10 Things To Know About Cryptocurrency

The cryptocurrency hype is back and on the rise. Multiple cryptocurrency trading platforms have been popping left and right with the surge of new investors looking to try their hand at crypto trading. In recent years, cryptocurrency has been making waves in both the tech and investment industry. Unlike the stock market and real estate investment, the appeal of a digital currency traded online is something only unique to cryptocurrency. Additionally, most investors are enticed by the value of cryptocurrency traded. In the case of Bitcoin, one bitcoin can be worth up to $50,000. 

While the value fluctuates drastically, most investors ultimately buy and hold onto it with the hopes of their crypto coins increasing in market value so they can sell it at a profit. But before you dive into the world of cryptocurrency, you must first read up on everything there is to know about it. Below are 10 things you should know about cryptocurrency. 

1. What is Cryptocurrency?  

A cryptocurrency is essentially a form of digital currency that people can use to pay for goods and services. The transaction is done online without having to go through intermediaries like banks or other financial institutions. With this, people can avoid additional transaction fees and can issue quicker payments. There are many types of cryptocurrencies issued and are traded on different crypto trading platforms. One of the most popular ones is Bitcoin, created in 2009 by its founder, Satoshi Nakamoto. These digital coins or tokens can be traded similarly to how stocks are traded on the stock market. Investors can also use fiat currency or real money to purchase cryptocurrency. 

Cryptocurrency utilizes blockchain technology which allows crypto transactions to be recorded on a distributed and decentralized online ledger. Blockchain is more secure and more transparent than any other traditional payment system. This will enable users to skip intermediaries like banks and other financial institutions. The result is cryptocurrencies essentially being immune to inflation. For instance, Bitcoin, the most popular cryptocurrency, uses blockchain technology as an online ledger or database for bitcoin transactions. This way, all users collectively hold control over each register which makes all transactions transparent to anyone. 

2. What are the Different Cryptocurrencies? 

There are about 6,700 cryptocurrencies publicly traded on crypto trading platforms, and this number keeps growing. Cryptocurrencies raise money through initial coin offerings or ICOs. This is similar to how companies hold initial public offerings or IPOs to raise funds to create a new token or coin. Investors interested in these offerings usually invest in acquiring a service or owning a stake in the company. According to the cryptocurrency data and analytics provider CoinMarketCap, the value of all cryptocurrencies amounts to a whopping $2.2 trillion. As the most popular cryptocurrency, Bitcoin’s market share comprises $1.2 trillion of the total cryptocurrency market. 

Below is a list of the top 10 cryptocurrencies based on their market capitalization based on the latest data from CoinMarketCap. 

3. How Do You Purchase Cryptocurrencies? 

There are many ways for investors to purchase cryptocurrencies. Some investors use real money or fiat currencies to buy crypto tokens. Other cryptocurrencies require buyers to pay using another cryptocurrency. For first-timers, buying cryptocurrencies requires investors to have an online wallet to keep their digital assets. Usually called an e-wallet or a crypto wallet, this app allows users to store and manage their digital assets. Aside from being a storage space, this also allows you to make transactions and payments. The next part will be about an in-depth discussion of how digital wallets work and how to keep them secure from cyber-attacks. 

4. How Does a Crypto Wallet Work? 

As mentioned previously, crypto wallets or digital wallets allow crypto investors to send and receive Bitcoin and other cryptocurrencies. A wallet contains your wallet address, public key, and private key. These are all essential for your cryptocurrency transactions. 

Wallet address 

The wallet address is similar to a bank account number. It is composed of a combination of numbers and letters in a string. If someone wants to send you cryptocurrency, they can do so by knowing your wallet address. It can be easy to keep track of transactions since blockchains make it transparent for everyone to view how much funds a particular wallet has. Keep in mind that a wallet address is unique and cannot be duplicated, which keeps your funds secured. Moreover, a wallet address does not show the identity of its owner in the real world. 

Private Key

Following the bank account number analogy, a private key can be related to your password or PIN. Just like how only you know what your password is to your bank account, the same thing works with your private key to your wallet address. This gives you control over the funds stored in your wallet address and allows you to transfer cryptocurrency from your wallet to another’s. 

Public Key

Now, what is a public key? A public key acts as an additional security layer that ensures that your wallet does not get hacked. You might be wondering why there is a need for two different keys when having a private access is already enough. The public key is linked explicitly to the private key and serves as a digital signature of some sort that confirms your ownership of the private key. In turn, it establishes your ownership of the coins and allows you to send funds at any time.  

5. How to Secure Your Crypto Wallets 

Now that you know how crypto wallets work, the next thing you should know is how to keep them secure. There are different types of crypto or digital wallets that users can choose from. They all vary in their accessibility, platform, and security. Below is a list of the different types of crypto wallets users can choose from: 

Desktop wallets

This type of crypto wallet is downloadable on a device, usually a laptop or a desktop. Users can only then access their crypto wallet through that device. Desktop wallets can provide users with both security and convenience. However, this also means that hackers can access your wallet should they get ahold of your laptop or desktop. One way to protect your account is by securing your device with another password. Additionally, most desktop wallets allow users to store different cryptocurrencies like Bitcoin, Ethereum, Litecoin, and more. 

