A brief guide to the world of cryptocurrency for novice players.
The mysterious world of cryptocurrency offers unprecedented opportunities. Ordinary people here become millionaires, millionaires turn into billionaires, and so on. However, it can be difficult for beginners to grasp the full amount of information. This guide with the answers to the most common questions will help ease the path to the world of cryptocurrency.
What is cryptocurrency
Cryptocurrency is the most common name for money based on the blockchain, they can also be called “digital” or “virtual”. The recognized leader of the cryptocurrency world is Bitcoin (Bitcoin) - the first and most popular digital currency. Bitcoin was coined in 2009 by a person or group of people under the pseudonym Satoshi Nakamoto. The real names of its creators have not yet been established.
The success of Bitcoin led to the emergence of a huge number of alternative cryptocurrencies. They are also based on the blockchain, but differ in the speed of transaction verification, block sizes and commissions. In 2017, Bitcoin strengthened its position with 18-fold price increases, but it was followed on its heels by various promising counterparts, the most popular of which are ether, Ripple, lightcoin and Cardano.
Where can I spend cryptocurrency
Most people still think that bitcoins can only be paid on specialized platforms. However, this is no longer a problem - the cryptocurrency is accepted by thousands of companies around the world. The most famous are Microsoft, PayPal, Subway, Shopify, and Virgin Galactic.
If you want to pay the cryptocurrency where it is not accepted, use a special plastic card. It is like any other debit card, but instead of dollars or rubles, you replenish it with a cryptocurrency of your choice. When used, digital currency is automatically converted into regular money.
How to choose a cryptocurrency wallet?
A cryptocurrency wallet is an application, service, or device that allows you to send, receive, and store crypto-money. There are several types of wallets:
- Stand-alone wallets (Bitcoin Core, Exodus). These are high-security wallets that require a powerful processor and large amounts of memory. On the computer, they store the local version of the blockchain (for example, Bitcoin Core on disk requires 150 GB).
- Online Wallets (Blockchain, Bonpay). Fast and convenient services with a friendly interface. Choosing such a wallet should be cautious because of the danger of burglary, so before using, ask how the funds of customers are stored and protected.
- Hardware wallets (Trezor or Ledger). Secure devices that store coins. The main task of the user is not to forget the PIN-code to your wallet. Another problem is rather inconvenient work with them: the funds are managed through the web interface, and it can only be used with a computer.
- Mobile wallets (MyCelium, Breadwallet). Mobile applications that allow you to manage cryptocurrencies. They are convenient, easy to use, they save time well, but they are rather poorly protected. An attacker can steal the phone and transfer the cryptocurrency to his account before the owner blocks the wallet.
Most people prefer online wallets, as they store the entire transaction history, are convenient, easy to use and do not require downloading the entire blockchain to a computer. You can create your own online wallet in just a few minutes. However, the choice must be approached carefully: in the past there have been cases of hacking such wallets, and users have lost their money.
How to safely store cryptocurrency?
To keep your cryptocurrency, follow these rules:
- Always back up your private key. It can be stored on a USB-drive, just be careful - there are cases when they were broken by children or eaten by dogs. You can also print the key (in the form of numbers or a QR code) and keep it in a safe place. This method is used by the Winkloss brothers, known cryptomillionaires. They divide the printout into several parts and store them in separate bank vaults.
- As a rule, private keys can be recovered using phrases from 12 or 24 words. Be sure to back up this phrase.
- Get a separate email address ONLY FOR THIS WALLET.
- If possible, use two-factor identification. To do this, you need to install an application that will generate passwords for your accounts. It will provide an extra level of protection.
- Choose only reliable and safe exchanges.
- Regularly update the software, always put the latest version of the wallet.
What is the difference between coins and tokens?
Cryptocurrencies are called both coins and tokens, which often leads to confusion.
Cryptocurrencies, such as Bitcoin, are based on the blockchain, are a digital equivalent of money and are used only for buying / selling goods and services. Tokens are also digital units, but they are not based on the original blockchain, but on platforms like Ethereum or Waves. They can be used for payment only in the ecosystem of the project that released them, in addition they provide access to the project functions, represent a stake in the company, etc.
To use tokens as money will not work - they are accepted only in the project itself. If you intend to use digital money for purchases in the future, stop at cryptocurrencies. If you believe in the prospects of a certain project, buy its tokens (you can speculate on them, as on ordinary promotions).
How to convert cryptocurrency into regular money?
Currently, the release of classical currencies involved in the government. Enthusiasts believe that cryptocurrencies will replace fiat currencies in the future, but most people still prefer traditional money. There are several ways to cash them:
- Cryptocurrency exchanges (Coinbase, GDAX). Choose an exchange as carefully as your wallet - check its safety, read reviews. In the past, some sites have been victims of major hacks (for example, Mt. Gox lost $ 460 million in customer funds) and technical problems.
- Services linking sellers and buyers. On these services, the parties find each other and agree on the exchange of cryptocurrency for regular money. This can occur in person, through payment systems or in other ways. When using such services it is recommended to be careful. There are cases when cybercriminals bought bitcoins with a credit card, and then simply canceled the payment, eventually receiving both bitcoins and money. Worse, during a personal meeting, some sellers of the meeting became victims of a robbery - the attackers simply forced them to send bitcoins.
- Cryptocurrency cards. They can be used directly or withdraw money from ATMs. Currently such cards are not available in the EU due to the suspension of the operating company. At the same time, Bonpay, for example, is at the final stage of negotiations with a new partner and will issue cryptocurrency cards in the next few months.
Why prepare for the cryptocurrency market?
Cryptocurrencies are a unique phenomenon for our society, therefore you should be psychologically prepared for the most unexpected turns of fate. High instability is one of the key features of the cryptographic market. You can wake up in the morning and see that overnight prices have changed beyond recognition.
Volatility works in both directions. In just a few days, the market can grow or fall significantly. In February, 2014, after the collapse of the largest stock exchange at that time, Mt.Gox, the cost of bitcoin fell by almost half, from $ 837 to $ 439. In December, 2017 th same bitcoin jumped in just two weeks from $ 10 000 to $ 19 000 on a wave of tremendous interest in cryptocurrency. Such rapid changes, of course, cause stress, but at the same time they allow you to make good money on fluctuations of quotations.
Before entering the cryptocurrency market, read books, articles and understand the basic concepts: how the cryptocurrencies appeared, what are their main features and how the ecosystem works.
Cryptocurrencies are not only money, but also technologies, sociology, business, and innovation. The prospects for the blockchain are vast. It allows you to build a completely new world in which the key principles are freedom, privacy and the protection of human rights. So investing money in cryptocurrencies is a reasonable investment in the future.