The ultimate beginner guide to cryptocurrency

The ultimate beginner's guide to cryptocurrency

The ultimate beginner's guide to cryptocurrency

As we are approaching the end of 2021, it’s safe to say that Bitcoin and other cryptocurrencies will be a staple of our day-to-day lives. But what exactly are these currencies? And how can you get involved? This article is your ultimate beginner guide to cryptocurrencies in 2021. Read on for insights into this burgeoning new technology!

There are many new coins on the market, but not all of them have a good team behind them. If you want to invest your money wisely, you must do some research first. This blog post is designed to be a beginner’s guide for those who might be interested in investing in cryptocurrency. We’ll start with an explanation of what cryptocurrencies are and how they work before moving into which types of currencies may or may not be right for beginners to invest in based on their risk tolerance level. This is a good article for beginners who want basic information on different types of cryptocurrencies, blockchain technology, etc… It uses blockchain technology in the context of blockchain mining which is very helpful.

What are cryptocurrencies?

Cryptocurrencies are a form of digital money. They use encryption techniques to control the creation and transfer of money. This means your cryptocurrency won’t be affected by inflation like it would when using physical cash. Cryptocurrencies exist only in the digital world and they can often be purchased with real cash. You can then use cryptocurrency to purchase goods or services much like you would if you used virtual credit card (VCC)  payments with normal (fiat) currencies such as USD, EUR, GBP, etc…

How does cryptocurrency work?

The way cryptocurrency works are relatively straightforward:

– A transaction must contain at least two pieces: a sending address and a receiving address

– For each transaction made, cryptocurrency is sent from one person’s cryptocurrency wallet to another.

– The cryptocurrency is sent in the form of units known as coins or tokens that are then assigned to cryptocurrency wallets. You can send cryptocurrency from your cryptocurrency wallet just like you would send money with PayPal. However, unlike PayPal, cryptocurrency wallets offer much more versatility than just sending and receiving funds because ownership of each address cannot always be attributed to a specific entity. This means transactions can’t be linked back to people unless they choose to reveal their identity during the transaction process (which you don’t have to do).

Different types of cryptocurrencies

To say there are hundreds of different cryptocurrencies on the market right now would not be an overstatement; there are thousands! There’s Bitcoin, Litecoin, Ethereum, Stellar Lumens, Ripple, Dogecoin, Shiba Inu, and many more.

– Bitcoin is often accepted by cryptocurrency exchanges to allow people to buy other cryptocurrencies with it. It is the cryptocurrency that most new investors are likely to purchase so they can get involved in cryptocurrency trading for themselves.

– Litecoin is very similar to Bitcoin but transactions are confirmed four times faster than with Bitcoin so payments are received almost instantly with Litecoin compared to minutes or hours with some other cryptocurrency wallets. This is why some cryptocurrency wallet providers accept both currencies in exchange for their own cryptocurrency.

– Ethereum is another cryptocurrency that has risen dramatically in recent years thanks in part due to its popularity on cryptocurrency exchanges despite being relatively new when compared to the likes of Bitcoins which have been on the cryptocurrency scene for years. Etherium is more flexible than Bitcoin: it offers a more robust programming platform that enables developers to build and run almost any type of decentralized application (DApps) or cryptocurrency wallet;

– Ripple is designed more specifically for banking systems and offers faster transactions thanks to its consensus ledger rather than using proof-of-work like many other cryptocurrency wallets such as Bitcoins do. This means lower fees and faster processing times. It is also fully compliant with money laundering laws, making it attractive to some cryptocurrency exchanges who can’t risk doing business with cryptocurrency wallets that don’t follow the rules and regulations of the financial industry.

As you can see there are many different types of cryptocurrencies: each was developed with a specific purpose in mind and cryptocurrency wallet providers may accept only certain cryptocurrency wallets as part of the exchange process for their cryptocurrency wallet. This is because cryptocurrency wallets can be programmed to suit a specific purpose: they can be tailored to offer different features so you may want to research cryptocurrency wallets carefully before deciding which one you want to use.

Guide to cryptocurrency mining / What is crypto mining

Cryptocurrency mining is the process of adding transaction records to cryptocurrency public ledgers called blockchain; it is what brings more cryptocurrency coins into circulation (for example, if you have 1 Bitcoin and you trade or spend it then that will leave your account and someone else’s account will now have 1 Bitcoin less and yours will now have 1 Bitcoin more). A blockchain is essentially just a record of all transactions that have ever taken place involving the cryptocurrency wallet in question.

There are many different blockchain platforms but they all work on the same principle; there is usually a reward for blockchain miners who maintain blockchain ledgers, which can be new cryptocurrency coins or payments of transaction fees. How this works differs depending on the blockchain platform you use (or whichever blockchain your chosen cryptocurrency wallet uses). For example, if you choose to mine Ethereum then you could earn Ether for every block added; whereas mining Bitcoin means adding blocks that contain transaction records and once these blocks are full then rewards are distributed proportionally based on how much power each miner contributed to solving said blockchain puzzle.

