption.
- Cost-effective mode of transaction
- Inflation Tolerance
- Secure & Private
- Quick global transfer 24x7x365
- Easy transfer of funds
- Illegal transactions
- High volatility
- High consumption of Energy
- Risk of Data Loss
- No refund or cancellation
- Vulnerable to hacks
- Global regulation & policy
5 tips for investing in Cryptocurrency safely
Apart from the first Cryptocurrency “the bitcoin”, Today we have nearly 20,000 cryptocurrencies!!!
The total value of all Cryptocurrencies on June 13, 2022, was about $970 million, having fallen substantially from an all-time high of around 3 trillion in 2021.
Some of these have total market valuations in the hundreds of billions of dollars; others are just worthless.
There is no guarantee of success in such a volatile space, but your careful choices will help you if you think about investing in Cryptocurrency.
- Research exchange platforms:
Before you invest, do thorough research before moving forward with any crypto platform.
- Know how to store your digital currency:
If you buy cryptocurrency, you must store it in an exchange or digital wallet. Know the different types of wallets and their security features.
- Diversify your investments:
Diversification is key to any sound investment strategy, don’t put all your money in just one Cryptocurrency; distribute your investment across several reputed currencies so the risk is spread out.
- Prepare for volatility:
The cryptocurrency market is highly volatile, so be prepared for steep ups and downs. If your investment portfolio or mental well-being can’t handle that pressure, kindly skip the Cryptocurrency route.
- Be Internet safe:
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3 Steps to buy cryptocurrency
With so many options, you may need clarification about how to buy cryptocurrency:
Step 1: Choosing a crypto platform
Depending upon your preference, decide between a traditional broker or a cryptocurrency exchange:
These are online brokers who facilitate you to buy and sell cryptocurrency.
B. Cryptocurrency Exchanges
Before choosing and settling upon a crypto platform, research all the aspects – what all cryptocurrencies are offered for trade, how much fees are charged on buying, selling, and trading, how they store coins and tokens, their security features, and their withdrawal options.
Listed are some robust crypto platforms you can look into as an investor.
- Binance (NASDAQ:BNB):
Binance is a cryptocurrency exchange that is the largest in the world in terms of the daily trading volume of cryptocurrencies where Coins and Tokens can be traded.
- Coinbase Global (NASDAQ:COIN):
It is one of the largest trading platforms and supports over 100 cryptocurrencies (including most of the top 10 largest cryptos by market cap).
- WazirX (WRX): Famous among Indian & Middle East Customers
Starting in 2018, WazirX has grown into India’s largest crypto exchange.
Step 2: Funding your account
After making an account in the crypto platform, the next step is to add funds to your account using traditional currencies such as the US Dollar, the British Pound, or the Euro using debit or credit cards (depending upon the platforms and your card).
TIP: Do understand the deposit and withdrawal transaction fees plus trading fees.
Step 3: Placing an order to buy
You can easily buy crypto using your crypto broker, crypto exchange website, or a mobile app.
There are many other ways also to invest in crypto:
- Buy ETF (exchange-traded fund)
- Buy blockchain stocks of a company that focuses on cryptocurrency.
- Buy a cryptocurrency-focused mutual fund
(A cryptocurrency mutual fund is a collection of cryptocurrency assets packaged together as one investment.)
How to store a cryptocurrency
Once you have purchased cryptocurrency, the most important thing to consider is how to store it so you protect it from hacks or theft.
As a fact, it’s estimated that around 4 Million Bitcoin have been lost since its launch.
Usually, cryptocurrency is stored in crypto wallets, which are physical hardware devices or online software used to securely store the private keys of your crypto coin or tokens.
You have two main wallet options to choose from; they are “Hot Wallet” and “Cold Wallet”
- Hot wallet storage (Usually FREE):
Hot Wallets use online software to protect the private keys of your crypto storage.
- Cold wallet storage (Fee-Based):
Unlike hot wallets, Cold Wallets (also known as hardware wallets) rely on offline electronic devices to securely store your private keys and are safer than hot wallets.
