What is Cryptocurrency? Beginners Guide to Digital Cash

Projections show that the global cryptocurrency market will reach a value of $2.2 billion by 2026.

Digital cash is becoming more widely used every year, and the possibilities grow with it. Even so, many people are still asking, “What is Crypto?”

Many analysts predict that its potential is almost limitless, and understanding it now could benefit you in the future.

To learn more, have a look through this guide to cryptocurrency.

The MadDev does not recommend or provide financial guidance. Make any financial decisions at your own discretion.

What Is Cryptocurrency?

Cryptocurrency is a modern form of digital currency used on the blockchain. Traditionally payment systems relied on banks for all transactions, but cryptocurrencies work on a peer-to-peer system known as the blockchain.

Unlike physical currencies, crypto is fully digital, and all entries are recorded on an online database. Encryptions are used to verify transactions. These encryptions give an increased degree of security.

The Blockchain

Cryptocurrency transactions take place on the blockchain, a distributed database that works across a vast network of computers worldwide. The blockchain records the data from all trades, and anyone can view these records.

Data is structured into blocks that are strung together to form an irreversible timeline. Because these records are kept on a decentralized network, people can’t alter transaction history or fake input information.

Cryptocurrency Explained

You can create units of crypto through a method known as mining. This involves using computers to solve problems that generate coins. This can use a lot of computing power, so it is not always efficient.

A more common way of getting crypto is purchasing it through brokers. You can store any crypto you own in one or more wallets. Because there are various coins, not all cryptocurrencies (which we will discuss below) work on all wallets, so purchase accordingly.

Popular Cryptocurrencies

With the rise in popularity of cryptocurrencies, different coins have appeared in recent years. Some have lost their value, while others have had tremendous success.

Bitcoin

This was the originator. In 2009, Satoshi Nakamoto, a developer or group of developers, created Bitcoin. People use this currency the most often. It originally had no value as the first crypto, and the first real-world transaction was in 2010.

One man spent 10,000 bitcoins on two pizzas, as each bitcoin was worth less than a cent. At the time of writing, this same amount of bitcoins would be worth $369,855,000.

One of the most noteworthy aspects of bitcoin is that the creator’s identity is still unknown today. Satoshi Nakamoto has never been identified may even be more than one person.

Ethereum

In 2015 Vitalik Buterin created Ethereum and it has rapidly grown in popularity to become the second most widely used crypto. Something that has helped Ethereum grow significantly in the last year is the popularity of NFTs.

NFT’s (non-fungible tokens) are digital assets, often in the form of images, music, or videos. These are mostly traded on the Ethereum blockchain.

Solana

Solana is another cryptocurrency that is quickly gaining popularity. It is the second most popular blockchain for NFTs, and some believe it will overtake Ethereum in the future.

All crypto transactions incur a small fee. For Ethereum, these “gas fees” can often be hundreds of dollars, but they are usually less than a cent when using Solana. As such, a lot of people prefer to use Solana.

Litecoin

Litecoin is similar to Bitcoin but has made more innovations and developments. This includes more transactions and faster payments.

Buying Cryptocurrency

There are several steps to buying crypto. You can make a lot of mistakes buying crypto and there are many potential scams. Make sure you do your research by using a safe method.

Step 1 – Choose a Platform

There are two main types of platforms available. Online brokers sell various financial assets, including crypto, stocks, and bonds. Costs are generally low, but brokers typically don’t have many crypto features.

The other platform is a cryptocurrency exchange. You can buy crypto on these platforms or other features, but they charge more fees. Some of the main features include:

• Many cryptocurrencies
• Wallet storage
• Interest-bearing account

You should research your options to decide what platform is best for you.

Step 2 – Fund Your Account

You can usually fund your account using fiat currencies, such as the US dollar or whatever your national currency is. You can do this via a debit/credit card transaction or a bank transfer.

It is worth noting that many credit cards don’t allow for crypto purchases. Also, look at the fees as these will vary between different exchanges and other payment methods.

Step 3 – Place Your Order

On an exchange, you can simply purchase your crypto with American dollars or vice versa. It’s quite simple. Selling works in the same way. Some payment services like Venmo and PayPal allow you to buy, sell, and hold crypto.

You can also use certain investment vehicles:

• Bitcoin trusts
• Bitcoin mutual funds
• Blockchain stocks or ETFs

The best thing to do is research these different options and decide based on your own needs and goals.

Storing Crypto

There is a significant hacker presence in the world of crypto. You should make sure your assets are securely stored. The two main options are “hot wallets” and “cold wallets.”

One method you can use is a software-based hot wallet or browser extension. Cold wallets (also known as hardware wallets) are physical devices and are the most secure way to store your crypto.

Investing in Digital Cash

Cryptocurrencies, and essentially every other aspect of the blockchain, can be complicated. The most important thing to bear in mind is that there are many options, and all your decisions should be based on your own needs.

Do the necessary research before investing in digital cash, and make sure you always do things securely.

The level of research and learning involved can be pretty strenuous, so make sure you balance this out with taking time to relax and focus on taking care of yourself.