The most common way to mine cryptocurrency is through joining a blockchain mining pool: blockchain miners work together to solve blockchain puzzles and share the rewards that they earn proportionally. This way it is more likely that blockchain miners will receive a reward and blockchain transactions are processed faster because there are more people involved with adding data to blockchain ledgers. Some blockchain platforms also use proof-of-work algorithms which means you can mine cryptocurrency by yourself without having to join a blockchain mining pool if you have computing power available.

Guide to cryptocurrency wallet / What is a crypto wallet

A cryptocurrency wallet is a software program that enables you to store, exchange and use your chosen cryptocurrency. Cryptocurrency wallets are pieces of computer code which store private keys necessary to access balances associated with public keys (your wallet’s unique address). Think of your cryptocurrency wallet as the same as how you manage an email account: it holds information that can be used to receive or send transactions on blockchain networks.

A wallet consists of two ‘keys’ – a public key and a private one. The public key is like your bank account number; everyone who wants to make a transaction with you gives this number out so they know where the money should go once it’s included in the next block added to the blockchain. The private key is like your PIN; giving someone else this number means that they can access your cryptocurrency balance or send money from it, which means that you must keep the details of your private key secret.

If a wallet application is an open-source then its code can be viewed and checked by anyone to verify that it does what it is supposed to do (i.e. no sneaky back doors for hackers).

How to buy a cryptocurrency coin

You can purchase a cryptocurrency coin in two ways: either buy from a cryptocurrency exchange, or buy from another person.

Buy from a cryptocurrency exchange

Using an online cryptocurrency wallet you can buy and store your chosen coin and then access it through the wallet interface and send transactions to the blockchain. Some crypto exchanges allow you to buy cryptocurrency directly with fiat currency (e.g. $) whereas others only deal in cryptocurrencies so you will have to purchase a different coin such as Bitcoin initially which you can trade for your desired cryptocurrency at an exchange platform such as Binance. How this process works depends on the type of exchanger platform but most offer some sort of registration/verification process which can take time depending on how much personal information has to be verified, plus sometimes users need to wait until a certain number of confirmations has been reached before funds become available for withdrawal.

Buy cryptocurrency from another person

A quick and easy way to buy a cryptocurrency coin is to buy it from another person who already owns it. This way you don’t have to wait until your chosen coin gets added onto a cryptocurrency exchange platform or go through the process of registration/verification because all parties involved already know about each other’s existence (the majority of people buy their first cryptocurrencies this way). However, there are risks involved with buying cryptocurrency from other users; such as account thefts via social engineering (i.e. phishing scams), hacked PayPal accounts used as payment methods, and unregulated brokers who pretend like they’re ‘legit’ coins but instead take a user’s BTC and send them non-existing coins.

Where to store a cryptocurrency coin

You can store cryptocurrency in a cryptocurrency wallet. Cryptocurrency exchanges offer cryptocurrency wallets, but they aren’t ideal places to store cryptocurrency for the long-term (>30 days) because their keys are usually held by a centralized system and can be hacked. If you want somewhere safe to store cryptocurrency long-term then look for a cryptocurrency wallet that offers good security features such as 2FA (i.e., Google Authenticator or Authy), strong passwords/pins, support from developers with established reputations, etc.

Guide to selling or trading cryptocurrency / How to sell or trade cryptocurrencies on exchanges like Coinbase or Binance

Selling on cryptocurrency exchanges is similar in process to buying cryptocurrency, in that you have the option of using the same cryptocurrency wallet or cryptocurrency exchange.

Check what kind of fees are incurred by sending/receiving transactions from/to your wallet so you can work out which options are the cheapest for you. For example, greater anonymity often leads to higher costs as personal information might have to be verified by the sender and receiver depending on how high their security standards are.

Check if cryptocurrency coins need to be stored in a cryptocurrency wallet before sending them to cryptocurrency exchanges. Most cryptocurrency exchanges require users to send cryptocurrency coins from a cryptocurrency wallet, so if this isn’t the case then you might have trouble trying to sell your cryptocurrency coins once they get listed on an exchange platform because you’d have already moved them out of your cryptocurrency wallet.

Selling/trading cryptocurrency on Binance

Binance is the most popular cryptocurrency exchange in the world with over $2 billion in daily trading volume. As one of Binance’s many features, users are able to register for an account and sell their cryptocurrency coins directly on Binance through a user-friendly interface.

If you want to sell your cryptocurrency coins on Binance, then first create an account, log in, go to the ‘Exchange’ > Coin tab and select the coin you’d like to trade from. There are two boxes for placing a Limit Order or Market Order, so if you don’t know how these orders work then read this guide.

In short, a limit order sets conditions under which your trade will be executed (e.g., how much of a coin do I want to buy/sell, how long should my order stay open) whereas a market order executes immediately at the current market prices. If you set up a stop-loss order which specifies how much of your chosen cryptocurrency coin you’re willing to sell in case it falls below a certain price then it will automatically execute as a market order.

Binance also has a temporary Stop-Limit feature that can be activated from the Limit Order box, which is how you set up stop-loss orders. Once enabled, you choose how much you want to sell and how long your stop-loss order should last (so make sure you input how long in seconds and not minutes or hours). If your chosen cryptocurrency coin’s value falls below the limit you set for your stop-loss order, then it automatically becomes a market order and sells at current market prices.

