Almost everybody is talking about cryptocurrency and how to make money off it.
One of the major reasons it became popular, is because of the recent spike of Bitcoin price, as well as other cryptocurrencies known as Altcoins.
Due to this fact that the price fluctuations of different can create huge income whenever it happens, it made lots of individuals to start to research about cryptos.
What is cryptocurrency?
A cryptocurrency is a digital asset (or virtual currency) that uses cryptography encryption techniques to secure the verification of transactions.
It can be centralized or decentralized, but depending on the method of issuance of that particular digital currency.
The cryptography is used to secure and also verify crypto transactions, as well as control the creation of new cryptocurrencies.
In other words, cryptocurrencies are totally different from all other currencies, including the FIAT money.
Fiat currencies are mostly approved and issued as physical bank notes or coins from the central bank of countries.
On the other hand, cryptocurrencies are digital assets that aren’t physically in existence, or being issued by the tranditional financial instituions.
It only works with an encrypted mechanism known as Blockchain, where transactions are recorded in a single ledger using different level of encryption.
How cryptocurrency works
Cryptocurrencies are not owned, controlled by financial institutions or authorized by any central bank.
It’s not under any governmental influential control.
Cryptocurrency does not need bank or any financial institution to be a third-party in the middle of transactions.
User can simply transfer crypto-coins between wallets freely, without trusting each other with their financial information.
Every cryptocurrency record their transaction on a publicly shared database known as the blockchain ledger.
Since cryptos are not regulated or monitored, the HODLers (holders) are anonymous, and that include all transactions made through the blockchain.
How to use cryptocurrency
Cryptocurrency adoption levels are increasing across the world at a remarkable rate, and more companies accept it than ever.
This means you can use it to pay for products, or services in physical stores and online.
Before you can use Bitcoin, or an alternate cryptocurrency (i.e. Altcoin), you’ll need to buy them on several exchange platforms.
Cryptocurrency basics
There are many kinds of cryptocurrency in the market, but all of them has these few things in common.
Every cryptocurrency project that is established is always aimed at these basic things below:
1. Digital
Cryptocurrencies are digital money (or digital currencies), which means that, it only exists in computers.
Cryptocurrencies don’t have physical coins, or paper notes just like the popular fiat money.
2. Peer-to-peer
A cryptocurrency can only be passed from person to person digitally through specific blockchain wallets and networks.
You don’t need to pass it through any financial institution to get it through to the person you are transferring it to.
3. Global
A cryptocurrency is the same in every country, and this is to say that, they can be used freely between countries and across borders.
4. Encrypted
This is where we get the ‘crypto’ part of the cryptocurrency definition, as the word itself in latin means ‘hidden’.
There are many ways to move money around without getting tracked, and cryptocurrency is one of the techniques.
I even wrote a guide on how to hide money with cryptocurrency from family, friends or the government.
5. Decentralized
In the crypto world, everyone is in charge of their own money, which isn’t kept in the bank, where most people keep money traditionally.
Cryptos are not managed by a central server, that’s why we say they are decentralized.
6. Trust-less
The way cryptocurrency assets are built means that you don’t have to trust anyone in the system in order for it to work.
Fiat money vs digital currencies
| Fiat | Digital |
|---|---|
| Owned by the government | Not owned by any government |
| Valued is derived from supply and demand | Value is defined by the scarcity |
| Based on faith and economic credit | Based on physical assets like; Gold and Diamonds |
| Does not have physical reserves | Does not experience inflation |
| Experiences hyperinflation |
Investing in cryptocurrencies
It’s not easy to pick a profitable cryptocurrency to invest in, so you’ll need to know how to find cryptos that will explode.
If you are interested in making money from different blockchain projects, you should read my guide on how to start crypto investment.
When you decide to invest in cryptocurrencies, you’ll need to sign-up on a reliable crypto exchange to buy them.
The world popular exchange Binance, is among the best crypto exchanges you can use no-matter your region.
If you don’t like exposing your identity online, then you should use any of these non-KYC crypto exchanges.
Best cryptocurrencies to buy
Now that you’ve understood what cryptocurrency means, you may want to know the best cryptocurrency to invest in.
I’ve got you some number of top cryptocurrencies you should consider acquiring first as a beginner, before investing in most cheaper altcoins.
1. Bitcoin (BTC)
Bitcoin is the pioneer cryptocurrency, and also the market leader by capitaliztion, due to its reputation, security and huge community base powering it.
It holds significant value and has received media attention around the world.
Retailers such as Overstock.com and AliExpress accepts BTC payments, alongside Amazon that allow consumers to purchase gift-cards with Bitcoins.
Brief history of Bitcoin
Satoshi Nakamoto is fictional name provided as the inventor of the first known crypto-coin known as, Bitcoin.
The community believes that Nakamoto started working on the project in 2007.
In 2008, Bitcoin domain was registered on a website that allow anonymous registration of domain names.
Bitcoin.org was up and running a year after Satoshi started working on the concept.
Nakamoto also publish a piece that explained Bitcoin concept in detail, and how it worked, including how double spending would be prevented.
Bitcoin was actually intended to be a peer-to-peer electronic cash system and not a digital currency as it’s being used today.
