There is so much blubbering, noise, chatter and contradictory information out there with respect to the digital currency world. Even seasoned investigators can have a challenging time trying to sieve through all the information they are continually bombarded with concerning crypto currencies. And for potential investors, it can not only be intimidating, but downright confusing as well.
If only you could have access to an unbiased and reliable source of concise information you could use, one to really decipher the truth from the misconceptions about cryptocurrency. This simple and comprehensive cryptocurrency investment guide has been carefully crafted to serve this purpose. It defines, outlines and expounds on the basis of crypto currency and what you need to know before you opt to invest in virtual currency systems.
Let’s commence by tracing our way back to the Genesis. It is highly possible that you have yet to hear anything about crypto currency and for those that have heard, you probably are still in quest for a proper definition of it. Rather than starting out with a technical term, herein is the simplest way to picture them: they are simply money on typical software systems/platforms.
It is very important to note that all the firms/teams who are the masterminds behind this project are simply not just establishing a new type of currency, but also a new software system.
Windows: A personal computers tailored software platform.
Dropbox: A storing and document sharing software platform.
To use any of these, you need a form of payment to get the program. To buy Windows license, you pay using your local currency. While if you buy a computer with it pre-installed, the package includes the license fee. You use your local currency to purchase a monthly or yearly Dropbox subscription depending on your preferred plan. And these two come with a database that is linked to it.
Windows: Its database is safeguarded in the local computer. Dropbox: Its database is safeguarded on Dropbox servers.
Cryptocurrency takes the place of your local currency which you use in purchasing these services. The subsequent database’ crypto currencies offer you is centered on a blockchain technology. Crypto currency is typically a digital currency structured to be anonymous and secure. But if the system is the same as the one of acquiring software is crypto currency then not like local currency? Not quite. Crypto currencies are designed to enhance an already existing software network or even system.
When you use the Western Union or even the PayPal to send money, you are typically and electronically sending local currency (fiat money). Nonetheless, that is the sole similarity. In some nations, electronic money sending platforms such as Paypal cannot go through with some transactions such as receiving/sending money (Nigeria). Cryptocurrencies seek to render financial operations more accessible and open to everyone across the globe as well. Others solve a number of issues as will be later highlighted.
CRYPTOCURRENCY: IS IT REAL MONEY?
Yes! The cryptocurrency concept is relatively new for a lot of individuals, it will obviously take a while before it receives the widespread levels of mainstream adoption associated with fiat currency systems. The great news is that Bitcoin has played a key part in carving the direction for this relatively new technology. Since this is a new concept to most people, it will take some time to become widely accepted.
This is where Bitcoin has been instrumental in paving the way for this new technology. For instance, Both Newegg (a website) and Stripe-a payment processor facilitates the acceptance of Bitcoin by online merchants. What stands out here is that other
coins such as Litecoin and Ether are not included. But Bitcoin is continually paving the way for other currencies.
CHARACTERISTICS OF CRYPTO CURRENCIES:
Cryptocurrency boasts several key features that give it an edge over conventional currency.
1. Decentralized: Unlike typical currency, crypto currency is not under the control of a single authority. It is controlled by a network comprising multiple elements working collectively. As such, it is impossible for it to have a meltdown or failure. Why? Even on the breakdown of one network, the rest of the networks continue operations since they function independently of each other.
2. East setup: As opposed to the use of the standard currency that requires you to go through unending procedures to get your bank accounts and other currency-related functions running, you can easily create a crypto coin addresses within seconds-devoid of nagging questions and absolutely free of charge!
3. Anonymity: Despite every cryptocurrency transaction being recorded in a secure public ledger called blockchain, personal details of the sellers and buyers including their names are not revealed-just their individual wallet IDs. This maintains transaction privacy and ensures transactions are not directly traceable to the concerned individuals.
Every cryptocurrency transaction is recorded in a public ledger known as blockchain. As such, if you have carried out a transaction, it is easily traceable back to the ledger and although the individual is not personally identified, records indicate his/her transactions.
WHAT IS A BLOCKCHAIN?
