"OMG!!!, I just made my first $10,000 through cryptocurrency, I am so excited!!!"
If talks like this weren't what brought you to learn about cryptocurrency then I must commend you. I, on the other hand, started learning about cryptocurrency because I perceived it to be a fast money-making scheme, and also didn't enjoy being referred to as stale for not knowing the latest happenings in the world. But a very common mistake with "hypes" like this is not knowing what it is in detail and diving into it.
This article would explain in simplicity what cryptocurrency is, and all you need to know to get you started using cryptocurrency.
What is Cryptocurrency?
Cryptocurrency is a decentralized digital or virtual currency used as a means of exchange secured by cryptography.
For better understanding, let us discuss the terms used in cryptocurrency.
Terms in Cryptocurrency.
Decentralized.
This currency is not controlled by anyone—it has no central Authority— but only works using Blockchain technology, which is a technology that controls how cryptocurrencies are made and validated.
Virtual / Digital.
This form of currency cannot be held and only exists in electronic form.
Cryptography
This represents the "crypto" in the word "Cryptocurrency" which means secret or hidden. It is used to secure transactions, whereby transactions are encrypted in binary numbers making it difficult for anyone to access, hack and alter.
Why was Cryptocurrency Created?
For centuries now, monetary power has been in the hands of the government. They regulated how funds were to be spent, the limit one could have in an account without raising suspicion, who could have an account and at what age, and how money reaches the people— which starts at the top from the wealthy and only reaches the masses through hard labor.
But someone daring enough to stop this order, built cryptocurrency to solve this issue and give power to the masses. With cryptocurrency, even a 9-year-old can have a crypto wallet, limitless transactions are allowed and no one can control how much goes in or out of your wallet.
Types of Cryptocurrency.
Bitcoin
This was the first ever digital currency created by an Anonymous person under the name Satoshi Nakamoto.
Altcoins.
This is a shorthand name for alternative coins. It is a collective name used to describe any coin that is not Bitcoin.
Eg. Ethereum, Solana, Cardano, Algorand, etc.
Uses of Cryptocurrency.
To Purchase Items.
Still new, but some stores use cryptocurrencies as a means of paying for goods and services. For example, PayPal allows payments and transactions in Bitcoin.
Money Transfer.
The most effective use of crypto is for transactions. Here, you can send bulk transactions from anywhere around the world in split seconds without having to go through the traditional means of sending money through banks that take a lot of days to process.
Spot Trading.
Just like owning a share in a company as an investment, you can get investment returns on cryptocurrencies by buying when the price is low and selling when the price goes up.
Guidelines on how to choose a Cryptocurrency to invest in.
Do a Deep Research.
You have to take your time to research any cryptocurrency you want to buy, read up on how popular the coin is, the management and development system in place before you decide this is a cryptocurrency you want to buy and invest in.
Read the Whitepaper.
This is a document that contains the vision and roadmap of that cryptocurrency. It gives all the information you need to know regarding that cryptocurrency and the technology behind it. No whitepaper equals a huge red flag.
Join Communities.
Join communities on Twitter, Reddit, and LinkedIn. Here, they share useful updates on currencies to invest in and why you should invest in those cryptocurrencies.
Where Can I Buy Cryptocurrencies?
There are so many marketplaces one can buy cryptocurrencies from, making it very easy for one to be scammed of one's money.
Here are trustable exchanges to buy your cryptocurrencies.
Binance Exchange
This exchange accepts a wide range of traditional currencies(value of money in your location) to purchase cryptocurrencies. It has an advantage over every other exchange because it supports over 500+ cryptocurrencies.
Coinbase
You can buy over 30+ cryptocurrencies on this exchange, also very secure and reliable.
You can read more on the advantage the exchanges have over one another here
It is very advisable to not store cryptocurrencies in these exchanges because they're centralized—owned by a central authority—and if anything goes wrong with the exchange or it closes, you will not have access to your funds again.
Where do I Store my Cryptocurrencies?
Just like we store our fortunes and assets in the bank, there is a provided place to store our crypto assets called a Wallet. There are two types of wallets.