Bitcoin founder Satoshi Nakamoto made the first cryptocurrency transaction, sending Hal Finney 100 bitcoins on January 12th, 2009.
Bitcoin saw a huge spike in price in 2016, where it grew from $1,000 to $20,000+ in value making it a popular currency for most investors.
2. Ethereum (ETH)
As Bitcoin was designed as a digital currency, Ethereum was designed to help deploy some decentralized applications (DApps) on the blockchain.
The underlying currency is called Ether, while also acting as the fuel that powers the DApp (i.e. Decentralized Applications) on the network.
Ethereum is often referred to as a ‘Swiss Army knife’ with numerous use cases that ranges from ticket sales, escrow agents, online betting etc.
3. Ethereum Classic (ETC)
Ethereum Classic is open-source, public blockchain-based distributed computing platform featuring smart contract functionality.
It provides a decentralized virtual machine, and consist of Ethereum Virtual Machine (EVM) that can execute scripts using a network of public nodes.
Ethereum Classic released in 2015 to correct the Ethereum blockchain hack, and has since then been growing in value.
4. Ripple (XRP)
Ripple is a digital asset intended to allow traditional financial institutions to make global payments more easy and cheap.
To meet the demand of these institutions, their technology also focuses on transaction through-put and can handle about 200 times more transactions per second.
5. Litecoin (LTC)
Litecoin was released in 2012 as a ‘Lite’ version of Bitcoin, built using much of the original code base.
Its primary advantage is the much faster payments and far more transaction through-put than Bitcoin.
It’s capable of handling global payments in less than one second.
Litecoin is sometimes referred to as the ‘test bed’ for Bitcoin, because it’s known to adopt and implement technological advancements.
6. Dash Coin (DASH)
A digital cash known as Dash is an independent next big also that started in 2015 with the market cap of $4.8 billion.
Dash network can handle up-to $100million worth of transactions per day, which made it one of the world’s top cryptocurrencies.
7. SteemIT (STEEM)
SteemIt is a blogging and social media platform that has its own cryptocurrency integrated into itself.
Right on the SteemIt platform, users are rewarded with the STEEM tokens when they write comments and blog contents.
This process of mining cryptocurrency by producing online web contents has been known to be one of the smartest ideas in the crypto world.
8. Monero (XMR)
Monero launched in 2014, is an open-sourced cryptocurrency that uses a combination of stealth addresses and signatures to mask transaction details on the blockchain.
Monero is a completely anonymous and untraceable cryptocurrency in the world.
Since its inception, XMR has seen over 1300% rise in value – making it very interesting for many investors and traders.
9. Tron (TRX)
Tron network is an incredibly exciting project for all those who are mostly interested in the media and entertainment industry.
The Tron project (TRX) was established by Justin Sun in 2017, and was initially based on the Ethereum network, but later established its own blockchain in 2018.
The developers’ main target is to make the network as useful as possible for users who are tired of platforms framed with ads.
Despite those amazing ideas behind the Tron project, there is also controversy associated with its creator.
What are the similarities of fiat money over digital currencies?
The nature of fiat money over digital currency is to be questioned, whereas money is traditionally identified with functions such as; Means of exchange, Unit of account and Store of value.
These functions are also the same with most of the cryptocurrencies in the market.
In that case, it can be said that fiat money and cryptocurrencies have the same similarities, despite decentralization of digital currencies.
How do I find cryptos that will explode?
Bitcoin has been the leader of the pack, as it continues to dominate the market with its high market share, popularity and user base.
Ethereum is another top contender that has gained popularity due to its scalability, security and real-world utility.
However, new players have emerged as promising options in recent days due to their aggressive marketing strategies.
To find a crypto that will explode just like BTC or ETH, you’ll have to follow new listings on an exchange platform like Binance.
What is cryptocurrency halving?
The halving of a crypto refers to the process in which the amount of new coins issued to miners on the network is cut in half.
This is intended to help limit inflation, while increasing the value of a given cryptocurrency.
What is Ethereum 2.0?
Ethereum 2.0 is an upgrade to the Ethereum network that aims to increase its security and scalability.
It’s part of a broader push towards Web3 and DApps through the use of proof-of-stake (PoS) consensus mechanism.
How does decentralization affect cryptocurrencies?
Decentralization is a key part of many cryptocurrencies, as it helps to ensure that no party has too much control over the network.
This can increase security, promote fairness and prevent censorship.
Final thoughts
Since there’s no central authority, it’s difficult to hack, censor or stop cryptocurrency – and it’s so brilliant.
The technology behind cryptocurrency with the immutable blockchain is incredibly secure.
It’s almost impossible for accounts and balances to be falsified, as crypto transactions are near-bullet-proof.
However, the volatility of cryptocurrencies are something you will need to be aware of, and take with a pinch of salt.
You also need to be wary of crypto scams, as some cyber-hack in history have seen billions of dollars stolen.
Make sure you don’t always leave your cryptocurrency investment in an online platform, as you will not have total control of your funds.
It may result into loss of your invested cryptocurrencies in case of hack or theft.
I suggest you get a hardware wallet to store most of your cryptocurrencies, as they mostly have high security standards.
I hope this content helps you to the concept of cryptocurrencies, while also helping you to make good decisions on the best cryptocurrency to invest in.