Currently, our personal information, financial information, and even passwords are all mainly stored in computer systems-whether in servers or cloud owned by various firms such as Google, Facebook, and Amazon. Even this article will probably end-up on one of the servers of a data storage firm. While these setups are convenient since they are controlled by professionals and securely safeguard data, they also come with various vulnerabilities.
As is now common knowledge, various parties can gain uninvited access to what is your personal data without your consent either for malice or other reasons. As such it is important to have a secure platform and this is what cryptocurrencies like Ethereum and Bitcoin among others seek to guarantee. But how do they do this? Both these currencies rely on a platform known as Blockchain networks.
Blockchain technology is simply a system of decentralized databases stretched across numerous servers online, each regularly updated to remain in sync. The underlying reason is to eradicate the conventional weak-points common with traditional setups. Moreover, with blockchain, the systems eradicate the need for a central controlling site such as banks and governments that dictate every occurrence. Rather, Blockchain depends on special peer-to-peer technologies in order to function.
Operating with numerous computers, the Blockchain then becomes transparent and more secure. In a simple definition, a blockchain is simply a database. Nonetheless, there is a distinct difference between a database and a block chain. In general, a customary database usually sits in either a single location or a computer. Unlike
traditional database provisions, block chain database allows the storage of data by numerous computers across the globe and for a much lesser fee.
The data in these particular databases is encrypted heavily and at times files are indexed in numerous data bits. This model ensures that the exposure of one particular piece of information does not lead to the compromise of the entire data set. If data on a particular server is compromised my malicious individuals, all the remaining copies in this database need to collectively agree’ that what was compromised was data altered legitimately. If the rest of the copies fail to agree, this change is then rejected with the data being altered to resemble the others.
While this is not a fully broken down explanation of this technology, it is sufficient to assist you in seeing all the associated advantages. Rather than boasting a single failure point, such as on one server, the blockchain comprises numerous copies of the original database spread across the globe eradicating the possibility of fixing’ or even cracking in the event of a malicious attack. This is well able to save of numerous funds for cyber security services and also software.
For instance: Assuming a cyber criminal accesses the systems of a bank and transfers every single amount into a bank account and subsequently erases the transaction traces, anyone using old-dated technology would certainly be screwed. On the other hand, with blockchain technology, users cannot lose their funds even where a server was maliciously accessed and fake transactions conducted. This technology basically makes it very difficult for cyber criminals who target online monetary investment and exchange systems.
CRYPTOCURRENCY FACTORS THAT YOU NEED TO CONSIDER:
Despite all crypto currencies being based on typical blockchain technology, they are all created distinctively. Some of the key differences that you require to understand prior to investing in cryptocurrencies include: ·
The speed of processing transactions. Currently available total supply. · Does the project have any big investors? Who are they? · Does this currency solve any real-world problem? · Is the background of the founders reputable?
While this only reflects a portion of the factors that you ought to take into consideration, once you begin to research on these factors, you will be in a position to identify whether your preferred cryptocurrency is either a scam or one that could serve its intended purpose. Moreover, with an understanding of these factors, you can well assess the long-standing viability of your preferred currencies.
WHAT ARE THE DIFFERENT CRYPTOCURRENCY USE CASES?
Virtually every digital currency comes with a diverse intended individual implementation and purpose, with inherent weaknesses and strengths. It is like Mac vs. Windows or Android vs. iOS. Below are several examples of different types of digital currencies and their main purpose. · Global Financial Transactions: Bitcoin, Litecoin, Ripple, Tether and Stellar Lumens. · Application Platforms: Ethereum,
Siacoin, Storj, and MaidSafe. · Private Transactions (Financial): Monero, Dash, and Zcash. · Specialty Currencies: ReddCoin and Game Credits. Carefully examine these diverse uses and identify one that blends with your interests. Afterwards, understand how every of these digital currencies works and then settle on one that will perhaps do well over time.
