What is cryptocurrency 101? If you’re reading this, you’ve probably already heard about people ‘investing in cryptocurrency’. But just what in the heck does that mean?! And how exactly can you start investing in cryptocurrency?
So I am here to share with you cryptocurrency 101: the ultimate beginner’s guide to cryptocurrency.
Learn, enjoy, take action and more importantly share everything!
“Wealth is not about having a lot of money. It is about having a lot of options.”
Cryptocurrency is deemed to be one such option. If you are a beginner, you may be anxious before investing, and at times wonder if cryptocurrency is safe. It is normal to be extra vigilant and worry especially if your money is at risk.
If you are looking for valuable information about investing in cryptocurrency, you have come to the right place.
Not aware of what cryptocurrencies are? Here’s a roundup to simplify the concept.
Cryptocurrency 101: What is Cryptocurrency?
So you want to learn more about cryptocurrency? First, you need to know what cryptocurrency is.
A cryptocurrency is a currency that only exists on the internet. It is a digital currency.
It is a medium of exchange like normal currencies such as the US Dollar but designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography.
With the advent of technology and the desire of humankind for safe and convenient transactions, digital payments will become more and more common in the future.
Cryptocurrencies might even have more platforms that provide more services and perks to their users.
To be more precise, cryptocurrency is a digital currency that uses cryptography for security. It is not owned by any government or statutory body and is fully safe for trade transactions.
Cryptography is used to secure transactions and to control the creation of new coins. Catching up on a fast pace, cryptocurrency is said to be the money of the future.
A History of Cryptocurrencies
The first cryptocurrency to be created was Bitcoin back in 2009. It was created by a pseudonymous developer named Satoshi Nakamoto. It was a new way to transfer value directly to a recipient without fees.
Bitcoin is an emerging encrypted form of digital money or cryptocurrency, that’s growing in popularity and value internationally. Bitcoin is attractive to users and investors because of its immediacy, lack of oversight and anonymity. Most investors enjoy how easy it is to purchase by using free crypto exchanges or even on investing apps like Robinhood.
How do cryptocurrencies work?
Bitcoin uses SHA-256, which is a set of cryptographic hash functions designed by the U.S National Security Agency. Bitcoin is a cryptocurrency that is based on the proof-of-work system.
In April 2011, Namecoin, the first altcoin, was created to form a decentralized DNS to make internet censorship more difficult. In October 2011, Litecoin was released and became the first successful cryptocurrency to use scrypt as its hash function rather than SHA-256. This gave the general public the ability to mine for Litecoins without the purchase of specific hardware such as the ASIC machines used to mine Bitcoin.
Litecoin began receiving media attention in late 2013 – reaching a market cap of $1 billion. Ripplecoin, created in 2011, was built on the same protocol as Bitcoin but services as a payment system – think of it like money transfer app like PayPal for cryptocurrencies that supports any fiat currency, cryptocurrency, commodity or even frequent flier miles.
Today there are hundreds of other cryptocurrencies, often referred to as Altcoins.
What Are The Benefits Of Cryptocurrencies?
Although cryptocurrency is becoming more and more common today, not everyone loves the idea of using or investing in this financial medium. Regardless of how advanced technology is, a lot of people would still opt to pay for their transactions using cold hard cash.
If you’re one of them, you should start changing your mindset and welcome the idea of using cryptocurrency. Aside from keeping up with the times, using cryptocurrency as your financial medium allows you to enjoy the following benefits:
- Easier transactions: People want to earn money, which is why they would often affiliate themselves in different business transactions by working as a middleman. And while their services can make the transition easier, this can entail more costs from the customers. The more people involved, the more money they have to pay for everyone’s services. You won’t have to worry about this because cryptocurrency cuts out the need for working and paying several middlemen during a single business transaction.
- Transaction fees: You can now pay for your transactions online, but most of these have transaction fees. If you don’t want to be burdened with paying more just because you use a convenient platform, use cryptocurrency because transactions do not require transaction fees, unlike banks and credit cards.
