Projections show that the global cryptocurrency market will reach a value of $13.17 billion by 2030.
Digital cash is becoming more popular every year as the possibilities and accessibility of it grow. Even so, most people still find themselves asking “What is Crypto?”. The future of crypto seems limitless, and getting in while it’s still early could be a great decision.
Read on for a rundown of the basics of cryptocurrency.
What Is Cryptocurrency?
Cryptocurrency is a modern form of digital currency that’s taking the world by storm. Traditionally, payment systems relied on banks and other financial institutions to facilitate transactions. This isn’t necessary with cryptocurrencies as they work on peer-to-peer systems known as blockchains.
Crypto is entirely digital, and all records are maintained on online databases. Cryptography is used to verify transactions, which is where the name comes from. These encryptions make transactions incredibly secure.
The Blockchain
Cryptocurrency transactions all occur on the blockchain — a distributed database that uses a network of computers across the globe. The blockchain records all transactional data which is then visible to anyone.
This data is established in blocks and kept on a decentralized network. No one can alter transaction history or input fake information.
Cryptocurrency Explained
Crypto itself is generated through a method known as mining. In this, computing power is used to solve problems that generate coins. This takes a lot of energy, so it is not always efficient.
For most people, the best way to get crypto is by purchasing it through exchanges. You can store your crypto in one or more wallets. Bear in mind that different wallets only support certain cryptocurrencies.
Popular Cryptocurrencies
As cryptocurrencies have grown more popular, a lot of different coins have been popping up. Some have been incredibly successful and are now highly renowned.
Bitcoin
Bitcoin was founded in 2009 as the first-ever cryptocurrency. To this day, it’s the most widely used crypto in the world. As the first crypto, it started out almost completely worthless and someone could buy a single Bitcoin for less than a cent. Since then, it has hit an all-time all-time high of $69,044.77, and at the time of writing, one Bitcoin is worth $43,033.59.
One of the most notorious Bitcoin transactions took place in 2010 when a man bought two pizzas for 10,000 Bitcoins. This would be worth over $430 million.
Another very noteworthy aspect of Bitcoin is the fact that no one knows who the creator is. The individual (or team) behind it is only known by the name Satoshi Nakamoto, but their true identity has never been revealed.
Ethereum
This is a somewhat newer coin that was developed in 2015. Since then, it has grown rapidly to become the second most popular crypto in the world. Ethereum is also the biggest blockchain for NFTs.
NFTs (non-fungible tokens) are digital assets (most commonly images, videos, or audio clips). Each one is unique, and they exploded in popularity after gaining some traction.
Solana
Solana is another major cryptocurrency that has gained a lot of popularity in recent years. It’s the second most popular blockchain for NFTs, and while it has seen a lot of volatility lately, plenty of investors are still very bullish on it.
All crypto transactions require a “gas fee”. The Ethereum blockchain has very high gas fees, but they’re much lower on Solana. This is one of the key reasons it’s becoming so popular for trading NFTs.
Ripple(XRP)
XRP is one of the older cryptocurrencies available, and it has been surrounded by a lot of controversy over the years. The SEC vs Ripple case has been closely watched by everyone in the crypto space, and it’s still difficult to tell exactly how things will play out in the end.
Buying Cryptocurrency
If you want to buy cryptocurrency, there are a few different approaches you can take. It’s important to understand, however, that there are a lot of mistakes people often make.
If you do things incorrectly, you could end up losing money. Make sure you always do your research and only invest in crypto if you’re confident that you understand what you’re doing.
Step 1 – Choose a Platform
There are two main types of platforms you can use. The first is an online broker.
In addition to crypto, brokers sell various financial assets such as stocks and bonds. They’re typically quite cost-effective but don’t tend to have many crypto features.
The other option is to use a cryptocurrency exchange. These are specifically made for trading crypto, so offer plenty of features. However, they’re often more expensive, so bear this in mind. Some of the main features of exchanges include:
- Wide selection of cryptocurrencies
- Wallet storage
- Interest-bearing accounts
- Spot trading
- Staking
There are a lot of popular crypto exchanges available, so make sure you look into the various options to decide what platform is best for you. Some of the most popular platforms include:
- Binance
- Coinbase
- Kraken
- ByBit
Step 2 – Fund Your Account
You can add funds to your account using fiat currencies. Most people do this using a debit/credit card or via bank transfer.
Note that some credit card companies don’t allow for crypto purchases. You should also look at the fees on any exchange you’re using as these will vary between different platforms and payment methods.
Step 3 – Place Your Order
Select the cryptocurrency you’re interested in and enter the amount you want to buy. Selling works in a similar way. You can also use some payment services like Venmo and PayPal to buy, sell, and hold crypto.
If you don’t want to invest in crypto directly, you can opt for certain investment vehicles:
- Bitcoin trusts
- Bitcoin mutual funds
- Blockchain stocks or ETFs
It’s best to research these different options and think about what best aligns with your investment goals.
Storing Crypto
One thing that scares a lot of people in the world of crypto is the risk of losing funds. As such, you want to make sure your assets are as secure as possible. There are three main storage options; custodial wallets, hot wallets, and cold wallets.
Custodial wallets are built into exchanges. This is where your crypto will go when you purchase it. It’s the least secure storage option, so if you plan on holding your crypto for a while, you should transfer it to a hot or cold wallet.
Hot wallets are software-based and usually come in the form of browser extensions and apps. They’re fairly easy to use and are relatively secure.
Cold wallets (also called hardware wallets) are physical devices that contain your private keys. They’re known to be the most secure way to store your crypto.
Investing in Digital Cash
Cryptocurrencies take a lot of understanding, and it’s vital that you don’t rush into things. Always remember that there are plenty of options in terms of what cryptos you can invest in, where to get them from, how to store them, and more. Always do your research before investing in digital cash and make sure you stay safe and secure.
At Coin Pinnacle, we work to help people figure out how to navigate this space responsibly and efficiently. Take a look at some of our other articles to learn more about the world of crypto.