STORING CRYPTOCURRENCY: HOW TO STORE CRYPTOCURRENCY
With respect to fiat currency, you can safeguard them either in the bank
institutions and your wallet. This is pretty clear-cut. Nonetheless, with digital assets, the process is slightly different: Cryptocurrencies are stored in
Exclusive wallets’ on the blockchain. Wallets are simple addresses on the blockchain. Each wallet comes with both a public and private address. Public addresses are locations where individuals can send money to while private address represents a password’ which you utilize in accessing and dispersing your funds. Having
understood the basics of wallets used in storage of crypto currency, below are the different available wallet options:
1. Desktop Wallet: The most common type of wallet across all digital asset platforms. It is an app which links directly to the client.
2. Mobile Wallet: It is a wallet which operates and can be accessed through Smartphone apps.
3. Online Wallet: This is a typical web-based wallet. It does not mandate for the downloading of an app. In contrast, hosting of data is done on a virtual or real server. Some forms of these types of wallets are hybrid versions enabling private data encryption prior to sending it to an online server.
4. Hardware Wallet: This is dedicated hardware precisely structured to store and securely safeguard crypto currency. It is inclusive of USB devices. These devices can be used in making transactions online and then taken off for security and transportation.
5. Paper Wallet: This wallet allows you to print out an exclusive QR code both for private and public keys. This allows you to not only send but also receive digital assets by means of paper wallets. This enables you to completely refrain from storage of digital data related to your chosen crypto currency.
These are distinct marketplaces/platforms where individuals can trade crypto currencies. Some of the most common include 1. ShapeShift. 2. Poloniex. 3.
Coinbase. 4. Kraken. 5. Bitfinex. Each exchange comes with its exclusive set of rules and regulations and as such, you should educate yourself on and understand the requirements prior to using any of them.
HOW TO INVEST IN CRYPTOCURRENCY
With the success witnessed with Bitcoin and the inception of new cryptocurrencies, it is not surprising to see numerous investors clamoring to make out how to best break in and succeed in the cryptocurrency market. Nonetheless, cryptocurrency investment is slightly different compared to the usual investments in typical stocks. When you, for instance, invest in typical companies, you are basically purchasing shares of the firm and assuming ownership to a percentage of the firm.
With digital assets, however, on investment, you are awarded digital tokens which serve diverse functions as well. For Bitcoin, for example, you receive a partially anonymous and decentralized currency while with Ethereum, you receive some, a portion of the power which runs smart contracts and also the decentralized apps.
TOP CRYPTOCURRENCY INVESTING COINS
When deciding on the way to go with crypto currency investment, there are a number of ways you can go about it. Among the finest and most popular choices for investment include: 1. Bitcoin 2. Ethereum 3. Litecoin 4. Monero 5. Bitcoin Cash 6. Ripple 7. ZCash
INVESTING IN BLOCKCHAIN TECHNOLOGY
Blockchain technology is the underlying power of most available crypto currencies. However, there are various methods you can utilize to invest in the technology devoid of spending money on the cryptocurrencies. First and foremost, you need to have a closer assessment of blockchain start-ups.
Secondly, have a look at crowdfunding platforms since blockchain start-ups (during the early years) will typically depend on crowd funding to start off.
One platform by the name BnkToTheFuture enables investors to successfully put their funds into a number of blockchain start-ups and crypto coins. Another way is through investment in ICOs (Initial Coin Offerings) of relatively new blockchain plans. Blockchain firms issue crypto currencies /digital tokens by way of ICOs so as to raise funds.
BEST CRYPTOCURRENCY EXCHANGES
Currently, there are several numbers of platforms from which you can select from. The list of exchanges below is based on several criteria but mainly user reviews.
1. Kraken: Created in 2011, Kraken makes the list as the biggest exchange when we try to talk about euro volume and liquidity options as well. Not only does it facilitate the trading of cryptocurrencies but it also allows transacting between fiat and digital currency. Moreover, it supports different digital currencies such as Litecoin and Bitcoin.
