What Is Cryptocurrency? All You Wanted To Know

As you know, it is difficult for almost every investor to achieve stability in investments. The exchange rate is constantly changing. Also, the classic financial instruments are losing their effectiveness. We recommend you to pay attention to Binany – a trading platform that is perfect even for beginners. In this article, you will learn what is crypto currency and how to start successful trading today.

Main Points

Let’s look at the main points to identify about cryptocurrencies:

  • What is crypto? It is a decentralized digital asset. It works on blockchain technology and allows transactions to be made without needing a central authority.
  • Blockchain is set to revolutionize the financial industry, according to leading experts. 
  • Among the pros of digital currencies are fast, inexpensive transactions and decentralized networks. 

We will describe all these points in more detail in this article. 

The Key Definition of Cryptocurrency 

What is crypto? Cryptocurrency is a digital currency that ensures the security of transactions through the use of cryptography. It exists entirely in electronic form and operates on decentralized blockchain networks, without any central authority getting involved.

The very name “cryptocurrency” uses encryption to verify transactions. Verification helps to secure your data. The first known digital currency is, of course, Bitcoin. 

This digital asset uses a peer-to-peer system to send and receive funds. Instead of physical currency that exists in the real world, cryptocurrency payments are stored as records in an online database. During transactions, the information is recorded in a public ledger. 

Basic Principles of Cryptocurrency Operation

As you know, cryptocurrencies work on the blockchain. This technology records and updates all transactions among currency owners:

  • Each crypto currency is created through mining – a process in which computers solve complex mathematical problems and generate new coins. 
  • Users can buy cryptocurrencies through brokers. They can then store and use them with cryptographic wallets. 

When you own a digital assets, you do not receive a physical asset. Instead, you have a key to move a record or unit of account between users. All this happens without the participation of third parties. 

Bitcoin has been around for almost 16 years, but cryptocurrencies continue to evolve. In the future, cryptocurrencies will likely be used to trade financial assets. 

Cryptocurrency: Main Types

There are many cryptocurrencies at the moment. For example:

  • Bitcoin;
  • Litecoin;
  • Ethereum;
  • Tether;
  • USDT.

Each investor can choose the coin that suits his needs. Check out the cryptocurrency examples in more detail.

Bitcoin

Bitcoin is the first and best cryptocurrency that has maintained its popularity since 2009. The developer is read as Satoshi Nakamoto – a pseudonym, which can be either one person or a group of people. In any case, the identity of the author of the most popular digital asset remains a mystery. 

Bitcoin Binany

Ethereum

The Ethereum platform began its activity in 2015 and has its own digital asset – Ether (ETH) and AMP token. Ethereum’s smart contracts and decentralised applications have made it popular. 

Ethereum

Binance Coin (BNB)

Binance Coins are issued by Binance, the world’s biggest cryptocurrency exchange. Initially, Binance Coin was used to pay for transactions within the platform, but over time it became a full-fledged asset for trading. 

Binance Coin (BNB)

Cardano (ADA)

Cardano is a third-generation digital currency that seeks to offer more secure blockchain solutions. At the moment, it is the digital asset with the most promise for the future.

Cardano (ADA)

Briefly About Buying Cryptocurrencies

If you want to buy digital assets today, follow this short step-by-step guide:

Step 1: Choose a platform

First, you need to choose a platform to buy digital assets. There are three main types:

  • Digital currency exchanges. They offer a huge range of digital currencies and features for trading.
  • Brokers. They offer easy purchase of cryptocurrencies, but with a limited selection of assets. 
  • P2P platforms. They allow users to trade directly with low fees. 

To choose the right exchange, focus on your needs

Step 2: Register your account

Now, you must create an account. Enter your personal information, email and password. Don’t forget to go through the verification process to be able to trade safely. 

Step 3: Deposit Funds

You need to deposit funds into your account to buy cryptocurrencies. Choose any method:

  • Bank transfer. Usually, with low fees.
  • Payment by bank card. A quick way, but can be more expensive. 
  • E-wallets. For example, PayPal or Skrill. 

If you already have this type of currency, transfer it to the selected exchange. 

Step 4: Select

Now select the encryption currency you want to buy. The most popular are Bitcoin, Ethereum and others. It all depends on your preferences. 

Step 5: Buy

Select the amount of currency and click “Buy”. On some platforms, you can set the order type, which determines how the transaction is executed. 

Step 6: Save

Now you can store assets on the exchange. To protect your assets, transfer them to a personal wallet. This will protect your funds from possible attacks on the exchange. 

A Short Guide On How To Store cryptocurrency

Check out this step-by-step guide to understand the different types of wallets and how to safely transfer funds to them.