- More confidential transactions: Not everyone is confident in letting other people know about their transactions. As much as possible, people would want to practice confidentiality, especially if the transaction involves a lot of money. You can achieve this goal when you choose to use cryptocurrency. This transaction will only involve two parties, which means that you don’t always have to use a reference document for banks and other credit institutions.
What Are Different Types of Cryptocurrencies?
Now that you’re familiar with the term Cryptocurrency, know that Bitcoin is the trendsetter of cryptocurrencies. The currencies joining Bitcoin are called altcoins.
Altcoins are said to be a modified or improved versions of Bitcoin. And, apart from Bitcoin, here’s a list of cryptocurrencies that are upsurging the market.
The 6 Most Important Cryptocurrencies Other Than Bitcoin
- Litecoin (LTC) – Launched in the year 2011, it is often referred to as ‘silver to Bitcoin’s gold.’
- Ethereum (ETH) – Launched in 2015, it can be used to decentralize, codify, secure and trade anything.
- Zcash (ZEC) – Launched in the year 2016, it claims to provide extra security or privacy to the transactions.
- Dash – Also known as Darkcoin, it is a secretive version of Bitcoin.
- Ripple (XRP) – Launched in 2012, it’s structure doesn’t require mining.
- Monero (XMR) – Launched in April 2014, it is a private, secure and untraceable currency.
The full list of all active Cryptocurrencies can be seen here:
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Get Started with Investing in Cryptocurrency
Investing in cryptocurrency starts with you having to first purchase Bitcoin. You will be able to do this by creating an account with an exchange. It is important because the exchange acts as a medium where buyers and sellers trade coins as per the respective currency selected by the buyer.
Also, the coins can then be transferred to a different exchange. Each exchange has its own guidelines and rules. Be sure you are through with them before trading. You can check out My Millennial Guide’s most popular article on the best places to buy Bitcoin for more information.
If you are already keen on making your first investment in cryptocurrency, here’s a list of cryptocurrency exchanges that you can choose from:
BlockFi – Best for Earning Interest on Your Crypto Holdings
BlockFi is one of the easiest places to buy, sell and earn cryptocurrency. The exchange allows users to earn up to 7.5% APY on their cryptocurrency and offers a commission-free trading environment, similar to Robinhood. BlockFi provides users the opportunity to earn interest on their crypto holdings instantly, which had never been done before.
So what if you need customer service? BlockFi offers support in three avenues: live chat, email, and phone lines with an agent during weekdays.
- Fees: There are no hidden fees, no minimum balances, and no reason to wait.
- Pro: With a BlockFi Interest Account (BIA), your cryptocurrency can earn up to 7.5% APY. Interest accrues daily and is paid monthly.
- Con: None, BlockFi is committed to trust and transparency. BlockFi has one of the built a best-in-class compliance program to protect your assets.
Kraken – Best for Security
As one of the largest and oldest Bitcoin exchanges in the world, Kraken is consistently named one of the best places to buy and sell crypto online, thanks to its excellent service, low fees, versatile funding options, and rigorous security standards — but this is only part of the story. They’ve been at the forefront of the blockchain revolution since 2011.
- Fees: The fee per transaction for buying Bitcoin is 0.9%.
- Pro: Lightning-fast engine allowing 1,500,000 transactions per second gives users a great trading advantage.
- Con: No credit/debit card deposits.
- User Interface: Sleek design, a good overview of the trading market with lots of customizations.
- Fees: Low
- Reputation: Trusted
If you are trying to take your crypto investments to the next level, you can get started with Kraken here.
Gemini – Best Beginner Friendly Platform
Gemini is the best place to buy Bitcoin with debit card instantly. Gemini makes it simple to research the crypto market, buy Bitcoin and other cryptos, and build a portfolio for the future of money.
You can also buy DOGE on the platform and is one of the only exchanges where your deposits are FDIC-protected.
