The Basics about Cryptocurrency

Cryptocurrency comes under many names. You have probably read about some of the most popular types of cryptocurrencies such as Bitcoin, Litecoin, and Ethereum. Cryptocurrencies are increasingly popular alternatives for online payments. Before converting real dollars, euros, pounds, or other traditional currencies into ₿ (the symbol for Bitcoin, the most popular cryptocurrency), you should understand what cryptocurrencies are, what the risks are in using cryptocurrencies, and how to protect your investment.

What is cryptocurrency? A cryptocurrency is a digital currency, which is an alternative form of payment created using encryption algorithms. The use of encryption technologies means that cryptocurrencies function both as a currency and as a virtual accounting system. To use cryptocurrencies, you need a cryptocurrency wallet. These wallets can be software that is a cloud-based service or is stored on your computer or on your mobile device. The wallets are the tool through which you store your encryption keys that confirm your identity and link to your cryptocurrency.

What are the risks to using cryptocurrency? Cryptocurrencies are still relatively new, and the market for these digital currencies is very volatile. Since cryptocurrencies don't need banks or any other third party to regulate them; they tend to be uninsured and are hard to convert into a form of tangible currency (such as US dollars or euros.) In addition, since cryptocurrencies are technology-based intangible assets, they can be hacked like any other intangible technology asset. Finally, since you store your cryptocurrencies in a digital wallet, if you lose your wallet (or access to it or to wallet backups), you have lost your entire cryptocurrency investment.

Follow these tips to protect your cryptocurrencies:

• Look before you leap! Before investing in a cryptocurrency, be sure you understand how it works, where it can be used, and how to exchange it. Read the webpages for the currency itself (such as Ethereum, Bitcoin or Litecoin) so that you fully understand how it works, and read independent articles on the cryptocurrencies you are considering as well.
• Use a trustworthy wallet. It is going to take some research on your part to choose the right wallet for your needs. If you choose to manage your cryptocurrency wallet with a local application on your computer or mobile device, then you will need to protect this wallet at a level consistent with your investment. Just like you wouldn't carry a million dollars around in a paper bag, don't choose an unknown or lesser-known wallet to protect your cryptocurrency. You want to make sure that you use a trustworthy wallet.
• Have a backup strategy. Think about what happens if your computer or mobile device (or wherever you store your wallet) is lost or stolen or if you don't otherwise have access to it. Without a backup strategy, you will have no way of getting your cryptocurrency back, and you could lose your investment.

 

Why is cryptocurrency the future of finance?

Cryptocurrencies are the first alternative to the traditional banking system, and have powerful advantages over previous payment methods and traditional classes of assets. Think of them as Money 2.0. -- a new kind of cash that is native to the internet, which gives it the potential to be the fastest, easiest, cheapest, safest, and most universal way to exchange value that the world has ever seen.

• Cryptocurrencies can be used to buy goods or services or held as part of an investment strategy, but they can’t be manipulated by any central authority, simply because there isn’t one. No matter what happens to a government, your cryptocurrency will remain secure.

 

 

• Digital currencies provide equality of opportunity, regardless of where you were born or where you live. As long as you have a smartphone or another internet-connected device, you have the same crypto access as everyone else.

 

• Cryptocurrencies create unique opportunities for expanding people’s economic freedom around the world. Digital currencies’ essential borderlessness facilitates free trade, even in countries with tight government controls over citizens’ finances. In places where inflation is a key problem, cryptocurrencies can provide an alternative to dysfunctional fiat currencies for savings and payments.
• As part of a broader investment strategy, crypto can be approached in a wide variety of ways. One approach is to buy and hold something like bitcoin, which has gone from virtually worthless in 2008 to thousands of dollars a coin today. Another would be a more active strategy, buying and selling cryptocurrencies that experience volatility.
• One option for crypto-curious investors looking to minimize risk is USD Coin, which is pegged 1:1 to the value of the U.S. dollar. It offers the benefits of crypto, including the ability to transfer money internationally quickly and cheaply, with the stability of a traditional currency. Coinbase customers that hold USDC earn rewards, making it an appealing alternative to a traditional savings account.

 

Why invest in cryptocurrency?

Online exchanges like Coinbase have made buying and selling cryptocurrencies easy, secure, and rewarding.

• It only takes a few minutes to create a secure account, and you can buy cryptocurrency using your debit card or bank account.
• You can buy as little (or as much) crypto as you want, since you can buy fractional coins. For example, you can buy $25.00 worth of bitcoin.
• Many digital currencies, including USD Coin and Tezos, offer holders rewards just for having them.
• On Coinbase, you can earn 1% APY on— that’s much higher than most traditional savings accounts.
• You can also earn up to 5% APY when you stake Tezos on Coinbase.  about Tezos staking rewards.
• Unlike stocks or bonds, you can easily transfer your cryptocurrency to anyone else or use it to pay for goods and services.
• Millions of people hold bitcoin and other digital currencies as part of their investment portfolios.

 

What is a stablecoin?

USD Coin is an example of a cryptocurrency called stablecoins. You can think of these as crypto dollars—they’re designed to minimize volatility and maximize utility. Stablecoins offer some of the best attributes of cryptocurrency (seamless global transactions, security, and privacy) with the valuation stability of fiat currencies.

• Stablecoins do this by pegging their value to an external factor, typically a fiat currency like the U.S. dollar or a commodity like gold.
• As a result, their valuations are less likely to shift dramatically from day to day. That stability can increase their utility for everyday use as money, because both buyers and merchants can be confident that the value of their transaction will remain relatively consistent over a longer timeframe.
• They can also work as a safe and stable way to save money, like a traditional savings account.

