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It’s no secret that cryptocurrency has taken the world by storm as of late. As the world moves towards total digitalization, crypto is becoming the future of money!

Chances are, if you’re reading this right now, you probably don’t know much about it. 

If you’re wondering what exactly crypto is, how to buy or invest in it, and how to protect yourself from it, here’s a simple breakdown. Educate yourself on it, so you can start profiting from it!

What is cryptocurrency?

Cryptocurrency is a new type of digital currency that can be used as an online medium of exchange for goods/services, secure online payments, or buying and trading for profit.

They’re not based on traditional coins or notes; rather, these digital currencies are produced from specialized computer code called “cryptography” using a technology called a “blockchain.”

Cryptocurrencies are encrypted so they’re super secure and hard to hack. Cryptography ensures that each unit of cryptocurrency is unique and cannot be copied. 

A blockchain is a decentralized technology across numerous computers around the world that verifies and records crypto transactions. It’s just a list of transactions between different digital wallets. Different cryptocurrencies have different blockchains, user bases, and networks.

Most cryptos are decentralized, meaning the cryptocurrencies held in the blockchain are not managed or controlled by any central authority or third party like a government or a bank.

A digital wallet is a software program that manages one’s cryptocurrencies. We’ll come back to this one a little later!

 

What are the different types of cryptocurrencies?

There are many different cryptocurrencies, like Bitcoin, Ethereum, Litecoin, Zcash, Ripple, and Monero. 

The three main types, though, are Bitcoin, altcoins, and tokens. There are several hundred billion worth of Bitcoin in circulation. Currently, a single Bitcoin is worth almost $32,000.

Bitcoin is produced through a complex mathematical process called mining. There is a fixed number of Bitcoins (21 million) that will ever exist as decided by its creator(s), though some remain to be mined.

The popularity of Bitcon led to the invention of new types of cryptocurrencies, including a few variants of Bitcoin itself, like Bitcoin Cash and entirely new cryptocurrencies based on similar underlying technology. These non-Bitcoin cryptos are called altcoins.

Altcoins are built upon similar underlying technology as Bitcoin. They are not as liquid as Bitcoin but many of them claim to be better versions of Bitcoins. Some popular altcoins include Namecoin, Dogecoin, Litecoin, Peercoin, and Auroracoin. Namecoin is considered the first altcoin, created in 2011.

Tokens are created and released through an Initial Coin Offering (ICO). They’re mainly used as a form of online payment in transactions, such as money transfers or bill payments to represent tradable assets/bills. Moreover, Tokens don’t have their own blockchain; they operate on an already existing blockchain.

 

How does one invest in cryptocurrency?

Clearly, Bitcoin is attracting intense interest from investors as an investment product.

To invest in a crypto you need to find a way to purchase and hold it. You typically need to use a crypto trading platform to buy a cryptocurrency. There are a number of companies called cryptocurrency brokers or exchanges which provide cryptocurrency trading platforms.

To buy cryptocurrencies, create an account on a cryptocurrency broker or exchange, and then buy the crypto of your choice (like Bitcoin or Ethereum) through the trading platform they provide.

A cryptocurrency trading platform can convert your real money (i.e., dollars or any other standard currency) into the cryptocurrency you want to buy, and securely hold it in a digital wallet they provide. You can also use a digital wallet that is not provided by the exchange you have created an account with.

Some cryptocurrencies, including Bitcoin, are available to purchase with U.S. dollars, but others require payment with bitcoins or another cryptocurrency through your digital wallet.

A digital wallet is a software program for managing the assets. It can be held online, or on hardware like a USB that is not connected to the internet or in a paper format.

When you pay coins using your wallet, you have to use a private key (password) to verify you own the wallet. By the way, a digital wallet doesn’t actually “hold” your cryptocurrency; instead, it interacts with the blockchain to prove ownership of your coins, and then uses those coins that you buy through your cryptocurrency broker. Your cryptocurrencies are technically stored on the blockchain itself. 

 

Why are cryptocurrencies so popular?

Crypto appeals to the general public or investors for a variety of reasons.

A lot of people see cryptocurrencies such as Bitcoin as “the currency of the future,” so they’re interested in investing in them now before they become more valuable.

Another reason many people are interested in investing in cryptocurrency is diversification. This is where someone invests in a variety of different assets—or a variety of securities within a certain asset class—to diversify their portfolio.

The values of cryptocurrencies can fluctuate significantly over a short period of time, making them highly attractive to many supporters of these digital currencies.

Crypto is not controlled by any third party authority either, which means they offer faster transactions and do not depreciate in value via inflation. Plus, since they’re decentralized and created based on cryptography, they can be more secure than traditional payment systems. 

 

Is buying cryptocurrency safe?

Even as cryptocurrencies grow in popularity and more sophisticated security systems are designed to secure crypto transactions, hacks still continue to take place.

Many financial institutions such as the Federal Reserve have warned that money laundering has been made more accessible thanks to Bitcoin.

Since cryptocurrencies are highly speculative and involve a high degree of risk, it is advisable that you understand the basics before investing in them. It’s a good idea to use a reputable company that will secure all of your crypto assets from fraud or theft so your assets are protected and can help you with your cryptocurrency investment goals.

 

So… should you invest in cryptocurrency?

A lot of people see cryptocurrencies as a lucrative investment, but very few people actually understand how to invest in it and how it works!

The value of Bitcoin has appreciated fast—the value was less than $1 in 2009 after its introduction. The cost of Bitcoin is currently almost $32,000. This means investors get enormous returns on their money.

Just like investing in the stock market, buying cryptocurrencies has risks. You may buy a crypto and wait for it to appreciate in value, then sell it and make a profit. But the value of a cryptocurrency can also depreciate, so it’s essential to understand that there’s always the possibility of losing money. 

It’s a good idea to buy altcoins as a long-term investment, as there will be enough time for it to appreciate in value and give you tremendous profits in the future.

 

If you were looking for a sign to invest in crypto, here it is!

While cryptocurrency remains a relatively new asset, it could become more widespread as a means of buying and paying for goods and services.

There are several thousand different cryptocurrencies out there, so it may be difficult to decidewhich ones are worth investing in to build and grow your portfolio. Before investing in any of the cryptocurrencies out there, it is advisable to do your research first so you can choose a crypto that ultimately meets your investment goals.

If you’re still unsure about the whole thing, read up on it a bit more to decide if it’s for you or not. And, if you DO choose to jump on the cryptocurrency train, I wish you the best of luck!

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