Cryptocurrency is the new generation cash. Its rapid growth in the past few years has gotten the attention of the entire world. Its decentralized nature has opened the gates to a better and faster transactions, be it in trading, of buying and or selling goods and services.
To some, cryptocurrency may still seem an enigma. People do still have a lot of questions about this type of industry. We may have heard people who chased their lucks and became millionaires and some even gave their 100% focus to every AMA they attended and still didn’t understand and investment went to REKT.
It is very important to know and understand the basic concepts about cryptocurrencies and blockchain. So, here we compiled the most asked questions in the crypto universe:
Is a digital or virtual currency that can be purchased, sold, or transferred securely using cryptography. Data encryption is a very essential method in order to keep the data
secret from third parties. Cryptocurrencies have numerous utilizations,like you can buy goods and services. It can also give investment opportunities. It can also be received or sent as payment mode and so much more.
The most popular cryptocurrencies are Bitcoin (BTC), Ethereum (ETH), Ripple (XRP),Bitcoin Cash (BCH), Stellar (XLM), Litecoin (LTC), Tether (USDT) and many more.
Recently, cryptocurrency has been turning the economic world upside down. With all the hums that we hear, why do we still continue to use this digital asset?
Cryptocurrency uses a decentralized technology where all data is stored with all users.Database cannot be hacked since no central server exists. The identity of users are kept hidden or anonymous. One of the strongest points of using cryptocurrency is being immutable or unchanged. That being said, if a transaction occurs, there will be no changing since it is conflicting timestamps, hacks, or anything else.
Another benefit of using cryptocurrency is that it can be purchased anytime with any type of money and can be used all across boundaries. Further, anybody of legal age can participate locally or globally without having a bank account.
The popularity of cryptocurrency has widely increased. More and more countries around the world is accepting cryptocurrencies as one of the payment options. And depending on the platform that you use, several cryptocurrencies offer a transaction fee that is lower or no cost at all.
A decentralized, distributed, public ledger. It is considered important in the crypto universe because it delivers trust to peer to peer networks. Transparency is valued since blockchain records can be viewed by anybody within a network, so no one can attempt to edit or delete existing records.
Blockchain is somewhat like a spreadsheet duplicated thousands of time across a network of computing devices. This network is designed to regularly update this spreadsheet. The information held on a blockchain is shared. It is not stored in any single location because it’s hosted by millions of computers at the same time, so its data is accessible to anyone on the internet.
Blockchain contains all records. Adding a block to the chain goes through a process. All participants in the network will each have copies of the existing blockchain. They carry algorithm to evaluate and verify the proposed transaction. If majority of nodes agree that the transactions is valid, it will then be approved and be added to the chain.
There is no condition or restriction of keeping records of any type in the blockchain network. In fact, among the types of records that can be stored are namely, medical records, management activities, transaction processes, identity management, and documentation. As we are gearing towards more advanced technology, more organizations are adopting this approach.
No, blockchain is incorruptible because all data stored is secured using cryptography. It kept across decentralized system, which means every node on the network stores the entire chain. What makes blockchain technology incorruptible is the guarantee of trust between the peer-to-peer transactions, limiting the need for intermediaries like banks and other third party retailers.
Here’s an example, let’s consider that Ripple has 18,000 nodes across the world on its network. In order for a hacker to steal money or tweak data on the chain, he needs to find an effective way to do so on every node at the same time. He then would need to repeat this for every subsequent block in the chain,like eternally. So just imagine the process a hacker will go through if he wishes to corrupt the data stored on a blockchain.
A.Public Blockchain- as the name suggests, it’s an open source and not permissioned. In this type of blockchain, anybody is in charge and participate without the need of permission. All transactions are transparent and users remain pseudonymous. Anyone can review and validate transactions in the network, anyone can check transactions on public block explorer to verify its validity.
Examples are: Bitcoin, Ethereum, Litecoin,Monero and etc.
B.Private Blockchain- is a private property of an entity or organization. Its applications are internal to single company, therefore public legibility may or may not be available. Here, anyone cannot run a full node and start mining and can’t even make transactions on the chain.
C.Federated or Consortium Blockchain- it performs under the leadership of a group. These groups through their representatives come together and make decisions that will benefit the whole network. In this type of blockchain, the consensus process is controlled by pre-selected set of nodes which operate and sign every block in order for it to be valid.therefore, selected members of the consortium can review or validate transactions on the blockchain.