Mobile wallets 

Mobile wallets are pretty similar to desktop wallets, only that this type can be downloaded as a mobile app. Users can access their crypto wallets through the app and transact with their crypto tokens. Users can even use their crypto tokens or coins in physical stores through their mobile wallets by scanning a QR code. 

Online/Web wallets 

Online or web wallets are probably the most convenient crypto wallets to have, but they are also the least secure. Users who are using online wallets are essentially storing their coins in a cryptocurrency exchange. This means that the wallet provider has control and access to your coins. Moreover, this leaves your coins vulnerable to hacker attacks. To keep your funds secure, it is recommended that you immediately transfer the bulk of your coins to a more secure crypto wallet and only leave enough for your transactions. 

Hardware wallets 

Perhaps the most secure crypto wallet type, hardware wallets are physical devices where users can store their private and public keys. These hardware wallets resemble your typical flash drives but function way differently. The only time a hardware wallet connects to the internet is when the user wants to transfer funds. Several hardware wallets support multiple cryptocurrencies.

6. How Do You Earn Money From Cryptocurrency? 

There are two ways investors can earn money with cryptocurrency. The first one is simply selling their cryptocurrency at a profit, just like how stocks are sold in the stock market. This is done on crypto exchange platforms like Binance or Coinbase. These platforms are compatible with Android and Apple devices and trade multiple cryptocurrencies like Bitcoin, Ethereum, and more. These platforms also offer exclusive crypto wallets which allow users to store their crypto assets. However, it is still better to keep your coins in a more secure crypto wallet to protect your assets from cyber-attacks. 

Another way investors can make money through cryptocurrency is by ‘mining’ crypto coins such as Bitcoin. Mining in crypto speak is how new bitcoins and other cryptocurrencies are added into the circulation. Some investors prefer crypto mining since miners are rewarded with crypto tokens for their work. However, mining is a lot of hard work, but some are attracted to the challenge it poses. 

7. How Does ‘Mining’ Crypto Coins Work? 

Crypto mining is the process that allows new bitcoins or other crypto coins to be entered into circulation. This is a crucial process that helps new coins be traded and makes sure the entire blockchain is working smoothly and efficiently. Mining allows individuals to gain cryptocurrency without having to shell out money or buy it on crypto exchange platforms. 

Basically, miners act as “auditors” who verify whether a crypto transaction was legitimate or not. This was established by Bitcoin’s founder, Satoshi Nakamoto, as a way to prevent “double spending” transactions. Double spending happens when a bitcoin owner spends the same bitcoin twice. This is where bitcoin miners come in and verify these blocks of crypto transactions. In bitcoin, a “block” consists of 1 MB (megabyte) of bitcoin transactions. For every verified block, miners can get a certain number of bitcoins. However, not everyone who verifies a block can earn bitcoin. It depends on miners meeting the following requisites: they must verify 1MB worth of bitcoin transactions, and they have to be the first one to do so. 

8. Are Cryptocurrencies Legal?  

Although not backed by governments or any regulating body, cryptocurrencies are entirely legal depending on each country. However, there are countries like China that ban the use of cryptocurrency. Ultimately investors and cryptocurrency owners must know how to protect themselves from fraudulent attacks.

9. Why Is Cryptocurrency Riskier Than Other Investments?

Unlike real estate investments or stock trading, cryptocurrencies are not regulated by any governing body. It means that if something goes wrong, there is no way for investors to get back their stolen funds. Unlike a house and lot or any real estate property, there is no assurance that cryptocurrency will appreciate over time. This is because of blockchain technology which allows a cryptocurrency’s oversight to be decentralized. Additionally, cryptocurrencies are volatile, and for a real currency to be viable, it needs stability. Cryptocurrencies are just as prone to price surges as it is to too sudden crashes. 

10. Is Investing in Cryptocurrency a Good Idea? 

Generally, cryptocurrency is known to be vulnerable to sudden price changes. Aside from being a purely digital currency, cryptocurrencies cannot generate any cash flow. For an investor to earn a profit, someone else must be willing to buy those crypto coins for a higher value than their original price. While the fact that it is a digital currency allows for many possibilities, it should also be noted that cryptocurrencies are still volatile to be considered fiat currency. People cannot possibly use cryptocurrency to decide the fair price for goods and services. Even expert investors advise against entirely investing all your funds in cryptocurrency. No matter how enticing the returns might be, cryptocurrencies can quickly plummet as well. 

For those who want to test their hand in investing, it is better to opt for less risky and more secure investments like stock trading or, even better, real estate investment, especially house and lots for sale. Start investing in your dream house and lot in the Philippines and explore the options available for you.