Have you ever considered investing in crypto, but you didn’t know where to start? How exactly does cryptocurrency work? How safe is it to buy crypto? Should you try it?
If these questions are popping in your head, we have the answers for them.
We created this crypto guide to help you master the basics of crypto and the benefits of investing in cryptocurrencies.
Here, you will also learn the best ways to invest in crypto today.
What is cryptocurrency?
Let’s start from the basics.
A cryptocurrency (or crypto) is a form of currency that exists digitally or virtually and uses cryptography to secure transactions.
In other words, cryptocurrency is a digital, encrypted, and decentralized medium of exchange. It is created with cryptographic techniques that enable people to buy, sell or trade them securely.
As you might guess, the most popular cryptocurrency is Bitcoin. Bitcoin is also the first cryptocurrency invented by Satoshi Nakamoto in 2008.
How does cryptocurrency work?
Unlike the Euro or the U.S. Dollar, there is no central authority that manages and maintains the value of a cryptocurrency.
In other words, the regulation of cryptocurrencies doesn’t rely on any central authority such as a central bank or government.
Instead, they use a decentralized system to register transactions and issue new units.
As the inventor of Bitcoin says: Cryptocurrency is an electronic payment system based on cryptographic proof instead of trust.
This cryptographic proof is in the form of transactions verified and recorded on blockchain technology.
What is blockchain crypto technology?
Cryptocurrencies run on a distributed public ledger named blockchain.
A blockchain is a distributed database shared among the nodes of a computer network. As a database, a blockchain stores information electronically in a digital format.
Blockchain is different from a typical database because blockchains store data in blocks linked together via cryptography.
As new data comes in, it enters into a new block. When a particular block is filled with data, it is chained onto the previous block, chaining it together in chronological order.
Blockchains are best known for maintaining a secure and decentralized record of transactions. They guarantee the fidelity and security of data without needing a trusted third party.
Here are the top 10 Blockchain platforms:
Ethereum (market leader)
What is crypto mining?
Crypto mining is the process of creating units of cryptocurrency.
It involves using computer power to solve complicated mathematical problems and generate coins as a reward.
How does crypto mining work?
Let’s dive deeper.
Crypto mining is performed with sophisticated hardware that solves a highly complex computational math problem.
The first computer that will discover the solution to the complex hashing puzzle will be awarded the next block of coins. Following this, the process begins all over again.
For example, for completing “blocks” of verified transactions added to the blockchain, Bitcoin miners will receive Bitcoin as a reward.
You may think that miners are solving complex mathematical problems. But they are actually trying to be the first one to develop a 64-digit hexadecimal number (hash), less than or equal to the target hash.
This process is known as PoW – proof of work.
To set up a mining rig, you need:
- – A GPU (graphics processing unit) or
- – An ASIC (application-specific integrated circuit).
To mine successfully, you need a high hash rate. It can be measured in Giga hashes per second (GH/s) and Tera hashes per second (TH/s).
What are crypto exchanges?
A crypto exchange is a platform where you can buy and sell cryptocurrency.
Crypto exchange platforms allow you to:
- – Buy and sell crypto using regular currency (ex. Euro or U.S. Dollar)
- – Trade one crypto for another (ex. Converting Bitcoin to Litecoin).
Please keep in mind that exchanges are based on the current market prices of cryptocurrencies.
What is a Crypto market cap?
Market capitalization (or market cap) is the total value of all the coins that have been mined.
Market cap is calculated by multiplying the total number of coins in circulation by the current market price of a single coin.
Why is market cap important?
Market cap helps you make more informed investment decisions by comparing the total value of one cryptocurrency with another.
This comparison can show you the growth potential of a cryptocurrency and whether it is safe to buy.
Cryptocurrencies are classified by their market cap into 3 categories:
Large-cap cryptocurrencies (such as Bitcoin and Ethereum)
- – Market cap of more than $10 billion.
- – Lower-risk investments.
- – Have higher liquidity (the price won’t be dramatically impacted when a higher volume of people start cashing out).
- – Market caps between $1 billion and $10 billion.
- – Higher-risk investments.
- – Have more untapped potential upside.
- – Market cap of less than $1 billion.
- – Most susceptible to dramatic swings based on market sentiment.
Still, it’s important to remember that cryptocurrencies’ market cap can swing dramatically due to their volatility.
What is a crypto wallet?
Crypto wallets allow you to send, receive, and spend cryptocurrencies. This is the place where you store your private keys, keeping your crypto safe and available.
Unlike a regular wallet, where you can carry actual cash, crypto wallets technically don’t store your cryptocurrencies.
Your holdings live on the blockchain. But you can access them using a private key. If you lose or forget your private keys, you won’t be able to access your money.
Here are the main types of wallets:
– Paper wallets: Keys are written on a physical medium (paper) and stored safely.
– Hardware wallets: Keys are kept in a thumb-drive device, held in a safe place, and only connected to a computer on demand.
– Online wallets: Keys are kept in an app or other software with two-step encryption.
What are the 7 most popular crypto wallets?
Why has crypto become so popular?
There are multiple reasons why cryptocurrencies are so popular around the world:
Payment fees are very low
You need to pay a specific fee for your transactions when using online payment options. These fees are much lower when paying with cryptocurrencies, and the transactions are way safer.
Cryptocurrencies aren’t associated with any government
The regulation of cryptocurrencies doesn’t rely on any central authority like a central bank or government. This means that cryptocurrencies can be stable even when there is a disruption in a specific country.
There is an enormous potential for profit
If you buy a cryptocurrency while it’s at a low price, you can potentially profit when the price peaks.
Widely accepted as a payment
More websites started to accept cryptocurrencies as payment. This will only become more dominant in the future of online payment. Paying in crypto might not be widespread right now, but it is happening soon.
With the risk of cyber-attacks online, using cryptocurrency to pay for things online is a lot safer than other traditional payment options. Crypto enables faster and more confidential transactions without the typical fees associated with card payments.
Easy to buy cryptocurrencies
It has never been easier to buy and sell crypto. Ensure to reach out to reputable sources like Dive In Crypto to exchange cash to crypto and vice versa.
If you have never purchased cryptocurrency, you will see that the process is very simple and customer-friendly.
Crypto is the future of money
The Covid-19 pandemic accelerated the shift toward digital and contactless payments. It also led to a more extensive acceptance of alternatives to physical cash like cryptocurrency.
Want to learn more about crypto?
Yes, cryptocurrencies are the future of money. Are you open to starting your journey to financial freedom? How do you feel about investing in crypto today?
Contact us for additional info on how to get started – we are always happy to help you!