Cryptocurrency For Dummies – A Full Crypto Guide
Although the crypto world has progressed so rapidly to this day, there are still many people who are not aware of how it works. One main reason for this can be that the crypto world does not necessarily have a platform that gives users an introduction to what cryptocurrency is all about. So many times, the newcomers struggle a lot with grasping how to trade cryptocurrency, and they do not even know how much profit they can generate from trading cryptocurrencies.
The reason why we have written this article is to introduce people to the world of cryptocurrencies who want to learn about cryptocurrency and want to trade in this financial market. Therefore after a lot of research and carefully choosing the information that would help a beginner go a long way in trading but also be understandable and not complex, we have written this article. In this, we have compiled some of the topics that are necessary for a newbie to know about the crypto world. It will help you gain knowledge about the basics so that when you step into the market, you know exactly what you are going to be dealing with.
So I would suggest that you read this article very carefully, as there is a lot to learn and it will only help you when you start trading.
What Is Cryptocurrency?
First of all, I would like to start with defining what actually the term “cryptocurrency” is. Cryptocurrency or digital currency is a virtual currency that is completely decentralized and operates online. It doesn’t have any physical shape. It is bought, sold, and traded only online through the means of trading platforms such as cryptocurrency exchanges or cryptocurrency brokers. The technology that is behind cryptocurrencies is called blockchain technology. I will talk about this technology below in detail so that you could easily understand this concept as well.
Cryptocurrency uses a ledger, which is available online, and this helps to make sure that the transactions are secure. Very strong cryptography is used to help with making the transactions secure on the web.
In the market, you will come across over 6,000 cryptocurrencies. Out of all these, there are many cryptocurrencies that are on the top currently, such as Bitcoin, Ethereum, Binance Coin, and many more. You may also question what makes cryptocurrencies so in demand? Well, there are a couple of reasons, but one of the leading ones is the technology behind it. There is a specific technology that allows cryptocurrencies to operate and run in the market, and that is blockchain about which I am going to talk about now.
What Is Blockchain Technology?
Like I mentioned above that the technology which helps cryptocurrency run is blockchain. It is important for you to know that blockchain is the type of technology that is decentralized. This is also spread over so many computers, which help to organize and monitor every transaction that takes place. But the best part of this blockchain technology which has helped to attract a lot of customers, is that it is very secure.
Basically, in very simple terms, this technology helps to record information, but it is done in a certain way that prohibits anyone from editing, hacking, or defying the system in place. It is a sort of online ledger that stores all the transactions, and this is shared with all the computers present on the network that are on the blockchain. The blockchain consists of individual blocks, and each of these blocks has a certain number of transactions. And every time there is an additional transaction that takes place on the blockchain, a record is kept. This record is put on every member’s ledger.
The database for this, which is also decentralized, meaning that it is not controlled by a single authority, is shared and controlled by various members, and the name for that is DLT. DLT stands for Distributed Ledger Technology. A blockchain is once again a form of DLT since its transactions are noted, and this is done by a cryptographic signature commonly known as a hash. This form of cryptography is unchangeable, and that is what helps blockchain be secure.
Bitcoin – The World’s First-ever Decentralized Cryptocurrency
Bitcoin is that one cryptocurrency that nearly everyone has heard of, including beginners. Many people get confused and think that this cryptocurrency is very new. But that is wrong. Bitcoin was introduced in 2009. This is the first cryptocurrency that was established, but even before that, people had tried to create online currencies that had ledgers and were encrypted. Two examples that we have heard of are Bit Gold and B-Money. These were never developed completely, which means that Bitcoin is the first cryptocurrency that was also decentralized.
In the beginning, when it was first introduced, the value was not really high like it is now. Back then, blockchain technology was also very new, which many people did not understand. It was not until 2010 that Bitcoin had taken off, and its market value increased within a short while. The only reason that Bitcoin became so popular was that one individual had traded his coins for some food. That then caused people to realize the market value for it, so more people started buying it and selling it. This was also when alternatives to Bitcoins started appearing in the market.
The alternatives to Bitcoin are commonly known as altcoins, which are nearly the same but offer better services such as increased speed.
How To Trade Cryptocurrencies?
Well, there are many people now that want to trade cryptocurrencies as a vast majority of individuals from across the world are somehow familiar with the concept of cryptocurrencies. However, what they know is only the name of the cryptocurrency, particularly Bitcoin, and that is it. They do not understand the concept of cryptocurrencies deeply. I have tried to explain what cryptocurrency is all about above, and I have also mentioned the basic idea of blockchain technology that is behind this virtual currency.
Now, once people get some basic idea of cryptocurrencies, they then want to trade them, but they don’t know how to trade digital assets. As this guide is centered upon giving newbie traders all of the information about cryptocurrencies trading, then let me tell you how you can trade digital assets. In order for you to start your trading career in the world of cryptocurrencies, you are required to open an account on a cryptocurrency exchange or a cryptocurrency broker. These are the trading platforms that provide their services and platform to users where they can trade their digital assets. Without a crypto exchange or broker, it is not possible for any trader in the world to execute trades. There are a lot of legit digital currency exchanges present in the industry. Some of the popular ones are Binance, Coinbase, OKEx, Kraken, Bithumb, and many others. You can choose any of the legit cryptocurrency exchanges and open an account with it. As soon as you create an account with a particular crypto exchange, you will be able to start trading with it.