- Fees: Gemini charges 3.99% fees for credit/debit card purchases but you can get your coins instantly. 1.49% if you buy from your bank account.
- Pro: You can buy Bitcoin right now with a debit card, very easy to use app-based interface, available in all 50 states, you can even earn interest on your crypto.
- Con: Customer service support is not the best.
- User Interface: Easy to navigate and fully customizable
- Fees: High
- Reputation: Trusted
Coinbase – Best for Learning About Crypto
Coinbase has emerged as one of the high-profile names in the Bitcoin world placing itself on the top as a one-stop solution for Bitcoins. Coinbase is a San Francisco-based digital asset exchange that lets you turn your fiat currency into cryptocurrency. It is the main entry point into the cryptocurrency space for most people. It’s currently is the quickest and easiest way to buy Bitcoins in the US. They also offer a lot of educational videos, free classes, and articles on learning about new cryptocurrencies.
Create your Coinbase account and get $5 in free Bitcoin at Coinbase.
- Fees: Coinbase charges 3.99% fees for credit/debit card purchases but you can get your coins instantly. 1.49% if you buy from your bank account.
- Pro: “Instant Buy” option available with credit card or debit card
- Con: Purchases made with bank transfer can take up to 5 days to complete
- User Interface: Easy to Navigate
- Fees: Average
- Reputation: Trusted
If you wanted to create a Coinbase account you can create a Coinbase account by clicking this link.
Robinhood – Best for No Cost
If you’re already familiar with how to buy and sell stocks, then buying Bitcoin on Robinhood will be super easy. In addition to buying Bitcoin (BTC) — you can buy Bitcoin Cash (BCH), Bitcoin SV (BSV), Dogecoin (DOGE), Ethereum (ETH), Ethereum Classic (ETC), and Litecoin (LTC).
Overall, using Robinhood to buy Bitcoin is smart, easy, and straightforward. Plus, you’ll even give you a free stock worth up to $225 for joining. Then you can sell that stock and buy free Bitcoin with it.
- Fees: Free
- Pro: Easy to use and you can buy or sell bitcoin without commissions.
- Con: Limited supported currencies and no crypto wallets.
- User Interface: Easy to navigate and fully customizable
- Fees: Low
- Reputation: Trusted
TradeStation – Best for Trading Across Multiple Asset Classes
TradeStation Crypto allows you to buy and sell cryptocurrencies like Bitcoin, but you can quickly move between all trading platforms.
Buy, sell, and trade cryptocurrencies all in a single hassle-free crypto trading platform, packed with the tools and technology crypto traders need.
- Buy, sell and hold BCH, BTC, ETH, LTC, and USDC
- One-click order entry
- Quickly analyze prices
- Customize your trading interface
- Instantly see your unrealized profits
You can also trade equities, options, and futures with TradeStation Securities.
- Fees: TradeStation Crypto offers innovative pricing that is not tied to volume. Instead, rates are based on your account balance. TradeStation charges a competitive 0.3% per trade for accounts with balances of $100,000 or less, and even less for higher volume crypto traders.
- Pro: Offers real-time market data, no minimum deposit required, and you can deposit and withdraw at any time for free.
- Con: For accounts that don’t maintain an average end-of-month equity balance of $2,000 or execute at least five trades during the 12-month period following the anniversary of when the account was first funded, TradeStation charges an annual inactivity fee of $50.
- User Interface: Easy to navigate and fully customizable
- Fees: Low
- Reputation: Trusted
Unifimoney – Best for All-in-One Management App
Unifimoney is currently available for iOS (sorry Android users) and you can use it to buy and sell more than 30 cryptocurrencies, including Bitcoin and Dogecoin. You can also buy alternative assets like gold, silver, and platinum. This app handles all your finances in one app, including robo advisor, banking, investing, cryptocurrency trading, insurance, credit cards, loans, mortgage and more.
After downloading the app, you sign up with your SSN and ID. There’s also a $100 minimum funding requirement to open an Unifimoney account.
