Cryptocurrency investment for beginners – what you need to know
Investing in cryptocurrency has been a trending topic over the last years, however, with all the controversies surrounding the subject, people are wondering, is it still worth it? But what exactly is cryptocurrency, how to start, and how you can store it? I will try to answer your questions as well as I can.
The history of cryptocurrency
Before jumping to the how part, I need to explain, what it is and why it was invented. So, let’s start with a little bit of history. Bitcoin, the first ever cryptocurrency, was developed in 2009 by the person under the name of Satoshi Nakamoto, however, we still don’t know the identity of this individual (or a group). It was the response to the problems with traditional banking system. As we all know, traditional currency is controlled by one entity, which is government, and this caused massive issues for some countries in the past. We have absolutely no control over the value of our money, as authorities can decide to print more paper bills, which causes inflation.
How does it work?
Cryptocurrency is decentralised, which means it is controlled by the network of computers through blockchain, and this is one of its great advantages over traditional money. Unfortunately, it didn’t gain a wide acceptance of business community, but things are getting better. Cryptocurrencies work like virtual money. If you buy crypto, you store it on your digital wallet. When you make a transaction, it happens between you and your counterparty. The most important thing you need to know is that there is a certain amount of cryptocurrency and there is no way to make more, like it happens with traditional bills. For example there is 21 milion Bitcoins. This is the perfect solution for the problem with inflation, as there is limited amount of money. What is more, Blockchain is a public registry, and that means all users have the same access. Thanks to cryprography, users remain anonymous.
What you need to know
1. Buying crypto is a high risk investment. It’s value can change even a couple hundred percent during a year.
2. Bitcoin is the most popular, however, the researchers claim that Etherum is the most likely to prevail in the future.
3. A high level of anonymity draws the interest of investors, but it also of high tech criminals and frauds.
4. Authorities do not control cryptocurrencies, unless pay for goods or services. The tax for crypto is different in each country.
How do you store cryptocurrencies?
Cryptocurrencies, like traditional money, need a wallet, where you can keep them. The wallet for crypto consists of two keys: private and public one. Only you have the access to the private key; you use it to authenticate and encrypt transactions. However, the public one is accessible for everyone, and it contains the number of out wallet.
If you read this post, you are probably at the beginning of your crypto investment journey. Before you start, you need to ask yourself two important questions:
1. What is the level of security you’re happy with and do you want to store a considerable amount?
2. How do you want to connect to your wallet? From a computer/tablet/telephone, or via internet browser?
If you store larger amounts of money, we recommend to use so called offline wallets, for example paper wallet, or hardware wallet like trezor, or ledger.
That means they do not have access to the network. They exist as a paper version, and you can print the keys (private and public) on a piece of paper. We consider them to be something like a safe for cryptocurrencies. You just need to remember not to lose or destroy it.
They often look like a pendrive, are really safe, and allow you to store a couple of different kinds of cryptocurrencies at the same time. They are protected and configured only to store your currency. You can use it on any device with USB.
Wallets that you can use on your computer/laptop. They give you safety if you follow the basic rules of protecting cryptocurrencies.
- Full – it stores the whole chain of blocks. A long time of synchronization, and a high level of software bloat makes it almost impossible to use as a wallet for beginners.
- Light – the chain of blocks is stored on servers. It gives you a good time of synchronization and a small software bloat.
You can use this type of wallets on your mobile devices. You can pay with cryptocurrency using the QR code.
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