By now, most people have heard about cryptocurrency. Digital currency and other emerging financial technologies have been prominently featured in headlines across the globe. Cryptocurrency is a digital currency that many believe is the future of money, though there are still many unknowns about it.
Given the sheer quantity of information about cryptocurrency (often referred to simply as “crypto”) available online, many people get overwhelmed when attempting to understand its intricacies. If you can identify, you’re in the right place. Let’s take a look at the three most important things to know about Cryptocurrency.
1. Understand Cryptocurrency Characteristics
Cryptocurrency started with Bitcoin, which remains its foundation in terms of characteristics and behavior.
Firstly, crypto is trustless, which means that you don’t have to trust any individual or any central authority to ensure a functioning and fair network: a primary difference between crypto and traditional financial systems. Each part of the crypto ecosystem (Blockchain) validates whatever the other parts tell it, thereby certifying transactions and changes without a central authority. This communication is achieved by ‘proof of work’ and ‘proof of stake’ consensus mechanisms used to verify transactions.
Secondly, crypto is immutable, which means that transactions cannot be undone. All transactions are recorded permanently on the blockchain, and only owners of a private key can make changes to their funds.
Thirdly, cryptocurrency is decentralized. This means that no single person or group controls it, and there is no central infrastructural point of failure.
2. Understand Where to Buy Cryptocurrency
There are many different ways to buy cryptocurrency, and your choice should be based on your level of expertise.
The easiest and safest way for beginners to purchase crypto is via centralized exchange platforms, which are essentially third-party platforms that oversee and facilitate transactions. They usually offer crypto at market value and make money by charging fees for their services.
You can also choose to purchase crypto via brokerage account setups. Some offer both crypto and stock exchanges, and others specialize only in crypto. Do your research first so you know what to expect from a given brokerage.
Decentralized exchanges that offer lower fees are also an option. The downside is that they are complicated to use, and a moderate amount of technical knowledge is required.
3. Understand How To Buy Cryptocurrency
Most popular forms of cryptocurrency are available to purchase using fiat currency, which is crypto-speak for traditional currencies like the U.S. dollar.
If you’re a beginner, your first transactions will be conducted using fiat currency. However, once you’re in the market, you can trade in crypto, and some cryptocurrency is only available by trading.
If you’re using a centralized exchange, which is advisable for beginners, you’ll first need to credit your account. Virtually all exchanges accept credit cards, debit cards, and bank transfers. There is also an option to use cash anonymously via crypto ATMs, which are becoming extremely popular.
Cryptocurrency certainly seems here to stay, and hopefully, this guide will help you begin your journey into this exciting world.