- Fees: Unifimoney uses Gemini for its cryptocurrency broker.
- Pro: Various banking and online investing options.
- Con: Can’t transfer crypto holdings to an external wallet.
- User Interface: Easy to navigate and fully customizable
- Fees: Fair
- Reputation: New
What are the Differences Between Cryptocurrency Coins, Tokens, and Altcoins?
Millennial investors are looking beyond traditional assets such as stocks, bonds, and real estate to find opportunities to make their fortune. Many young people are launching their own startups, investing in startups, and joining the gig economy among other things. Interestingly, cryptocurrencies such as Bitcoin, Litecoin and Ripple are gradually rising in prominence as an interesting way to make your fortune.
Cryptocurrencies fundamentally refers to virtual currencies that are cryptographically encrypted to prevent their duplication while the records of their transfer of value is stored on a blockchain. If you’ve been looking for opportunities in cryptocurrencies, you’ll most likely have heard about all the different terms being bandied around.
For a beginner trader or investor, it might be somewhat hard to make heads and tail of the similarities and differences (if any) between coins, tokens, and altcoins. The industry is not making much effort to differentiate between the different types of cryptocurrencies. For instance, you can store coins, tokens, and altcoin together in multi-cryptocurrency wallets and many new cryptocurrency traders erroneously think that coins, tokens and altcoin all mean the same thing. This piece provides concise information that could help you identify and differentiate the different classes of cryptocurrencies.
What are Coins?
A cryptocurrency coin is primarily designed to facilitate the transactional transfer of value. Bitcoin and Monero are two examples of cryptocurrency coins in the market. Did you know that those currently or planning to provide services surrounding cryptocurrency may need a money transmitter license based on state or federal rules? These coins are regulated and are the real deal. Cryptocurrency coins can be further categorized into groups based on their use cases. For instance:
Value coins such as Bitcoin and DigixDAO are transitioning from being used for transactional purposes to become a blockchain-backed store of wealth. Bitcoin is the oldest cryptocurrency in the market and its blockchain has never been hacked in the last 9 years of its existence. Stable coils such as the Tether could also qualify as value coins because their value is pegged against a fiat currency.
Transaction coins such as IOTA and STREAMR are meant to facilitate peer-to-peer transactions or machine-to-machine transactions on a blockchain network. Transactional coins tend to have near-instant settlement and practically negligible network fees.
Privacy coins such as Monero are created to offer users with the original promise of privacy and anonymity that cryptocurrencies could offer over fiat currencies. People who want a layer of anonymity on how their cryptocurrency holdings would love Monero for its stealth addresses and ring signatures.
What are Tokens?
Cryptocurrency tokens are primarily built to serve utility or security purposed on a platform built on a blockchain such as Ethereum or Stellar. While Ethereum itself is a platform for building and hosting decentralized applications, the cryptocurrencies used on such applications are usually referred to as tokens. All cryptocurrencies used on ERC-20 platforms are tokens.
Utility tokens are designed to provide access or for transactions within a network or platform. Tokens such as Binance Coin and VeChain are used to access network features such as discounts (on Binance Exchange) and to track orders (on VeChain) respectively.
Security tokens, also referred to as equity tokens are designed like the stock of a company to essentially make owners “shareholders” in a venture. People who hold security tokens can vote, weigh on decisions, and expect dividends on their part ownership of a blockchain venture.
Other types of tokens include network tokens which are designed to incentivize people to the growth and development of a blockchain. A hybrid token could be a mix of utility, network, security token.
What are Altcoins?
An altcoin is fundamentally a cryptocurrency that started with the same source code that was used to create Bitcoin—but with certain code modifications that makes it different from Bitcoin. Altcoins include Dash, Bitcoin Cash and other future forks of Bitcoin.
How to Store Cryptocurrencies?
