What is Cryptocurrency? A Beginner’s Guide to Digital Currency
You’ve almost certainly heard a lot about cryptocurrency. Some good, some bad. People complain that it is too risky or too futuristic. Others swear by it and claim it has made them wealthy.
With its enormous popularity and low learning curve, it’s simple to see why so many people flock to it. Here’s all you need to know if you’re interested in cryptocurrencies.
What is Cryptocurrency?
- A cryptocurrency is a type of digital currency. There are no tangible coins or bills to carry. They are not even linked to any assets, as most investments available today are, including commodities, equities, and bonds
- Crypto is entirely digital or virtual
- The currency has no practical application. Its only worth is that the owner wants money for it if you want to buy it. That is what drives its worth
- However, cryptocurrency solves two major issues that our traditional money confronts. It does not require a centralized authority to control or administer it, and it cannot be replicated fraudulently
How Do Cryptocurrencies Work?
As previously said, crypto works without the involvement of the government. There is no central authority in charge of it. When you exchange cryptocurrencies, you will not see anything physical.
The value of cryptocurrency is determined solely by the supply and demand for the currency at any particular time. Crypto is occasionally used to purchase products or services, but not frequently. It is mostly utilized as an investment to increase a person’s net worth.
How to Invest in Cryptocurrency?
Investing in cryptocurrencies works differently than investing in stocks. Most people buy cryptocurrency through a broker, just as they would in stocks, but the resemblance ends there.
Most sellers prefer that you pay in cryptocurrency rather than cash. This is accomplished by storing your cryptocurrency in a digital wallet. You can exchange your US dollars for cryptocurrency in the wallet and invest more when ready.
Although not all brokers currently sell cryptocurrencies, some of the most popular brokers do, including Robinhood, Webull, and SoFi. There are a couple of outstanding cryptocurrency exchanges you can use if you’d rather conduct the transactions directly rather than going via a broker.
Coinbase
Coinbase is the most popular but also the most expensive cryptocurrency exchange. Their fees for bank account transactions start at 1.49% and go up to 3.99% for credit card transactions.
Binance
Binance is another famous cryptocurrency exchange with the biggest trade volume and reduced fees. Traders pay a 0.1% trading cost, as opposed to the substantially greater fees charged by Coinbase.
Common Cryptocurrency Forms
There are over 21,000 different types of cryptocurrencies available today. However, most people are familiar with the following.
Bitcoin
Bitcoin is where it all began. It currently has the greatest market share and has outperformed all other forms of cryptocurrency. The issue with Bitcoin’s remarkable success is that it now costs a lot of money to buy just one. For example, one Bitcoin is currently worth $19,000, but that figure can fluctuate dramatically in a single day, as it happened a few months ago. Bitcoin went from almost $69,000 to $18,000 in a matter of a few months.
Litecoin
Litecoin is called Bitcoin’s relative. It’s a cheaper form of Bitcoin. It processes transactions faster than Bitcoin and costs a fraction of the price, with a current value of around $52.
How to Transfer a Bitcoin?
It seems weird to be able to exchange currency online, doesn’t it? Here’s how cryptocurrency is exchanged.
You agree to send $10 in Bitcoin to John. You’ll need John’s Bitcoin address to transfer it. This address is important since it is used to transmit and receive money. The address is a series of numbers and letters linked to your bitcoin wallet and should be kept private. Anyone who possesses the key to your wallet has access to your money.
Once you have John’s Bitcoin address, enter it into your wallet and enter the amount you want to transfer to him, which you will convert to Bitcoin based on its value. You send the money to John, but a little fee is deducted from the total depending on how quickly you want the currency to arrive.
3 Reasons Why Cryptocurrencies are so Popular
Decentralization
These days, many people desire to do anything that does not involve the government. With inflation out of control, cryptocurrency investing can feel like a secure haven from it all.
Safe and secure
Since hackers are much more difficult to steal cryptocurrency than to gain access to your bank account or brokerage account, some individuals prefer it for added security.
Huge earning potential
Many people understand that cryptocurrencies are the way of the future, and they want to get in while the prices are still low to profit alongside the cryptocurrency’s rising value.
Conclusion
Whether we all come on board or not, cryptocurrency is the way of the future. With its value skyrocketing in recent years, it’s clear that its popularity isn’t decreasing. Talk to your broker about your options if you want to invest in cryptocurrency.
If you’re a do-it-yourself investor, choose an exchange you’re comfortable with and join the excitement. Remember that the value can fluctuate dramatically within a day or even a few hours. Work with someone who can teach you the ropes, and you might discover that crypto is the way to go for your investment future.