Do you realise how your daily, government-issued cash is held in banks? And that you’ll need an ATM or a bank link to obtain more or transfer it to others? You may be able to do away with banks and other centralised intermediaries entirely if you use bitcoins. This is because cryptocurrencies depend on a decentralised technology called blockchain (meaning no single entity is in charge of it). Instead, the transactions are confirmed by every computer on the network.
The following sections cover the fundamentals of cryptocurrencies, including their history, advantages, and more.
The Meaning of Money
Before delving into the specifics of cryptocurrencies, it’s important to first grasp the notion of money. Money philosophy is similar to the question of “which came first: the chicken or the egg?” Money needs possess a variety of properties in order to be valued, including the following:
- It must be in the hands of a sufficient number of individuals.
- It must be accepted as a mode of payment by merchants.
- Society must have faith that it is worthwhile and will continue to be important in the future.
Of all, when you sold your chicken for shoes back in the day, the swapped commodities’ worth were inherent in their nature. However, the meaning of money and, more crucially, the trust model of money altered when coins, cash, and credit cards were introduced.
Another significant difference in money is the ease with which it may be transferred. One of the key reasons for the invention of currency was the difficulty of transporting a tonne of gold bars from one nation to another. Then came credit cards, which were developed as people became more lazier. Credit cards, on the other hand, transport money that your government controls. Cryptocurrencies may provide a helpful alternative as the globe grows more linked and individuals become more worried about authorities who may or may not be acting in their best interests.
Now that cryptocurrencies exist, your traditional, government-backed money, such as the US dollar, must be referred to as fiat currency. Fiat currency, such as coins and banknotes, is defined as legal tender that has value only because the government says so.
History of Cryptocurrencies
Bitcoin was the first cryptocurrency ever created (drum roll, please)! You’ve undoubtedly heard of Bitcoin more than anything else in the crypto world. Bitcoin was the first product of the first blockchain, which was created by an unknown person known only as Satoshi Nakamoto. Satoshi Nakamoto first proposed Bitcoin in 2008, calling it a “pure peer-to-peer form” of electronic money. TECHNICAL INFORMATION Although Bitcoin was the first cryptocurrency, there had been other efforts to create digital currencies years before Bitcoin was first released.
Mining is the method through which cryptocurrencies like Bitcoin are generated.
Mining bitcoins, unlike mining minerals, requires strong computers to solve complex issues.
Until 2011, Bitcoin was the sole cryptocurrency. Then, when Bitcoin aficionados began to see faults, they decided to build alternative currencies, often known as altcoins, to enhance the design of Bitcoin in areas like as speed, security, privacy, and more. Litecoin was one of the earliest cryptocurrencies, aiming to be the silver to Bitcoin’s gold. However, there are already over 1,600 cryptocurrencies accessible, with the number projected to grow in the future.
Key Crypto Advantages
Still not persuaded that cryptocurrencies (or any other kind of decentralised money) are a preferable alternative to conventional government-backed money? Because of their decentralised structure, cryptocurrencies may be able to supply a variety of solutions:
- Corruption reduction:
When you have a lot of power, you also have a lot of responsibility. When you give a lot of authority to just one person or institution, though, the possibilities of them misusing it rise. “Power tends to corrupt, and absolute power corrupts absolutely,” declared Lord Acton, a 19th-century British statesman. Cryptocurrencies attempt to overcome the problem of absolute power by sharing it across a large number of individuals, or, better yet, among all network participants. That is, after all, the core concept underpinning blockchain technology.
- Excessive money printing should be avoided:
When confronted with a significant economic situation, governments have central banks, and central banks have the authority to simply create money. Quantitative easing is another name for this approach. A government may be able to bail out debt or devalue its currency by printing additional money. This method, on the other hand, is like to placing a bandage on a broken limb. It not only seldom solves the problem, but the harmful side effects might often outweigh the initial problem.