Hot wallet.
These are wallets that are accessible online, they are very easy for fast transactions and storing your crypto assets. Eg. Metamask, Trust Wallet, etc. They are secured by having a seed phrase and a private key which should only be known to you and nobody. If you disclose your private key, your wallet will be hacked and your funds will be stolen.
Cold Wallet.
This is an offline wallet that could exist in the form of a USB Drive, Ledger, and even Paper or a Journal where your public and private keys are stored. This is helpful to prevent hacking from online attacks, but also has a downside which could be exposure to bad environmental conditions like fire and loss of hard drives.
Do well to choose the best option for you and ensure maintenance is in place to protect your wallets. Note: Do not share your Private key or SeedPhrase with anyone!!!!!
Advantages of Cryptocurrency.
Fast Transactions.
Using the bank system, bulk transactions take several days to process as it goes through many agencies to process these transactions. But using cryptocurrency, transactions are made in seconds which makes it a very effective means of exchange.
Anonymity.
This particular feature keeps you unknown and protects your identity. No one knows how much you have in your account, unlike the bank where the bank managers have access to your account and stay on the lookout for suspicious activities like large transactions.
Decentralized.
No one has the right to dictate to you how to run an account, how old you must be, and how many transactions you can make in a day. This gives you the power and authority over your money and income.
Secure.
It is very secure and protected by the cryptography explained in the paragraph above. Nobody can alter your transactions and redirect your funds to another account.
No Transaction Limits.
You can send up to 1000 or more transactions in a day using cryptocurrency. There are no police in place to question your activities. Your money, your choice!
Low Transaction Fees.
Transaction fees for huge sum transfers and low sum transactions are very low compared to the traditional method of transactions, where you pay processing fees, convenience fees, maintenance fees, and annual fees. Here, cryptocurrency removes the middle man and enables you to pay little fees for transactions.
Peer to Peer Transactions.
This allows transactions to be done easily anywhere in the world irrespective of locality. For example, I can be in Nigeria and send someone in China some Cryptocurrencies which he can in turn change into his currency in seconds, without having to go to the bank and wait for days before my transaction goes through.
Disadvantages of Cryptocurrency.
Loss of Wallet.
This has to be the most painful way of losing access to your crypto assets, because once you have no access to your private key or seed phrase your funds are lost and cannot be recovered.
Scammers.
With a new wave comes a series of criminal activities. People use this opportunity to lure you into revealing their private keys and connecting to malicious websites hence, stealing your funds.
Volatility.
This in cryptocurrency means instability and fluctuations in prices, which is caused by supply and market demand.This would affect investors who bought at a high price when the currency either goes down 50% or the currency becomes worthless. Always monitor your cryptocurrencies and know when to sell them off.
No Internet Services.
This particular disadvantage is never even mentioned but very important. Cryptocurrency transactions run mainly online, in a situation where there is no internet service or a blackout, it would be impossible to make transactions.
Environmental Effect.
The creation of new Cryptocurrencies takes a huge toll on the environment. For example, Bitcoin uses so much electricity and computing power to process transactions and the machines used to create Ethereum coins releases dangerous gases that harm the ecosystem.
Conclusion.
It is important to have your mind prepared to make losses and also profits in this space, if you don't have a strong mind to withstand losses I would not recommend cryptocurrencies as a means of investment for you.
Key points to Note:
1) Always Invest what you can afford to lose or do away with it, do not ever put your life-saving into it!!!
2) A very important tool in minimizing your losses and excelling in this space is simple—Do Your Research. I cannot overemphasize the importance of research, do not rush into anything because you see it booming and enticing. Always take pain to research on It, and ask experienced people in the space about it before you dive into it.
If you made it to the end of this article, A big congratulations to you, because now, you are ready to start your journey into cryptocurrency.
Enjoy!
Top comments (6)
Thank you so much obi for reading through 😚
A very nice one Chizoba.
Keep it up and in a few years you'd be a master sought after by masters.
Thank you so much Davetobes this means a lot!🥺
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