Cryptocurrency 101: Cryptocurrency for beginners

Investing in cryptocurrency may seem daunting for beginners especially cause there are 20,000+ cryptocurrencies in the market. In 2009 Bitcoin was first created and ever since then, the number of cryptocurrencies keep on increasing.

If you are looking to start investing in cryptocurrency but confused about where to start, you’ve come to the right place. Cryptocurrency is the currency of the future as the number of countries allowing cryptocurrencies transaction is increasing.

What is Cryptocurrency?

A cryptocurrency is a digital asset or a decentralized form of money. ‘Crypto-‘ comes from the Greek ‘kryptos’ meaning ‘hidden or secret’, and ‘currency’ comes from the Latin ‘currere’ meaning ‘to run’.

Because all transactions are highly encrypted, the exchanges are highly secure. As opposed to traditional currencies, which are managed and controlled by a central authority, cryptocurrencies are decentralized.

Cryptocurrency operates through distributed ledger technology, known as blockchain. The number of cryptocurrencies is limited, and they can be compared to precious metals such as gold and silver. The first cryptocurrency, Bitcoin, became popular in 2008. Since then, many other cryptocurrencies have emerged, including Ethereum, Tether, Solana, and Cardano.

How to invest in Cryptocurrency as a beginner?

As a beginner investing in cryptocurrency may seem like a foreign concept. But it is actually quite simple. At first, you should sign up for a cryptocurrency exchange. There are many cryptocurrency exchanges in the market such as Kraken, Gemini, Crypto, KuCoin, Coinbase and more.

You can select any one of these exchanges to buy and sell cryptocurrencies like Bitcoin, Ethereum and many more. You should download a crypto wallet that’s compatible with your coin to keep your cryptocurrency safe.

How does cryptocurrency work?

Cryptocurrencies run on a distributed public ledger called blockchain, that records of all transactions updated and held by currency holders. The distributed ledger of a blockchain maintains records across multiple computers on a network. As new transactions are completed, they are added to a “block” of data, and the block is then added to the chain. As new transactions are recorded, the entire ledger can be updated.

Cryptocurrency are created through a process called mining. The process of mining involves solving complicated mathematical problems using computers to generate coins. Alternatively, users may purchase the currencies from brokers, store them, and then access them using cryptographic wallets.

As a matter of fact, if you own cryptocurrency, you do not own anything tangible. It is a key that allows you to move a record or unit of measurement from one person to another without relying on the assistance of a third party.

How many types of Cryptocurrency are there?

• Utility Token

A utility token is a digital token that is used for a blockchain-based product or service.

In most cases, utility tokens are ERC20 tokens that run on the Ethereum blockchain, but other blockchain platforms are on the horizon. The TRC10 and TRC20 token types have also emerged.

Examples :  Brickblock, Sirin Labs Token, Funfair, Golem, Basic Attention Token.

• Security Token

Securities tokens are digital versions of traditional investments, such as stocks, bonds, and other securitized assets. A company that wishes to raise funds for an expansionary project might consider issuing a digital token instead of stock.

To protect user investments, their exchange, issuance, dealings, value, tokenization, backing, trading must be controlled and governed by financial regulators.

Examples : Sia Funds, Bcap (Blockchain Capital), and Science Blockchain

• Payment Token

Payment tokens are used for buying and selling goods and services on digital platforms without an intermediary.

Since payment tokens cannot be invested in securities, they do not fall under financial regulation as asset securities. Bitcoin is an famous example of Payment token.

Examples : Ethereum, Bitcoin, Monero, etc

• Exchange Token

Exchange token are the ones used in cryptocurrency exchanges. The tokens can be exchanged for free discounts, paying fees, or used to facilitate exchanges between other tokens.

Examples : Binance Coin or BNB token, Gemini USD, KuCoin Token, Uni token, HT for Huobi exchange, Shushi, CRO for Crypto.com and FTX Coin for FTX Exchange

• Non Fungible Token

Non-fungible tokens are one-of-a-kind assets on the blockchain that are unique, non-replaceable, and untradable.

It is commonly used to represent videos, audios, photos collectibles, real estate, fashion,  virtual worlds, memes, digital content such as posts and tweets, paintings, music, etc.

Does crypto have a future?

Investing in cryptocurrencies today will certainly make you wealthier in the future. Due to the recent market crash, some investors speculate that cryptocurrency is coming to an end. However, the crypto market is experiencing a correction.

Analysts predict that the global cryptocurrency market will triple by 2030, reaching a valuation of nearly $5 billion.

The upsides of cryptocurrency have increasingly attracted institutions, and traditional finance is rushing to meet the increased demand. This is illustrated by the U.S. Bank’s recent creation of a bitcoin custody service which allows hedge funds to take a stake in digital currency.

The larger the pool of investment, the greater the potential for everyday investors.

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