Is cryptocurrency safe?
Usually it is safe.
Cryptocurrencies are built using blockchain technology which is comparatively complex for hackers to tamper with. But cryptocurrencies are still possible; here are four of the biggest cryptocurrency hacks.
- Coincheck: $534 Million
- BitGrail: $195 Million
- Coinrail: $37.2 Million
- Bithumb: $30 Million
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What is the future of cryptocurrency?
Are you still confused? Is Cryptocurrency a good investment?
Since 2008, when the world most mysterious man, Satoshi Nakamoto, developed bitcoin and devised the first blockchain database, Cryptocurrency has grown exponentially for the last 15 odd years.
I will tell you a real story…
Remember that this is a high risk but has high returns.
My nephew is a UX designer with a Singapore Travel Booking App company (aged 24) and invested in Bitcoin when levels were around $4000 and Ether when they were around $150.
We both talk and share ideas as we are in the same creative design field, and we play network video games; you can call me more of a friend and less of an Uncle.
He called me zillions of times to invest in crypto… but the middle-age dilemma, I kept investing in traditional ways to be sure of 8-10% yearly returns.
He saw the hit when Bitcoin crashed from the $67566 mark; he kept on holding it; now it’s down to $19000 (July 2022), yet it gave him 400-500% returns till now (approx. 125% yearly)
Look at me… with 8% returns….
I could have retired 2 times if I had invested 25% of my old traditional investment.
As per safe bet, high-risk investments should never be 10-12% of your whole portfolio. If you are in your 20s, you can stretch to a max of 20-25%, that too if you can live without it.
Yes, it’s high volatility, but it offers the potential for high returns.
Diversify your whole portfolio with a pension plan, real estate, bonds, mutual funds, and gold.
I wish I’d invested some money in Crypto a long time back then. But, there is still time, as Crypto is correcting itself, and the current entry is still medium-low.
But remember, you need a trusted cryptocurrency exchange to buy, sell, and trade cryptocurrencies like Bitcoin, Ethereum, and NFTs.
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These Are The Richest Crypto Billionaires In The World 2022 – YT Channel ‘Forbes Digital Assets’
Why central banks want to launch digital currencies | CNBC Reports – YT Channel ‘CNBC International’
The ‘Black Bitcoin Billionaire’ Tells Us About His Business –– YT Channel ‘VICE News’
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A. You should store the majority of your crypto in a cold wallet which is the most secure option, for smaller amounts of crypto that you want fast access for trading, use a hot wallet.
As an old schooler, you can even physically record ‘write it down’ the recovery phrases for your crypto wallets, and put them in a secure location that only you can access.
A. Cryptocurrencies’ price fluctuates because it is influenced by many factors like viral stories, demand & supply, media hype, overall market sentiments, government news, regulations, and even a tweet from Elon Musk.
Yes, the crypto market is way more volatile than the stock market, but the high volatility can be rewarded with high returns.
A. Bitcoin was created by a person or group of people using the pseudonym “Satoshi Nakamoto.” The true identity of Satoshi Nakamoto has never been revealed, and it is not known if the name represents a single person or a group.
Bitcoin was first described in a white paper published in 2008, and the first version of the Bitcoin software was released in 2009.
A. There are several key differences between paper money and bitcoin:
1. Paper money is a physical form of currency, while bitcoin is a digital asset that exists only in electronic form.
2. Paper money is issued and controlled by central banks and governments, while bitcoin is decentralized and is not controlled by any single entity.
3. Paper money is primarily used as a medium of exchange, while bitcoin can also be used as a store of value and as a means of transferring value between individuals or organizations.
4. Paper money is recognized as a legal tender in most countries, while the legal status of bitcoin and other cryptocurrencies varies from one jurisdiction to another. Some countries have recognized bitcoin as a legal tender, while others have banned it or restricted its use.
A. There are over 20 thousand different cryptocurrencies in existence today in the world.