What's a cryptocurrency?
A cryptocurrency is just like a digital form of cash. You can use it to pay friends for your share of the bar tab, buy that new pair of socks you've been eyeing up 👀, or book flights ✈️ and hotels 🏨 for your next holiday. Because cryptocurrency is digital, it can also be sent to friends and family anywhere in the world.Just like PayPal or bank transfers, right?
Well, not really. It's way more interesting!
You see, traditional online payment gateways are owned by organizations. They hold your money for you, and you need to ask them to transfer it on your behalf when you want to spend it.In cryptocurrencies, there isn't an organization. You, your friends, and thousands of others can act as your own banks by running free software. Your computer connects with other people's computers, meaning you communicate directly – no middlemen required!
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To use cryptocurrency, you don't need to sign up for a website with an email address and password. You can download a wide variety of apps onto your smartphone to begin sending and receiving within minutes. So, this magical internet money isn't owned by anyone and uses cryptography to secure the system. But you've already got apps for paying people – why should you care?
What about that ₿ Bitcoin thing your friend or family member keeps talking about? That's the original cryptocurrency, and, to date, the most popular.
Bitcoin provided the foundation for many other cryptocurrencies. Some were based on the same software, while others took a very different approach. Ok, but what's the difference between all the cryptocurrencies?
To even make a list of all the different cryptocurrencies would take us weeks. Some are faster than others, some are more private, some are more secure, and some are more programmable.
There's a common saying in the cryptocurrency space: Do Your Own Research (or DYOR). We're not saying that to be rude, we promise. It just means that you shouldn't take information from a single source as the truth.
Before investing your money into a particular project, make sure you do your due diligence.
What is
blockchain?
Don't be spooked
by the technobabble that people use to describe "blockchain." A
blockchain is just a database. It isn't a particularly sophisticated one,
either - you could create it in a spreadsheet with minimal effort.
There are some
peculiarities with these databases. The first is that blockchains are
append-only. That means that you can only add information - you can't just
click on a cell and delete stuff that you've already added, or change it in any
way.
The second is that
each entry (called a block) in the database is cryptographically linked to the
last entry. In plain English, each new entry must contain a sort of digital
fingerprint (hash) of the last one.
And that's it!
Since each fingerprint points back to the last one, you end up with a chain of
blocks. Or - as the cool kids like to call it - a blockchain.
A blockchain is
immutable: if you change a block, it changes the fingerprint. And since that
fingerprint is included in the next block, the next block is changed too. And
since that block's fingerprint... well, you get the idea. You end up with a
domino effect where any change becomes evident. You can't alter any information
without everyone noticing.
Is that it?
Underwhelmed?
It's that everyone can download blocks from other people on the network
to build identical copies of the blockchain on their computers. That's what the
software we mentioned earlier does.
Suppose that you
and your friends Alice, Bob, Carol, and Dan are running the software. You might
say "I want to send five coins to Bob." So you send that instruction
to everyone else, but the coins aren't sent to Bob immediately.
Carol might decide
at the same time to send Alice five coins. She also sends her instruction out
to the network. At any time, a participant can gather up the pending
instructions to create a block.
If anyone can make
a block, what stops them from cheating?
It probably seems
very attractive to you to create a block that says "Bob pays me a million
coins." Or to start buying Lamborghinis and fur coats from Carol by making
transactions with funds you don't own.
Well, that's not
how it works. Because of some cryptography, game theory, and something called a
consensus algorithm, the system prevents you from spending funds you shouldn't
be able to spend.
Trading
As you might have heard, blockchain and cryptocurrencies are already used in a lot of different areas. Undoubtedly, one of the biggest current use cases is speculation.
Trading generally implies a shorter-term approach to generating profit. Traders may jump in and out of positions all the time. But how do they know when to get in and out?
One of the most common ways to make sense of the cryptocurrency market is through an approach called technical analysis (TA). Technical analysts look at price history, charts, and other types of market data to find bets that have a good chance of returning a profit.
You must be dying to get started right away. And technically, you could. It's that easy! But, like most things worth pursuing, trading is hard! It would take us a long time to talk about all that you need to keep in mind.
Investing
Investors look for long-term bets based on the fundamentals of an investment. For example, how much profit a company is making. While cryptocurrencies are a new and unique type of assets, they can also be viewed through a similar lens.
Many Bitcoin investors follow the "HODL" philosophy. This means that they believe so deeply in the success of Bitcoin that they don't intend to sell for a long time. But don't take their word for it! Read our extensive Bitcoin guide and decide for yourself.
After going through that, you may decide that you want to become a Bitcoin HODLer. Well, you could become one in a matter of minutes. Just go to the Buy Crypto page and follow the instructions.
The onboarding process is smooth and quick. You don't have to jump in with large amounts, either. You could start with as little as 15 dollars! So, what is some mind candy that you should be looking into related to crypto investing?
Passive income
So far, we've talked about trading and investing. These methods generally require a lot of time, which not everyone has. If you're one of those busy but efficient people, we have some other options for you.
As Warren Buffett, one of the most successful investors of all time, said: "If you don't find a way to make money while you sleep, you will work until you die."
You can basically use your crypto holdings to make more crypto!
Why isn't everyone doing this? Well, they probably don't know. But now you do!
One of the ways to earn passive income is by securely lending your holdings to other people. In exchange for the opportunity to borrow your funds, they'll pay interest to you.
Besides, you may have heard about Bitcoin mining. It generally involves a lot of loud and expensive machines churning away for Bitcoin rewards. However, there are other ways to secure a cryptocurrency network. One of these is through a process called staking. And spoiler alert, it doesn't involve meat.
Privacy and Security
We're a cryptocurrency website, but we also ❤️ privacy and security topics – and you should, too!
The digital age brought with it some serious innovation. Your fridge can text you when you forget to close the door, you can summon your car from a smartphone app, and it looks like you'll soon be receiving mail by drone.
Unfortunately, there's also been innovation in ways to steal your sensitive data – something we unknowingly produce A LOT of. Do you know the best way to deal with ransomware? Or the steps you can take to stop websites from finding out where you're browsing from?
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