One of the essential qualities of cryptocurrency is that it has no physical embodiment. There’s no coin or token that needs to be locked up in security vault by the bank since you can’t have that in paper, or any form of tangible currency. However, just like we keep our precious jewelries or cash, the safety of your cryptocurrencies solely depends on you.
With more money being invested in cryptocurrencies now than ever before, hackers are coming up with innovative ways to steal funds. Here are the several types of wallets where you could store and access your digital currency securely:
Desktop Wallet– has to be downloaded and installed on your computer or laptop. Exposure of security keys online is minimized or prevented since it can only be accessed via private computer with personal keys stored just on that computer. It will be prone to hacking if your computer gets infected with malware.
Hardware Wallet– this offers increased security for your investment. External hardware device like USB which we carry with us can be used to store private keys. Complete obscurity is one of its benefits because no personal information is displayed so no identifying data is leaked during transactions.
Paper Wallet– is another safe way of storing digital currency. It refers to a physical copy of users’ private and public keys. This can be generated online using committed websites or offline for a much greater security. It also offers anonymity to its users. If a user wishes to transact, all he has to do is enter the keys manually or scan the QR codes on the paper wallet.
Online Wallet– is accessible from any computer in any location. It is though susceptible to hacking because a user’s private keys are stored online and are controlled by a third party.
Mobile Wallet– this is an application that can be downloaded on your smartphone. It is very convenient because it can be used anywhere like retail outlets. Examples are: Copay, Coinomi, Coins,ph and so much more.
There are many cryptocurrency exchanges out there now. It plays an integral part of the market. However, before handing out your hard-earned cash, there are few factors that a user needs to consider when choosing an exchange. To name a few:
Fees- the amount that will cost you in using the exchange.
Reputation- if the exchange has proven itself to be a trustworthy or reliable platform.
If it has a good solid history, its reviews from its users.
Payment Options- if it does accept debit or credit cards only. Or does it also accept other Options like paypal.
You have now finally decided to invest in cryptocurrency, so here’s the list of exchanges That performs a mixture of beginners-to-advanced tools, and tools for day trading.
1.Binance- offers a significant number of cryptocurrencies and is open to almost all countries around the world. It offers a mobile app and considerably one of the top exchanges by both trading volume and usability.
2.Bifinex- a user can trade a huge variety of coins on this exchange. It is based out of Hongkong and operates since 2014. With Bitfinex, you can trade using USD and users need to pay a trade fee which ranges from 0.1 to 0.8 percent.
3.Bittrex- a US based cryptocurrency exchange which was founded in 2015 with somewhat very similar UI to Bitfinex. This is a well regulated crypto exchange so users need not to worry about the security of their funds. However, Bittrex is a crypto exchange ONLY, therefore, it doesn’t allow user to deposit fiat such USD EUR and etc.
4.Coinbase- is a good starting point for a beginner to buy from, and an easy platform to trade fiat to cryptocurrency. Coinbase is good for absolute beginners and those looking for altcoins. Digital asset stored are covered by insurance policy. Mobile app can also be downloaded for Android and iOS phones.
5.Poloniex- is considerably one the top exchanges around the world which started its operation since 2014. It is based out of US and offers more than 100 cryptos to its users to trade. This exchange platform has the highest ETH volume because it supports an unconstrained Ethereum and Bitcoin market.
Currently, there are so many crypto exchanges out there sprouting in the market. For sure, there are some users that won’t agree with the crypto exchanges on the list due to personal experience and of course preference. What is important is that it offers security to our investment.
It is really surprising to notice that the large number of cryptocurrencies that are existing has grown enormously in the market. But yes, why are there so many? I mean, well, why Not?
CoinmarketCap has listed more than 2000 cryptocurrencies already. The open source nature of blockchain technology has let people, developers, entrepreneurs, etc. to launch their great ideas on the blockchain in order to make money.
The crypto industry is filled with excitement and speculation. Each of these assets has their own stories to tell, problems to resolve and major improvements to be deployed. The more familiar we are and well-versed about a particular coin, the more accountable we are in considering a purchase.
This question would really pop up in our heads considering all the recent news about exchanges being hacked. These hackers will always target these exchanges. They will find means to steal and empty a user’s wallet. In fact, most of them will create fake accounts and IDs just to pass KYC application. Precautionary measures are always emphasized when it comes to account security. Some of these are:
1.Create a secure password with a combination of alphanumeric symbols.