Before anything else, you’ll need a wallet. Yes! Even digital money requires a wallet. You store your cryptocurrencies in a wallet. Also, you can purchase cryptocurrency, buy into an initial coin offering (ICO), or execute smart-contracts using the wallet.
Every wallet has a public address and a private address. The public address is the address where you receive funds from people. The private address is the “password” to access and send funds. Never share your password. Otherwise, you might lose all the money in your wallet.
How to secure your Bitcoin and Altcoin Investments
- Online Wallet – It is the easiest way of storing money. And also, the least secure. However, it is fine for purchasing things and funding your trading accounts.
- Paper Wallet – The least convenient but hacker proof wallet of all times. It contains all data necessary to generate any number of private keys.
- Mobile Wallet – This wallet works when you download apps. Like Cryptonator, Mycelium, Venmo and so forth.
- Desktop Wallet – It is similar to the mobile wallet, just used on desktops instead.
What Keeps the Cryptocurrencies Safe and Updated?
There are two terms that justify the security of cryptocurrencies: Blockchain & Escrow.
What is Blockchain?
Blockchain, regarding cryptocurrency, deals with the way in which data is structured. Also, it records all transactions to keep track of who had paid what and how much. Moreover, it makes payments faster and more secure. cryptocurrency 101
This process altogether throws light on Cryptocurrency Mining, which is an interesting concept again. Crypto miners verify the transactions recorded in the blockchain and write them into a general public ledger. Also, the crypto miners are paid a small reward for accounting & validating services by receiving little coins every couple of days.
What is escrow?
Escrow is a financial agreement between two parties, where a third party arbitrates in & controls the transaction with secure hands. Initially, the seller and buyer need to sign an agreement. The transactions are to be held only after checking whether the requirements are met or not. cryptocurrency 101
Best Cryptocurrency Wallets to Keep Your Crypto Safe
Recent years have seen an immense increase in awareness about cryptocurrencies, which are based on the invention namely blockchain technology. And with the increased awareness, it can easily be said that more and more people are now investing in bitcoins and cryptocurrency in order to make some profit and have assets for themselves.
While cryptocurrency can be bought through online exchange sites, there are various cryptocurrency wallets which people can use to keep their cryptocurrency safe. Bitcoin hardware wallets are considered more secure than other wallets.
These cryptocurrency wallets come in two categories, either as a connected device, which performs various tasks of any other wallet by helping you select which deals you wish to trade in, or the other option is a disconnected device.
Other than these hardware mining bitcoin, other cryptocurrencies such as LiteCoin, Dash, Ethereum etc. can also be stored in these wallets keeping one’s digital currency secure in a single place.
1. Ledger Nano S
Ledger Nano S: One of the more affordable hardware wallets, available in the market which enables storing multi-currencies, is made as a smart card device. It needs a USB port connection to make transactions and manage the user’s account. It has free updates, and its user interface is compatible with all software, making it a hassle-free device.
Trezor: It is another form of a cryptocurrency wallet that can be used to store bitcoins and make easy transactions. Accompanied with advanced security options, Trezor is compatible with Windows, OS and even Linux. Whenever the user wants to make a transaction, the deal is directed to Trezor for the user’s digital signature. The user can validate transactions through the device, merely by clicking the correct buttons.
KeepKey: This is a cryptocurrency wallet, based on USB interface. It is designed in a manner that the user will have to facilitate each and every transaction, as all the requests would go through authorization. Additional feature of KeepKey is that is can easily be integrated with any other wallet software, by generating private keys and storing them.
How to Maintain Ownership of Your Cryptocurrency
Every day, new people are discovering the benefits of bitcoin and cryptocurrency. Many have purchased their very first digital asset from exchanges such as Circle Invest or Coinbase.
However, only a few will have learned how to keep their private keys secure so that they can really call themselves the owner of those precious coins. Veteran bitcoiners have repeatedly said that if someone buys bitcoins, but aren’t in possession of their private key, they don’t truly own their digital coins.
This is a fact that will become an increasingly important one to know as bitcoin grows in popularity. The digital currency is being used more and more widely in a number of industries.