Once your trade goes through, click ‘Withdrawal’ on the left of the screen and enter how many coins of your choice do you want to withdraw (make sure it has the same wallet address as in your Binance account).

Selling/trading cryptocurrency on Coinbase

Coinbase is a coin exchange that’s popular with beginners because it accepts credit/debit card payments through its platform, while some other coin exchanges don’t. Coinbase is a regulated coin exchange and your cryptocurrency coins stored on there are insured by the FDIC.

If you want to sell your cryptocurrency coins on coinbase, then first create an account, log in, go to ‘Selling’ > ‘Trade’ and select the coin you’d like to trade from. There are two boxes for placing a Limit Order or Market Order, so if you don’t know how these orders work then read this guide.

In short, a limit order sets conditions under which your trade will be executed (e.g., how much of a coin do I want to buy/sell, how long should my order stay open) whereas a market order executes immediately at the current market prices. If you set up a stop-loss order which specifies how much of your chosen cryptocurrency coin you’re willing to sell in case it falls below a certain price then it will automatically execute as a market order.

Once your trade goes through, click ‘Withdrawal’ on the left of the screen and enter how many coins of your choice do you want to withdraw (make sure it has the same wallet address as in Coinbase).

You can also use Coinbase if you already have bitcoin/ethereum/litecoin since Coinbase is often used as an exchange platform for these cryptocurrencies.

Guide to risk factors of buying any type of cryptocurrencies (volatility)

You should do some homework before investing in cryptocurrencies, for there are risks involved when investing in them.

You should also note that investing in cryptocurrencies is not appropriate for everyone, and it’s important to know what type of investment suits you best. A general rule or guideline would be investing money that you won’t need anytime soon.

Price volatility

Cryptocurrencies are renowned for their extreme price volatility, so investing large amounts of money at once is not advisable since prices can decline drastically the next day (as cryptocurrencies are very new, they’re unpredictable). You should consider investing small amounts regularly over a long period of time instead. If you lose most of your investment then it would only be worth investing again if prices go down further, but this defeats the purpose because if they do then you might as well not have invested in the first place.

If you’re investing in cryptocurrencies due to volatility then it’s not for you since investing is all about making money, and if investing $1 gives you $2 after a week then investing another $10 would mean gains of $12 instead. A price decline can cause panic among people who own that particular cryptocurrency so they might want to sell immediately. This leads to more prices declines which lead to mass panic sales, which leads to further price declines.

It’s therefore recommended that only buy the amount of cryptocurrency coin that you’d be okay parting with should prices suddenly tank (lose value). Similarly, don’t sell your coins when prices suddenly shoot up because it’s very difficult to predict when these price rallies will stop (which could be the next day).

It’s also not advisable to invest in newly launched coins because they’re very unpredictable. For example, investing $500 (could be less or more) into a newly formed cryptocurrency coin that uses blockchain technology would give you initial investment of about 2 million coins, which might rise or fall drastically depending on how popular the coin becomes. These ICOs are unregulated therefore it’s difficult to predict whether investing in them is safe or not.

Reasons for investing in cryptocurrency

There are many reasons why investing is considered advantageous, such as: investing is a long-term commitment when done correctly it takes time for your investment to increase in value investing only what you can afford losing some money from investing makes you think about how to make your money work for you investing is a good way to make passive income investing in cryptocurrencies can provide huge returns investing is interesting investing in cryptocurrencies can be fun

Risks involved when investing in cryptocurrency

As with all investments, there’s always a risk . Cryptocurrencies may not be suitable for everyone since they could collapse due to their volatility so do some research before investing. There are also risks associated with investing in any type of cryptocurrencies (due to how new they are), such as: losing online wallets private keys being hacked because of an exploit or virus not understanding the infrastructure behind blockchain technology buying into fraudulent ICOs bad press- could damage the company if they’re false claims scam coins- lack real value and could collapse investing in cryptocurrency is investing in the concept of blockchain technology- investing without fully understanding what that means could lead to losses investing money that you don’t need- might want to consider investing spare change instead due to volatility lack of knowledge about investing- this article was written to help people who want to invest but don’t know where to start.

Conclusion

Cryptocurrencies are an uncertain investment because they’re so new (they’ve only been around for 8 years) and prone to volatility. With the right approach, investing can be very fruitful if done correctly. There are many reasons why investing is considered advantageous, however, it’s important not to invest money that you’ll need anytime soon. Prices can decline drastically overnight, which would mean huge losses if invested in large amounts.

There are significant risks involved when investing in cryptocurrency, such as investing money that you’ll need anytime soon or investing in a fraudulent ICO which can lead to losses. It’s therefore recommended that only invest what you could afford to lose since investing is all about making money and not losing it.

We hope you’ve enjoyed reading these articles and hopefully, they’ve been helpful! If there are any topics that you’d like us to write an article on then please let us know in the comments below!

Disclaimer: The contents of this post do not serve as advice in any way, shape, or form, instead they’re meant for informative purposes only.

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