So you’ve decided it was time to join the ranks and become a part of the cryptocurrency league. You’re entering the market at a great time, given that there is still relatively low competition compared to hard money stock investing. This is because cryptocurrency is still a relatively new idea to the general public, even though it has been around for over a decade.
In fact, only 8 percent of Americans have invested in cryptocurrency, according to a recent study. In other words, crypto is still a fringe investment when compared to other investment routes.
There is a lot of opportunity in this growing field. Before we dive into the technical details, we’ll give you an overview of the history of crypto and what exactly is it. By the end of this guide, you’ll have a solid foundation to get you started on your first investments in cryptocurrency.
Let’s get started!
What is Cryptocurrency?
Cryptocurrency is an internet-based medium of exchange which uses cryptographical functions to conduct financial transactions. They wield the power of blockchain technology (a growing list of records, called blocks, that are linked using cryptography). This ensures three important features are gained:
Over 10 years before cryptocurrencies, the concept had been introduced by computer engineer Wei Dai. In 1998, he published a paper where he discussed “B-money”. This basically was a digital currency that could be exchanged in a group of untraceable digital pseudonyms. Years later, Bitcoin emerged in 2008 as the first of its kind.
The most important thing to note about cryptocurrency is that it is not controlled by a central authority. This is because of its decentralized nature, which makes crypto immune to government interference.
How do you exchange this virtual currency? Cryptocurrencies can be sent directly between two parties via the use of private and public keys. The best part? These allow users to avoid processing fees.
There are over hundreds of crypto out there in the online space, all of which share the same basic functions. Some of these include, in order of popularity:
- Bitcoin (BTC): the first and most popular cryptocurrency with 5% of Americans investing.
- Ethereum (ETH)
- Ripple (XRP)
- Bitcoin Cash (BCH)
- Stellar Lumens (XLM)
- EOS (EOS)
- Litecoin (LTC)
The list goes on and on.
How Does Cryptocurrency Work?
Cryptocurrency has several important features that allow it to function and succeed in the online space. It is important that you get to know such features if you plan to use and invest in crypto. These include:
- Irreversible: After confirmation, a transaction can’t be reversed. The bank cannot get you your money back. There is no safety net.
- Pseudonymous: Neither transactions nor accounts are connected to real-world identities. Your Bitcoins are sent and received by “addresses,” which are randomly seeming chains of about 30 characters. This means your identity is completely hidden while using crypto.
- Fast and global: Transactions are sent almost instantly in the network and are confirmed within a couple of minutes. They occur in a global network of computers, which means you could be interacting with a neighbor or someone across the globe and it would not make a difference.
- Secure: Cryptocurrency funds are locked by a key cryptography system. Only the owner of the private key can send cryptocurrency. Strong cryptography makes it basically impossible to crack.
- Permissionless: Anyone can use cryptocurrency and you do not need permission by an authority as it is a software that everybody can download for free. After you install it, you can receive and send Bitcoins or other cryptocurrencies.
What Do I Need to Invest In Cryptocurrency?
In order to invest in cryptocurrency, you need a few important things. Here are
First a foremost, you need to select a trading platform. There are several out there that track the rise and fall of major cryptocurrencies and allow you to choose when to invest and when to pull out. A few include:
Do research on each and select the platform that best suits you. They vary in terms of features, difficulty level, user-friendliness, etc. Decide on a wallet for you to put your Bitcoin wallet, Ethereum, and other coins.
Once you have the basics, follow these steps to develop a solid strategy:
- Watch the market and learn. Use your trading platform to get a basic understanding of how the market moves and how each coin affects each other.
- Go further into your research by learning about the people behind the coins and the concept they are bringing to reality.
- Pick the coins you want to invest in, and watch their charts for months before investing.
- Buy your first coins! You may have a bit of beginner’s luck, or maybe your research will pay off. Regardless, a big part of any investment is taking that risk of loss.
Now go out there and make some crypto money!