 

How does cryptocurrency work?

Bitcoin is the first and most well-known, but there are thousands of types of cryptocurrencies. Many, like Litecoin and Bitcoin Cash, share Bitcoin’s core characteristics but explore new ways to process transactions. Others offer a wider range of features. Ethereum, for example, can be used to run applications and create contracts. All four, however, are based on an idea called the block chain which is key to understanding how cryptocurrency works.

• At its most basic, a blockchain is a list of transactions that anyone can view and verify. The Bitcoin blockchain, for example, is a record of every time someone sends or receives bitcoin. This list of transactions is fundamental for most cryptocurrencies because it enables secure payments to be made between people who don’t know each other without having to go through a third-party verifier like a bank.
• Blockchain technology is also exciting because it has many uses beyond cryptocurrency. Blockchains are being used to explore medical research, improve the sharing of healthcare records, streamline supply chains, increase privacy on the internet, and so much more.
• The principles behind both bitcoin and the Bitcoin blockchain first appeared online in a white-paper published in late 2007 by a person or group going by the name Satoshi Nakamoto.
• The blockchain ledger is split across all the computers on the network, which are constantly verifying that the blockchain is accurate.This means there is no central vault, entity, or database that can be hacked, stolen, or manipulated.

What is cryptocurrency mining?

Most cryptocurrencies are ‘mined’ via a decentralized (also known as peer-to-peer) network of computers. But mining doesn’t just generate more bitcoin or Ethereum - it’s also the mechanism that updates and secures the network by constantly verifying the public blockchain ledger and adding new transactions.

• Technically, anyone with a computer and an internet connection can become a miner. But before you get excited, it’s worth noting that mining is not always profitable. Depending on which cryptocurrency you’re mining, how fast your computer is, and the cost of electricity in your area, you may end up spending more on mining than you earn back in cryptocurrency.
• As a result, most crypto mining these days is done by companies that specialize in it, or by large groups of individuals who all contribute their computing power.
• How does the network encourage miners to participate in maintaining the blockchain? Again, taking Bitcoin as an example, the network holds a lottery in which all the mining rigs around the world race to become the first to solve a math problem, which also verifies and updates the blockchain with new transactions. Each winner is awarded new bitcoin, which can then make its way into the broader marketplace.

 

How to buy bitcoin and other cryptocurrency

The easiest way to acquire cryptocurrency is to purchase on an online exchange like Coinbase.

• On Coinbase, you can buy major cryptocurrencies like

BTC, LTC, ETH, BCH, ETC. Or you can explore emerging coins like Stellar Lumens or EOS. For some cryptocurrencies Coinbase offers opportunities to .

• One good approach is to ask yourself what you’re hoping to do with crypto and choose the currency that will help you achieve your goals. For example, if you want to buy a laptop with crypto, bitcoin might be a good option because it is the most widely accepted cryptocurrency. On the other hand, if you want to play a digital card game, then Ethereum is a popular choice.
• Keep in mind that you do not need to buy a whole coin. On Coinbase, you can buy portions of coins in increments as little as 2 dollars, euros, pounds, or your local currency.

 

How do you store cryptocurrency?

Storing crypto is similar to storing cash, which means you need to protect it from theft and loss. There are many ways to store crypto both online and off, but the simplest solution is via a trusted, secure exchange like Coinbase.

• Coinbase customers can securely store, send, receive, and convert crypto by signing into their account on a computer, tablet, or phone.
• Want to transfer money from your wallet to a bank account? The Coinbase app makes it as easy as transferring funds from one bank to another. (Much like conventional bank transfers or ATM withdrawals, exchanges like Coinbase set a daily limit, and it might take from a few days to a week for the transaction to be completed.

 

What can you do with cryptocurrency?

There’s a wide range of things you can do with cryptocurrency, and the list grows with time. Here are a few ways to get started, from participating in everyday activities to exploring new technological frontiers:

• Shop: Over 8,000 global merchants accept cryptocurrency via 
• Donate to causes:  and many nonprofit organizations accept bitcoin donations.
• Gift it: Cryptocurrency makes a great gift for friends and family who are interested in learning about new technology.
• Tip someone: Authors, musicians, and other online content creators sometimes leave Bitcoin addresses or QR codes at the end of their articles. If you like their work, you can give a little crypto as a way of saying thanks.
• Explore unique new combinations of money and technology: Orchid is a VPN, which helps protect you when you’re online, and a digital currency at the same time. Basically it’s broken down into two parts, the Orchid VPN app and the OXT cryptocurrency, and it all runs on the Ethereum network. Intrigued?
• Travel the world: Because cryptocurrency isn’t tied to a specific country, traveling with crypto can cut down on money exchange fees. There’s already a small but thriving community of self-titled “crypto nomads” who primarily, or in some cases exclusively, spend crypto when they travel.
• Buy property in a virtual gaming world: Decentraland, which also runs on the Ethereum blockchain, is the first virtual world entirely owned by its users. Users can buy and sell land, avatar clothing, and all kinds of other stuff while partying in virtual nightclubs or mingling in virtual art galleries.
• Explore decentralized finance, or DeFi: A wide variety of new players are aiming to recreate the entire global financial system, from mutual-fund-like investments to loan-lending mechanisms and way beyond, without any central authorities.