What Are Cryptocurrency Wallets?
You may think that discussing what a wallet is pointless because everyone knows what a wallet is, but the thing is that digital wallets are different, and there are some key things to know about them. A cryptocurrency wallet is basically an application that gives permissions to users of crypto to store all their assets in the wallet. Normal currency is different because it can be used without a wallet, but if you start earning in cryptocurrencies, then once you store it in your wallet, you can use it for transactions.
These applications can be used on any device, such as a laptop or a phone. Satoshi Nakamoto was the person who had created and introduced the first cryptocurrency wallet, and this was during the time he had introduced Bitcoin into the market in 2009. A good thing about these wallets is that they can easily hold various cryptocurrencies.
But how does a crypto wallet work exactly? So let’s say you want to buy cryptocurrency from an exchange, or someone is gifting you an amount of cryptocurrency. All you have to do is give the sender the details for your cryptographic address. This is provided by the wallet you are using. Another interesting thing is that cryptocurrencies are not stored like files in a wallet. Instead, your wallet just holds information for the location of your cash on the blockchain.
Important Terms Related To Cryptocurrency That You Should Understand
It is important to be familiar with cryptocurrency terms because, just like professionals of other fields discuss their work with some terms, the crypto world also has specific terms. These all have a certain meaning and are used so that traders can communicate with words that are specific to their line of work.
Initial Coin Offering (ICO)
The initial coin offering is basically a term used in cryptocurrency, which otherwise would be referred to as an initial public offering. ICO is basically like an event that a company can throw if it is interested in gaining funds, whether that is to make a new coin, establish an app or launch any service. You may be confused about what investors would gain from ICO?
Well, when investors who are interested buy into some of the offerings, the company grants them cryptocurrency tokens in return. Through the token, investors can either access the company’s goods or services, or the token can be a symbol of a share that the investors have in either the project or the company.
One of the things that you should know about ICO is that firstly it is a method of fundraising like explained above, and it is carried out by startups that are interested in offering their services or goods which are linked with cryptocurrency or the blockchain space. This is also very similar to stocks, which are another trading asset. If you are not sure about ICO’s then just know that many of these have helped their investors by granting them huge profits, but at the same time, many ICO’s have unexpectedly been a fraud and have made investors suffer due to them losing their investments.
If you are interested in being a member of an ICO, then you would have to buy any digital currency and also have an understanding of how cryptocurrency wallets work as well as exchanges. But keep in mind that ICOs are mostly unregulated, which means that if you want to invest, you have to research and investigate the cause of the project, as well as those in charge of the project. It is best to remain cautious as you never know when it might be a scam.
Initial Exchange Offering (IEO)
This is also a fundraising event that is carried out by an exchange. The main difference between an ICO and an IEO is that the ICO is conducted and run by a team, whereas the IEO is an event that is carried out by an exchange on its platform, which is popular. This can be a platform like the Binance Launchpad, and it allows users to buy tokens that can be bought immediately through the funds present in the exchange wallet.
So why should users participate in IEOs? What benefits would you receive? First of all, participating in an IEO will be very easy for you as the process is very simple. All you need is an account with an exchange, and all you need to do is have some funds in there, and then you can easily participate in the event by using the interface of the website. Also, the good thing about IEOs is that the organization behind the project promises and provides users with a userbase. This userbase allows investors to see the product that they have invested in.
Not only can you purchase or sell digital assets rather you can stake them as well. Staking can be thought of as an alternative to mining, although it is a decreased resource-intensive type. As a user, during staking, all you have to do is hold funds within your cryptocurrency wallet, which helps to provide support for the blockchain network. The support mainly helps to maintain the security of the blockchain network and keep it operating. But if you are still confused, then staking is just the process of holding your cryptocurrencies within the wallet, which helps you to earn rewards in return.
Most of the time, users can stake their coins from their crypto wallet directly, an example of such a wallet is the Trust wallet, and this is beneficial as it helps make staking simpler and quicker. But there are also some exchanges that allow users to stake, and Binance Staking is one of them. This platform is a really good one as it has simplified its staking process and has allowed users to earn rewards very easily, too, because you just need to keep your coins wherever the exchange wants, such as its platform.
FAQs-Frequently Asked Questions
- Why are cryptocurrencies so popular?
There are a number of reasons why cryptocurrencies are so wanted these days and why the hype is not dying down. One of the leading reasons is that cryptocurrencies such as Bitcoin that have proven to be very successful, are regarded as the currency that will rule in the future. That is why many people are trying to buy them from now so that they do not suffer a loss then.
Secondly, cryptocurrency has reduced or completely removed central banks from controlling the flow of money. This is a good thing as banks usually reduce the money’s value in many ways, such as inflation.
- Are cryptocurrencies a good form of investment?
This is a topic that has led to many arguments, as there are two different beliefs. One is that as it is a currency of the future, it is bound to be a good form of investment. The second is that there is no actual investment because there is no cash flow being generated and the main reason for this is that if one individual is profiting, then the other obviously had to pay more than you for the currency.
Conclusion
Cryptocurrency has proven to be a very successful currency in the market, and the main reason for this was bitcoin that gained so much market value overnight. That caused people to start investing in this currency so that they can profit a lot. As a beginner, it is important that you familiarize yourself with all the cryptocurrency terms so that when you start participating in the market, you can perform well.
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