If you currently live in this era, the chances are that you know a person who invests in crypto. The popularity of crypto is not new. It started as far back as a century ago, with the success of Bitcoin. Now, most people are looking to increase their earnings with as many crypto projects as they can lay their hands on.But before you decide to join the bandwagon of crypto investors that have invaded the market, it would be helpful to know exactly what cryptocurrencies are and what you may be getting yourself into if you decide to invest.
What are Cryptocurrencies?
Cryptocurrencies are digital assets that are built on the blockchain network. A blockchain network is basically a digital database distributed across many users. Because the data is distributed, every participant has a copy of the data, so it is difficult to manipulate. There are also crypto tokens like utility tokens, exchange tokens, security tokens, etc. An example is CRD token, an altcoin token based on the ERC-20 standard, used on the CRD Network to log internal transactions and associated fees.
The primary difference between cryptocurrencies and conventional assets is that cryptocurrencies are removed from the control of the government. These assets are not issued by the Central Bank or any other regulatory authority. Instead, the value of cryptocurrencies is solely influenced by the market. Popular cryptocurrencies are Bitcoin, Ethereum, and Tether (USDT).
How do Cryptocurrencies Work?
Cryptocurrencies are created through a process called mining. Mining is a highly technical process. Put simply, it involves solving difficult mathematical problems to confirm new transactions and release more cryptocurrencies into the market. The transaction is recorded on the blockchain when you buy cryptocurrencies while your crypto assets are stored in a digital wallet.
Currently, the popularity of crypto has increased to the point where you can purchase items with them. In addition, some restaurants have also been reported to receive buy cryptocurrency as payment. So, aside from being an investment source, cryptocurrencies can equally function as real-world currencies.
While most cryptocurrency transactions are available to the public, certain cryptocurrency projects make use of cryptography to conceal transaction details, such as the parties to the transaction. Cryptography is the process of securing transaction data between the parties to prevent hack attacks or manipulation.
Should you Invest in Cryptocurrencies?
Buy cryptocurrency are highly speculative assets. That is, their value drops and rises constantly. If you cannot afford to invest money that you are comfortable losing, cryptocurrency investment may not be for you. This statement is not to suggest that you would lose your investment, but the risks attached to cryptocurrencies are high because of how fast the value changes. So if you do decide to invest, it will be wise to avoid investing funds that you may need in the foreseeable future.
How to Buy Cryptocurrencies
At this point, if you have decided to invest in cryptocurrencies, you would need to purchase them through crypto exchanges. These exchanges are platforms through which you can buy, sell, and hold cryptocurrencies. There are centralized and decentralized exchanges on the market. However, as a beginner, centralized exchanges are recommended. The reason is that centralized exchanges are generally easier to use. Also, centralized exchanges enable you to purchase cryptocurrencies with your real-world currency (fiat).
Upon opening an account with a crypto exchange, proceed to fund your wallet by purchasing cryptocurrencies of your choice. After this, you will be able to proceed with your investment. While there are currently thousands of cryptocurrencies, it may be helpful to stick with popular coins as a beginner. Because these coins have gathered more popularity, they are often easier to predict.
Choosing a Crypto Exchange
To choose a crypto exchange, there are some points that you need to consider. The first is cost. Most exchanges charge fees for facilitating buy cryptocurrency transactions. However, these fees differ. For example, some exchanges charge as much as $3 (depending on the transaction), while others charge barely a dollar. Therefore, an exchange with relatively lower transaction costs may be best.
Another factor to consider is security. As an investor, your priority should be choosing an exchange that ensures that your payments are safe and your funds are secure. Thus, it would be helpful to utilize exchanges with integrated compliant payment systems. This system would protect you from fraudulent buy cryptocurrency projects.
Most exchanges are transparent about their security systems. They often use digital asset providers to ensure that transactions are secure on the blockchain. Platforms like Kapersky and DLTify are prominent in this area. For example, DLTify uses a blockchain-backed infrastructure to help crypto exchanges facilitate risk-free transactions like trading and staking. In choosing an exchange, you may opt for one that utilizes a third-party digital asset provider. This attribute ensures that your funds are duly secured on the platform.
Cryptocurrencies are undoubtedly the most popular investment products currently. However, as a potential investor, it will be helpful to conduct your research on specific cryptocurrencies and the exchange you wish to use in investing. This effort will largely save you from being burned.