Welcome to the world of Cryptocurrency!
In this guide, you will learn 7 amazing facts highlighting all there is to know about Cryptocurrency.
With the banking system failing us, the need to take charge of our money and finding a safe harbour for it becomes our utmost priority.
But the great question is: HOW DO WE GO ABOUT THIS?
Now, that’s where this guide comes in handy.
So, sit back and relax (you can grab a glass of juice) as I dish out the 7 top facts you need to know about this virtual currency in the next section.
To help us understand better, I will be discussing the 7 top facts about Cryptocurrency under these subheadings
- The History of Money- From Gold to Cryptocurrency
- What is Cryptocurrency?
- Types of Cryptocurrency
- Blockchain Technology
- Cryptocurrency Wallets
- Cryptocurrency Exchanges
- Crypto Trading: Basic Tools and Styles
A click on any of the subheadings will take you to where it is discussed.
1. The History of Money- From Gold to Cryptocurrency
In years past, we used a lot of things as money. From salt to seashells, to cowries, and to gold.
Gold was valued more because it is rare and holds a lot of value. We used gold as a medium of exchange for a number of years with its only disadvantage being its weight.
Later, people resorted to keeping their gold in the bank.
The equivalent of their gold is recorded on a piece of paper as receipt and given to them; so when they present the receipt, their gold will be given to them.
This idea brought about Paper or Fiat money where people actually believe this paper is worth something. We still use that to date.
The paper money is a form of digitization (dealing with digits) and as such, made money easy to carry about and manage. Asides from the advantages, it also made money very easy to counterfeit.
This brought about the Double Spending problem (where a particular amount is duplicated over and over again) which banks solved using a Centralized System.
Banks opened a ledger in the system that has all the accounts in it. This ledger keeps track of the amount in each account.
Problem solved, right?
But the problem with this solution is that it is CENTRALIZED i.e. the banks call the shots here; deciding what is wrong or correct.
In 2009, an anonymous researcher published a paper on how to solve this problem in a DECENTRALIZED way.
Wondering how possible this is, right?
Although it seemed impossible, well it was and gave birth to Cryptocurrency.
2. What is Cryptocurrency?
Cryptocurrency is a decentralized digital or virtual currency that is secured by cryptography and serves as a medium of exchange at a person-to-person level.
Notice the words in bold? In them lies the peculiarity of cryptocurrency.
Let me give a brief explanation so you can understand better.
It is decentralized because no Banking Institution or Monetary Reserve controls it, a digital or virtual currency because it cannot be printed, and secured by cryptography which is a method of protecting information and communications through the use of codes so that only those that the messages are meant for can understand it.
Brilliant, isn’t it?
It can be used by anybody, anywhere, at any time and can self – manage the entire system from currency creation and distribution to validating transactions.
Fascinating, isn’t it?
Ride with me to the next phase.
3. Types of Cryptocurrency
To talk about Cryptocurrency is to talk about Bitcoin, which is the first Cryptocurrency that existed. The never-seen Satoshi Nakamoto founded Bitcoin in the year 2009.
This was followed by the evolution of other cryptocurrencies such as:
- Litecoin (founded by Charlie Lee in 2011)
- Namecoin (founded by Vincent Durham in 2011)
- Peercoin (founded by Sunny King in 2012)
- Dogecoin (founded by Jackson Palmer and Billy Markus)
- Ripple (founded by Chris Larsen and Jed McCaleb in 2013)
- Dash (founded by Evan Duffield and Kyle Hagan in 2014)
- Monero (founded by Monero Core Team in 2014)
- Ethereum (founded by Vitalik Buterin in 2015)
Cryptocurrencies have their decentralized ledger as the Blockchain. This holds the record of all transactions that go on in each Cryptocurrency.
Hmmm…..Becoming a lil’ complex, right?
I’ve got you covered still……… Follow me to the next stage.
4. Blockchain Technology
As I mentioned earlier, the Blockchain is the ledger (A ledger is an accounting record) for cryptocurrencies. It is like a history book containing all the transactions from the genesis block to the most recent block.
Cryptocurrencies are generated by using very supercomputers to solve complicated mathematical equations. A coin is released each time a block is added to the blockchain.
Some of the cryptocurrencies have been pre-mined, for example, Ripple while others are not, for example, Bitcoin. The time for the creation of a new block varies among the cryptocurrencies.