2.Enable 2FA Authentication. This is another layer of security in which a user is granted access only after presenting pieces of credentials to fully verify themselves. Anyone can do a password reset so this form of account security is very useful to prevent a user from being hacked.
What is considerably a best practice?
It is very important to secure your cryptocurrencies in a wallet where we can control private keys. There are downloadable, or web based wallets available that offer convenience to its users. However, we should always remember that whenever a third party controls your coins, they are not totally, or 100% secure. Get a hardware wallet.
Investing in digital asset such as cryptocurrency is highly volatile which most investors are already aware of. Well, these options might be useful in times like this:
a.If your faith convinces you that the price will be back to where you originally bought it, then hold it and wait for it.
b.Sell it for a loss. Well, sometimes we make bad moves and it surely gives us lesson to be more careful next time.
c.Invest your BTC into altcoins on crypto exchanges. Expand your investments.
Supply and Demand is a big factor that determines the value of cryptocurrencies in the market. If more users are willing to buy BTC while others are willing to sell them, the price will go up and vice versa. Since the supply of cryptocurrencies is limited, it drives the prices to go up.
Media or public sentiment also provides impact over the price of cryptocurrencies. If a Coin gets bad publicity especially with the help of trolls, we’d notice that the price of such coin will take a dip. In reverse, if a coin gets full support from its community and good media report, its price will certainly increase.
Government interference can also influence the price of cryptocurrencies. Since these virtual assets became a trend now, it did attract the eyes of the regulators around the world. They are stepping in to check the legitimacy of these currencies since it offers anonymity which created a big room for money laundering and other illegal activities. Despite its regulation, the wave of new cryptocurrency investors and speculators continue to soar.
Digital currencies are highly volatile and unpredictable. Many investors have made Incredible gains from the business, and many others are anxious about their Investment. So, when is the best time to sell cryptocurrency?
Well, it would actually depend on your ROI expectation. It is advisable to check your buying price and then decide how much return you are looking for it. If you are happy enough with a 50-100% profit, then set a bid of that amount. On the other hand, if you want a long term investment, and you are hopeful that eventually you will profit from it, then leave your virtual currencies for years in a secured wallet.
Day trading cryptocurrency as the name suggests is a short term nature. It is opposite to HODL where you buy a cryptocurrency and then keep it safe for a promising long term growth. Day trading is likely the fastest to earn profit in cryptocurrency but can be very risky considering that market is horribly volatile.
The main goal of day trading is to get into the market with a favorable position and exit at a profit in a short span of time. Since this imposes significant risks, day trader ideally should consider the following:
a.Never trade with money which you cannot afford to lose.
b.Get yourself familiarized. It would be best to train yourselves, acquire the right education and practice before you drench in trading. You might also want to consider getting a mentor or sign up to demo account which allows you to trade using fake virtual currencies until you fully develop your strategies.
c.Learn about blockchain and how it impacts the growth of cryptocurrencies.
d.Learn which cryptocurrencies to invest and trade. As of this writing, Coinmarketcap has listed 2071 cryptos.It is advised to do a little research on these digital currencies before you shell out your hard earned money.
e.Learn the basics of day trading and more practice.This is at least to minimize potential losses.
The laws surrounding cryptocurrencies are complex and are constantly changing. There are countries that have legalized cryptocurrencies and exchanges while other countries have banned them.
On a global scale, it is legal. Its enormous growth in the past years has led more countries to adopt and in fact issued guidelines on how people can use them. Unlike bank transactions where it needs a lot of personal details, cryptos offer anonymity between any account holders anytime, anywhere across the world. Although many fear that it attracts criminals and other illegal organizations, this skepticism prompted countries to develop rules and regulations concerning its use.
The US Department of Treasury has issued guidance and a number of tax laws concerning virtual currency. More and more large businesses, namely Dish Network, Dell, OSTK and even sandwich retailer Subway paved their ways toaccept bitcoin as one of its payment options.
Canada and Australia
Established number of tax laws for cryptocurrencies and allowed these virtual currencies for trading.
The European Union
Although it may have not issued an official stance regarding the use of cryptocurrency, however, it didn’t oppose to them. A decision has to be made by each individual country since a number of nations have accepted cryptocurrency in doing transactions.
Most asian countries if not all have legalized the use of cryptocurrency in their respective territories. Several warnings have been issued regarding its use, yet the buying and selling is not restricted.