As of 2024, more than 300 million people worldwide use cryptocurrencies.
Cryptocurrencies have been around for well over a decade now, and in that time they’ve become increasingly popular. Plenty of people believe crypto is a bubble and won’t go anywhere, while others think it will shape the future. If you’ve been hearing more about it, you’re probably wondering if it really is worth all the hype.
So what is crypto, and how can you get into this new and exciting world? Keep reading to find out.
What Is Crypto?
The first crypto ever created was Bitcoin, a virtual currency that appeared in 2009. It’s a digital asset invented by someone known only as Satoshi Nakamoto — though this is just an alias.
To this day, no one really knows who created Bitcoin. Many believe it was a group rather than one individual.
Cryptos use blockchain technology which allows people to trade and transfer it through a decentralized ledger. Because of this, no one can manipulate or control a cryptocurrency.
This is one of the main reasons people support crypto. They know that governments and banks can’t interfere in any way.
Bitcoins (as well as some other cryptos) are generated through mining. This involves the use of computing power to solve complex equations. Miners who provide this power are rewarded in crypto.
Alongside the growth of Bitcoin, various other cryptocurrencies have been launched, and there are now more than 20,000 coins available. Some have become very popular, but Bitcoin is still the largest and most well-known.
Blockchain Technology Explained
Without a central bank running the show, you may be wondering how it all works. Transactions go through cryptocurrency blockchains which facilitate all transfers. Everything is recorded, and these records are open to the public. Anyone can see the details of any transaction that’s occurred.
A blockchain uses DLT (distributed ledger technology) which offers several benefits. The main advantages include a high level of security, quick transactions, and improved anonymity. All of these appeal to crypto investors.
A blockchain is made up of blocks which each contain multiple transactions. Each transaction is recorded in a block as it happens and is then added to the ledger.
Once recorded, a transaction can’t be altered by anyone. As such, you can always trust the validity of these records.
Where to Buy Cryptocurrency
The first step towards investing in cryptocurrencies is knowing how and where to buy them. Most investors buy crypto through cryptocurrency exchanges. These are online platforms that facilitate the buying, selling, and trading of crypto.
There’s a wide selection of available, and they vary in terms of features, cryptos they support, and usability. Some of the most popular exchanges available include Coinbase, Binance, and Kraken, but there are plenty of others.
Research the different options to find one that you think would be good for you. You can then create an account and get started.
Opening an account is typically fairly simple. Bear in mind that some exchanges require proof of ID for verification, and possibly some other details.
After opening your account, you can add a payment method. Most people use a debit/credit card as it’s the easiest option. Note that all exchanges have fees for purchases and trades, so look into these before making your decision.
Any crypto you purchase will go straight to your custodial wallet on the exchange. From here, you can trade it again freely, hold it, or move it to your own wallet.
It’s generally a good idea to move crypto off of exchanges and into another wallet. If an exchange is hacked or has any other issues, you could risk losing your crypto permanently. This has happened to plenty of people in the past, so it’s better to be safe than sorry.
CFD Trading
If you don’t want to use an exchange, you could opt for CFD (contract for difference) trading. This is done through a broker and comes with various advantages such as:
- Leveraged trading
- Short (sell) positions that aren’t typically offered
- Access to overseas markets
This is a less popular option, so most people will want to opt for an exchange.
Storing Your Crypto
If you choose to move your crypto assets off of an exchange, you can send them to a wallet. The two types of wallets available are soft and hard wallets.
Soft Wallet
Most people start with a soft wallet (also known as a hot wallet). These are software-based and usually operate as browser extensions or smartphone apps. Most of these are free to set up and use. Some of the most popular choices are Metamask, Phantom, and Exodus.
When looking at digital wallets, you should compare the options available. Different wallets have different features and support different cryptocurrencies. When you know what wallet would be best for your needs you can download it and create an account.
When creating a wallet it will generate a 12-24 word seed phrase. It’s vital that you don’t lose this. If you do (and you get locked out of your wallet) you might lose the crypto in it forever.
It’s also vital that you don’t let anyone else get your seed phrase. If they do, they may be able to steal all of your crypto.
Make sure you write your seed phrase down — not on your phone, computer, or any device that’s connected to the internet. Keep it somewhere safe and secure. You’ll want to do the same with seed phrases for any other wallets you create in the future.
Soft wallets are more secure than exchanges, but they’re not 100% risk-free. They’re constantly connected to the internet which presents some vulnerability. The most secure approach is to use a hard wallet.
Hard Wallet
A hard wallet (also known as a cold wallet) is a physical device that you can use to keep your crypto secure. Hard wallets need to be connected to a computer for any transactions to take place, and you must physically approve these transactions. This helps make them the most secure wallets available.
You’ll get a seed phrase when setting up a hard wallet. Keep it safe just as you would with a soft wallet. Hard wallets also use private keys, and these stay on the device.
There are various manufacturers that make hard wallets with different features and capabilities. Some are better for beginners and others are better suited to experienced investors. If you want to hold a large sum of crypto long-term, a hard wallet is highly recommended.
One downside to bear in mind is that these aren’t as convenient as soft wallets. You need to connect them to your computer whenever you want to make a transaction. Many traders keep the majority of their funds in a hard wallet and keep a small amount in a soft wallet for more convenient use.
Most Popular Cryptocurrencies
Bitcoin (BTC) has always been the biggest and most well-known cryptocurrency, but over the years several others have become very big players. Ethereum (ETH) has held the second-place spot for a long time, and just behind it are several other popular cryptocurrencies such as:
- Binance Coin (BNB)
- Cardano (ADA)
- Ripple (XRP)
- Solana (SOL)
- Dogecoin (DOGE)
Several stablecoins are also very popular but are somewhat different from normal cryptocurrencies. These are coins that maintain a constant value as they’re pegged to the fiat currency. The biggest ones are Tether (USDT), USD Coin (USDC), and Binance USD (BUSD), all of which constantly have a value of 1 USD.
Many crypto exchanges offer all of the most popular coins. When you start looking at lower-cap coins, it may be a bit trickier to find them.
Advantages and Disadvantages
There’s still a lot of uncertainty around the crypto market as it hasn’t been around for a very long time. Despite that, a lot of people have full faith in crypto, and more people are investing every day. Crypto offers several advantages such as:
- Protection from inflation
- Security
- Privacy
- Decentralization
- Cost-effective transactions
- Self-governance and management
- Smooth currency exchanges
- Easy fund transfers
While these advantages are very noteworthy, there are also some disadvantages you should bear in mind. These include:
- High volatility
- No refunds or cancellations
- Risk of data loss
- Sometimes used for illegal transactions
- High energy consumption
- Some vulnerabilities to hacks
Before you start investing in crypto, weigh up these advantages and disadvantages. You should always do your research on any cryptocurrency before buying it. Make sure you fully understand what you’re investing in.
Getting Started With Crypto
Now that you’re no longer asking “What is crypto?” you may be ready to get started. Make sure you understand what you’re doing and the risks involved. Research platforms, wallets, and coins to ensure you have a good understanding so that you can make the best investment decisions.
To learn more about the world of crypto, check out some of our other blog posts.