When a government creates too much money, such as Iran or Venezuela, the value of its currency plummets, causing inflation to soar to the point that citizens can’t afford to purchase basic goods and services. Their money is now worth less than a roll of toilet paper. The majority of cryptocurrencies have a finite number of coins accessible. When all of those currencies are in circulation, there is no straightforward method for a central authority or the firm behind the blockchain to simply generate more coins or increase the supply.
- Giving individuals power over their own money: When you use conventional currency, you’re essentially handing over complete authority to central banks and the government. If you trust your government, that’s fantastic, but bear in mind that your government may freeze your bank account and prevent you from accessing your cash at any time. In the United States, for example, if you die without a formal will and run a corporation, the government has the right to all of your assets. Some governments may even be able to just eliminate bank notes, like India did in 2016. You and only you have access to your money with cryptocurrency.
- Cutting out the middleman: With conventional money, a middleman, such as your bank or a digital payment provider, gets a cut every time you make a transfer. All network participants on the blockchain are that intermediary with cryptocurrencies; their pay is phrased differently from that of fiat money intermediaries, and so is small in comparison.
- Serving the unbanked: A large percentage of the world’s population lacks or has limited access to payment systems such as banks. Cryptocurrencies promise to tackle this problem by bringing digital commerce to every corner of the world, allowing anybody with a phone to start making payments. And, certainly, mobile phones are more widely used than banks. In reality, more people have cellphones than toilets, yet blockchain technology may not be able to fix the latter problem at this time.
Myths About Cryptocurrency and Blockchain
During the 2017 Bitcoin craze, several misunderstandings about the whole sector began to spread. These beliefs might have contributed to the subsequent Bitcoin meltdown. It’s crucial to remember that both blockchain technology and its offshoot, the cryptocurrency market, are still in their infancy, and things are constantly evolving. Let me clear up some of the most prevalent misunderstandings:
Only criminals benefit from cryptocurrency.
One of the primary benefits of several cryptocurrencies is anonymity. This implies that when you make transactions, your identify isn’t disclosed. Other cryptocurrencies are built on a decentralised blockchain, which means they aren’t controlled by a single entity. These characteristics make such coins appealing to criminals, but they may also help law-abiding residents in corrupt regimes. For example, if you don’t trust your local bank or nation due to corruption or political unrest, the blockchain and cryptocurrency assets may be the ideal option to hold your money.
All cryptocurrencies allow for anonymous transactions.
Many individuals mistakenly associate Bitcoin with anonymity. However, Bitcoin, like many other cryptocurrencies, does not have any kind of anonymity. All transactions involving these coins are recorded on the public blockchain. Some cryptocurrencies, such as Monero, value anonymity, which means that no one outside the transaction can see the source, amount, or destination. Most other cryptocurrencies, including Bitcoin, do not work in this manner.
Bitcoin is the sole application of blockchain.
This is the farthest thing from the truth. The blockchain revolution has produced Bitcoin and other cryptocurrencies as a minor result. Many people think Satoshi built Bitcoin just to demonstrate how blockchain technology may be used.
Every transaction on the blockchain is kept secret.
Many individuals mistakenly assume that blockchain technology is exclusively available to its network of common users and is not open to the general public. Although some businesses construct their own private blockchains that are exclusively available to workers and business partners, the bulk of the blockchains that underpin well-known cryptocurrencies like Bitcoin are open to the public. The transactions may be accessed in real time by anybody with a computer. For example, at www.blockchain.com, you can see real-time Bitcoin transactions.
Risks
Cryptocurrencies, like anything else in life, come with their own set of risks. You must examine and comprehend the dangers before trading cryptos, investing in them, or just holding them for the future. Volatility and lack of regulation are two of the most talked-about bitcoin hazards. Volatility reached new heights in 2017, when the prices of most major cryptocurrencies, including Bitcoin, soared beyond 1,000 percent before plummeting. However, as the Bitcoin craze faded, price swings became more predictable, like those seen in stocks and other financial assets.
Another important problem in the sector is regulations. The irony is that for cryptocurrency investors, both a lack of regulation and exposure to rules may be risky.