Blocks are generated by consensus mechanisms such as:
- Proof of Work (For this, the amount of computational work done by the miner determines the probability of mining a new block)
- Proof of Stake (Here, the probability of validating a new block is determined by how large of a stake [coins] a person holds)
- Proof of Importance (Here, the probability of adding a new block is determined by higher scores possessed by eligible network participants[nodes]).
Pretty interesting, isn’t it?
Well, we are yet to get to the very interesting part…….. Read on.
5. Cryptocurrency Wallets
You might ask: What are cryptocurrency wallets?
Do I need a wallet to own a cryptocurrency?
Well, the answer is YES! You do need a wallet to hold your cryptos, literally though.
I will go ahead and explain.
A cryptocurrency wallet is a device, physical medium, program or service which stores the Public and Private Keys and can be used to track ownership, receive or spend cryptocurrencies.
NB: The Cryptocurrency wallet does not hold the cryptocurrencies; not like when you open it, you will see the coins inside. It is used to store the Public and Private keys.
The Public and the Private keys are long strings of numbers and letters that access the password to where your Cryptocurrency is stored. If one accesses your Private key, he/she can access your Cryptocurrency.
We have 2 basic types of Cryptocurrency wallets– Hot and Cold Storage wallets. This classification is done based on how the wallet is accessed(via the internet or not).
Let’s look at the Hot Storage Wallets. They are the ones that can be accessed with an internet connection. Examples are:
- Web wallets
- Mobile wallets
- Desktop wallets
Hot storage wallets are highly convenient as you don’t need to be carrying your Private key around.
Though convenient, they are highly insecure and prone to hackers.
You will require a malware-free computer and also enable Multifactor Authentication to safely use a Hot Storage wallet.
The Cold Storage Wallets are the ones that are independent of internet connection.
- Paper wallets
- Hardware wallets
- Brain wallets
- Multi-Signature wallets
Cold storage wallets are the most secure form of wallets. It is not as convenient as hot wallets, but you will have no business with hackers accessing your Private key.
However, the wallet should be kept safe.
Okay, now you have your wallet, what’s next?
Let’s meet up in the next part.
6. Cryptocurrency Exchanges
A Cryptocurrency Exchange is a business that allows customers to trade cryptocurrencies for other assets such as the conventional fiat money or other digital currencies.
To credit your wallet, you need the services of a Cryptocurrency exchange. Cryptocurrencies can be bought with fiat money or by using your debit card, bank transfer, or other payment options.
You can also sell your cryptos on these exchanges too.
Some indigenous exchanges include:
You can read about our reviews on these exchanges here.
Other exchanges include:
Now that we have some coins in our wallet, let’s go talk about Crypto trading proper.
7. Crypto Trading: Basic Tools and Styles
Crypto trading or Cryptocurrency trading is simply the exchange of cryptocurrencies. You can buy when the price falls and sell when the price rises hereby, making a profit.
You will run into losses if you do otherwise.
NOTE: Every kind of trade involves a certain level of risk. The risks can only be minimized by trading right.
To start crypto trading, you need a
- Charting tool e.g Coinigy (This is used to monitor the market).
- An exchange where the trade will take place.
You can trade cryptos for cryptos, cryptos for fiat money and vice versa.
We have 2 types of Cryptocurrency traders: Long term and Short term traders.
The Long term traders are in for the long run and could make a high-profit margin on a single trade correctly. Short term traders are those who stay in the market for a shorter period of time, they make a smaller profit on a single trade but can make multiple trades in a day.
The 5 different Styles of Trading include:
- Hodling trading: This is more like investing. The trader buys a coin and holds it for a long period of time and selling only when the price hikes.
- Scalping trading: This is the most active type of traders. They stay online monitoring the market and taking advantage of any slightest turn in the market.
- Day trading: This, as the name implies, is done during the day when the market is most active. It differs from Scalping in that it takes a longer time.
- Swing trading: Here, the trader makes an opening and sits back to watch the market movement. He is more patient and calculated than a Day trader.
- Position trading: These types of traders do not depend on crypto trading for their livelihood. They ascertain a coin’s future prospects before investing in it.
The success of every trade remains to map out a trading style that works for you and working with it.
Also read: Crypto-Trading: How to win every trade
Now that we’ve come to the end of our jolly ride, I’d like to hear from you.
What cryptocurrency are you buying first?
Which of the exchange companies will you be trading with?
Did I leave out any Trading style?
Let me know by leaving a comment below right away.
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