Step 1: Choose a wallet

You can use following wallets:

  • Online. The best option for quick access, but they are less secure.
  • Hardware. They guarantee a high level of security, since they store keys offline.
  • Mobile. A convenient option for daily use.

There are many types of wallet, so choose which one is right for you.

Step 2: Set up a wallet

Create a new wallet, note private key and recovery seed phrase. This is important data that provides access to your funds.

Step 3: Transfer digital currency to the wallet

Go to the platform where you bought the crypto money and select the “withdraw funds” option. Fill in your wallet address and confirm the transfer.

Step 4: Security

Be sure to keep the key and recovery phrases in a safe place. To protect your account, activate two-factor authentication. Don’t forget to update your wallet software.

A Short Guide On How To Store cryptocurrency

Types of Purchases With Cryptocurrencies

You can use cryptocurrency in your everyday life without any problems. Here are the places where and how you can use cryptocurrency:

  • Online stores. Use assets to pay for goods on Amazon and Shopify platforms.
  • Financial assets. Invest in stocks and bonds through platforms that support such type of transactions. 
  • Digital goods. Buy games, programs, and subscriptions with currency. 

Remember that digital currencies are constantly evolving. As a result, there has been a steady increase in the number of companies accepting this form of payment.

Types of Cryptocurrency Scams

Digital currency scams come in many forms. Investors should be especially careful. Let’s look at the most common scams:

  • Fake ICOs. Scammers create fictitious projects and offer investors to buy tokens. After collecting money, they disappear. The investors are left with nothing.
  • Ponzi schemes. In such schemes, payments are made to the old investors at the expense of the funds of the new participants. Scammers promise high returns on digital asset investments, but ultimately fail to make a payment.
  • Phishing. Scammers create fake websites or send fake emails. In this way, they ask for personal data of users, their private keys and passwords. With this data, scammers can access wallets and steal funds.
  • Gift cards. Scammers convince victims to send assets in exchange for “gift cards” or “prizes”. The fraudsters disappear as soon as the victim sends money. Of course, no one will ever receive the promised gifts.

Be careful and always check the information! Learn more about cryptocurrency definition and study popular schemes. If you know the scammers’ schemes, you can already protect yourself from danger.

Safety of cryptocurrencies

As you already know, cryptocurrencies are based on the blockchain. The blockchain technology itself is considered reliable and safe. However, there are still risks. Cryptocurrency exchanges can be subject to hacker attacks.

Activate 2FA and use hardware wallets. In short, you can see that assets are a safe tool. However, be careful and attentive.

Tips for Safe Investing with Cryptocurrencies

If you want to know how to use cryptocurrency safely, check out this advices:

  • Research the market. Research different cryptocurrencies and choose reliable projects with a good reputation.
  • Choose a platform. Using safe crypto exchanges and brokers is necessary. 
  • Use hardware wallets. Store your assets in cold storage for the protection of your funds. 
  • Activate two-factor authentication. This will help keep your accounts safe and protected.

These simple steps will help you protect your investments.

Legality of Cryptocurrencies

Digital currency has different status in different regions. Here are some cryptocurrency explained:

  • USA. Several bodies regulate cryptocurrencies, including the SEC, the CFTC, and the FinCEN. These organizations guarantee investor protection.
  • Asia. In Asia, the status of these currencies varies between countries. In Japan, for example, the circulation of cryptocurrencies is regulated by the FSA. In China, on the contrary, digital currencies are prohibited.
  • Europe. In Europe, digital assets regulation is carried out at the level of the European Union. The main bodies that regulate the market are the ECB and the European Commission. Regulations may vary depending on the country.

As you can see, the legality of digital currencies varies from country to country. Be sure to check the laws in this regard in your particular country.

Cryptocurrency: Pros and Cons

The pros and cons of digital currencies are highlighted by many investors. Let’s consider them in more detail:

Advantages Disadvantages 
Decentralized system High volatility
Fast and cheap transactions Risks of fraud and hacking
Privacy protection Lack of regulation in some countries
Possibility of asset diversification Potential loss of funds

Be sure to consider these factors before investing in digital assets.

Wrapping Up

Cryptocurrency is an innovative technology that is changing the financial sector. Digital currency offers fast and secure transactions, as well as protection of personal information. All thanks to decentralized technologies and blockchain. However, investors should carefully study the market and follow security measures to protect their assets. Digital assets are the future of the financial sector, so take a closer look at it today. 

FAQ

How does cryptocurrency make money?

Digital currency makes money through the growth of asset prices in the market. Investors buy digital assets at a low price and sell it at a higher price. Some cryptocurrencies also offer the opportunity to earn money by staking or mining. 

Can cryptocurrency be converted to cash?

Yes. Users can convert digital assets through crypto exchanges or exchangers. Users can sell their assets for fiat and withdraw money to their bank account.

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