Getting Ready to Make Deals
Cryptocurrencies exist to make transactions simpler and quicker. But, before you can take advantage of these advantages, you’ll need to arm yourself with crypto devices, figure out where you can get your hands on various cryptocurrencies, and familiarise yourself with the cryptocurrency community. Cryptocurrency wallets and exchanges are among the necessities.
Wallets Some cryptocurrency wallets are comparable to digital payment systems like Apple Pay and PayPal in that they store your acquired cryptos. However, they vary from typical wallets in that they exist in a variety of forms and security levels. REMEMBER Without a bitcoin wallet, you won’t be able to participate in the cryptocurrency market. Instead than utilising the handy internet wallets, I propose using the most secure sort of wallet, such as hardware or paper wallets.
Exchanges
You’re ready to start crypto shopping after getting a crypto wallet (see the previous section), and one of the finest places to go is a cryptocurrency exchange. These online web services allow you to purchase cryptocurrencies with regular money, swap various kinds of cryptocurrencies, and even store your cryptocurrency. WARNING Because many exchanges have been subjected to cyber attempts and frauds in the past, storing your cryptocurrency on one is considered high risk. Once you’ve completed your transactions, you should transfer your new digital assets to your own, safe wallet.
Exchanges come in a variety of shapes and sizes. Some function as a middleman, similar to conventional stock exchanges, which crypto aficionados say is a smack in the face to the cryptocurrency market, which is attempting to eliminate a centralised intermediary. Others are decentralised, allowing buyers and sellers to connect and trade on a peer-to-peer basis, but they come with their own set of issues, such as the danger of locking oneself out. A third sort of crypto exchange is known as hybrid, and it combines the advantages of the previous two to provide consumers with a better, more secure experience.
Communities\s TIP
As you navigate the market, getting to know the crypto community may be the next step. There are several chat rooms and support groups on the internet that may help you get a feel of the industry and what others are talking about. Here are some ways you may help:
Telegram communities dedicated to cryptography.
On the Telegram app, several cryptocurrencies have their own channels. To join them, you must first download the Telegram messaging programme for iOS or Android on your smartphone or computer.
Crypto chat rooms on Reddit or BitcoinTalk: Some of the oldest crypto chat rooms can be found on BitcoinTalk (https://bitcointalk.org/) and Reddit (www.reddit.com/). You may browse certain subjects without registering, but if you want to participate, you must register. (Of course, Reddit isn’t only for cryptos; you can search for a wide range of cryptocurrency-related subjects.)
Chat in the TradingView chat room:
TradingView (www.tradingview.com/), one of the top trading platforms available, also provides a social service where traders and investors of all types can join together and exchange their views, questions, and ideas.
Premium Investing Group of Invest Diva:
You may join our investing group (and speak directly with me as a reward) at https://learn.investdiva.com/join-group if you’re seeking for a less crowded and more investment/trading-focused venue to obtain help.
Before you go in, have a plan.
You could only want to acquire a few bitcoins and put them aside for future development. Alternatively, you may become a more active investor, buying and selling cryptocurrencies on a more frequent basis to optimise profit and income. Whatever the case may be, you must have a strategy and a plan. Even if your transaction is one-time and you don’t want to hear anything about your crypto assets for the next 10 years, you still need to learn how to figure out things like the following:
What should I buy?
When should you buy?
How much should I spend?
When should you sell?
The sections that follow provide a high-level overview of the procedures you must complete before purchasing your first bitcoin.
Choose Your Cryptocurrencies
At the time of writing, there are over 1,600 cryptocurrencies available, and the number is rising. Some of these cryptos may go extinct in the next five years. Others may skyrocket by 1,000 percent or more, eventually displacing conventional currency.
Analyze, Invest, and Profit are three words that come to mind while thinking about how to make money.
After you’ve narrowed down the cryptocurrencies you want to acquire, you’ll need to figure out when the optimum moment is to do so. For example, many individuals began to believe in the concept of Bitcoin in 2017 and wanted to participate. Unfortunately, many of those individuals misjudged the time and purchased when the price had reached its high. As a result, they were not only able to purchase fewer Bitcoins (pun intended), but they also had to sit on their losses and wait for the next price spike.