One industry where it’s proving to be a force is the music industry, with artists encouraging its use among music buyers as a way to cut out the middleman, such as producers and record labels.
What are Private Keys?
A private key is a secret alphanumeric code mathematically paired with your public key- the alphanumeric address where you receive payments. Private keys enable you to spend your digital currency and ensure that ownership remains under you, as long as you keep the alphanumeric code a secret.
Private keys can be stored in a number of ways:
If a wallet was given to you, you may need to find out the cryptocurrency’s mnemonic phrase or associated mnemonic seed. An example phrase would be 12 random words that the software client gave you, which you need to back up, noting it down in the exact order that it was given to you. You can use the phrase to recover your cryptocurrency, using either the same wallet or a different one.
A backup JSON file
Importing and sweeping
These are two ways of securing ownership of keys, which both occur during the cryptocurrency-import process. When you import a private key, you’re tethering the funds belonging to the private key to an existing set of keys on your wallet. So the coins remain linked to the private key that may be linked to a paper wallet, for example. Each wallet can now access the funds tethered to the private key until those funds have been spent. Sweeping is essentially importing, but the private keys go to a different address entirely, and the original imported key set is emptied and rendered invalid.
To summarize, keys can be stored in Mnemonic phrases, JSON files, and via importing or sweeping, and every cryptocurrency owner must know how to access them. If your money is being held in an exchange, you are telling the third party that it’s okay for them to own your coins and, if that exchange is ever hacked, you could potentially lose your coins.
Being able to access your coin’s keys means that you have full ownership. After all, the main benefit of owning bitcoin is that you can essentially act as your own bank.
What is the Future of Cryptocurrency?
This trend has been continued over the course of the last 18 months, with a sustained decline in value during 2018 prompting some to suggest that the Bitcoin bubble was finally about to burst.
But is this really the case, or is the cryptocurrency simply declining in line with its uniquely volatile nature?
Charting Bitcoin’s Recent Rise and Fall
In 2017, Bitcoin enjoyed a truly historic and unprecedented price run in the markets and one that looked to have catapulted the leading cryptocurrency into the conscience of mainstream investors.
Having traded between $930 and $978 on December 31st, 2016, the value of Bitcoin subsequently ticked over the $1,000 mark on New Years’ Day. Just 12 months later, Bitcoin’s price had soared to an incredible $20,000, with significant gains having been made during the summer.
What goes up must come down, however, and this adage could have been invented with Bitcoin in mind. True to form, the poster boy for cryptocurrency has surpassed $55,000 at the time of writing this article.
What are the Key Takeaways Here?
Regardless, the evidence clearly indicates that Bitcoin’s bubble is far from being burst, with the currency boasting relatively healthy growth and intrinsic value within the market.
Instead, it’s more accurate to say that it is deflating in a challenging market, in a way that reflects its inherently volatile nature and the wider economic climate.
The market of cryptocurrencies is similar to the stock market, fast and unpredictable. Nearly every day new cryptocurrencies appear, old ones die, early adopters get wealthy and investors lose money. Every cryptocurrency comes with a promise, mostly a big story to turn the world around. cryptocurrency 101
Is Cryptocurrency a Bubble?
As per the research carried out by Technavio analysts, in 2014, the worldwide cryptocurrency market grew remarkably by 622.7%. Websites like Overstock.com, Expedia, Newegg, Expedia and similar companies accepting Bitcoin, along with the other traditional payment methods.
Note that other altcoins like Litecoin or Ether are not accepted. However, the fact that Bitcoin is accepted is a step forward towards the adoption of other cryptocurrencies. cryptocurrency 101
So, now that you’re gone through the entire cryptocurrency 101 ultimate guide with the beginner’s knowledge of how investing in cryptocurrencies works, you can make your first investment easily.
Bitcoin, in the words of Nassim Taleb – “Bitcoin is the beginning of something great. A currency without a government, something necessary.”