2. Coinbase: Backed by dependable investors not to mention worldwide usage, Coinbase is among if not the most well-known and popular trading platforms and brokers globally. This platform simplifies securing the purchasing, using, storing and or even trading digital currency as well. Currently, Coinbase makes it possible for users to purchase crypto coins through a unique digital wallet now available on both iPhone and Android gadgets not to mention buying and selling from and to other users through their company subsidiary exchange Global Digital Asset Exchange (GDAX).
3. ShapeShift: This is among the best options that support different types of cryptocurrencies like BItcoin, Zcash, Monero, Dash among others. It suits any users looking to carry out a simple and instantaneous trades. This is done independent of reliance on platforms to hold their funds.
4. Poloniex: By far the largest Moreno trading market, Poloniex.com offers the deepest liquidity and the lowest of prices although this is accompanied by lowest privacy prospects. This platform requires you to provide your email address to facilitate the signup process. It is recommended to connect to it through Tor and preferably via an email account compatible with Tor. And similar to other online exchanges, you can withdraw funds from it to your exclusive wallet ASAP.
5. Bitfinex (BFX): This is a distinctive major crypto currency exchange based in Hong Kong. It facilitates a US dollar-based buying and selling of crypto coins. It is the biggest and leading exchange for Bitcoin trading allowing leveraged trading stretching up to 3.3 times together with advanced algorithmic types of orders. What’s more, in addition to being a high-security forum, Bitfinex is characterized by complex analytic charts to suit traders who prefer graphic trading types of experiences.
RISKS OF CRYPTOCURRENCY TRADING/INVESTING
Now that the basics are well known to you, what risks are involved with the investment of crypto currencies? Technology is prone to failure: Crypto currencies are based on systems and software designed by firms and individuals and as such, they are prone to failure. And failing they can do quite spectacularly. In the market, there is much talk revolving around several crypto currencies said to gain some thousand percent all in several months. What is unknown though is that much of this is hype and ignorance.
Similar to the Internet’ in its initial years of the unveiling, there was significant hype to it but it did succeed in changing the entire globe. When investing, it is important to remember that like all other available technological provisions, it can either meet the anticipated success or result in significant disappointment. Moreover, the market is now filled with numerous scam coins necessitating the need to take precaution and tread with intelligence. Learn on how you can distinguish between scams and exclusive currencies then make use of good risk management then submerge in the investment.
It necessitates Technical education. Let’s be honest, cryptocurrencies are a creation by super geeks. Similar to Linux, to effectively understand it, you need to be technologically conversant. You may not need to have full information on every detail, but if you have no knowledge of computers, then refrain from this investments-at least until more accommodating interfaces are built. Why? You could potentially lose significant funds in the process.
Nonetheless, you can identify an individual that is good with computers and technology to assist you in your endeavor. Numerous Technological risks and brokers as this remain an emerging technology, the number of unknown variables still remains at a high. If you consider Forex brokers risky, then you need to regard crypto currency brokers as at least double as risky. Not just for their anticipated shady undertakings, but also due to the variables associated with technology.
WHAT CAN INFLUENCE CRYPTOCURRENCY PRICES?
Below are some of the factors that can influence the overall price of cryptocurrencies:
Exchange Listing: Exchanges announcing the listing of a crypto currency can spark the asset into significant rises and as such as an investor, you need to take note. Listing especially in renowned exchanges opens a crypto currency into a wide audience and hence can inspire a huge boost.
Software Upgrades: Digital currency offers the least transaction times compared to any other currencies. One transaction can take a number of minutes to go through. Changing software can come with a number of consequences among them the splitting of coins or boost of its value. As such it is important that you take this into consideration.
Public Hype: Similar to the effect as can be inspired by fake tweets, crypto currency value can significantly be altered by public hype-Whether bad or good. As such, don’t be quick to dismiss any hype surrounding a currency since it also has significant influence in the markets also.
Wallet Improvements: Unlike traditional currency which can be safeguarded in banks, your wallet, or at home, cryptocurrencies necessitate for compatible wallets for safe storage. Bear in mind that digital assets are simply software. As such, wallet software ought to be well able to function with the characteristic cryptocurrency software. With proper wallets come influxes of technical investors.
Government Regulation: In the end, government regulation is among the main factors that can significantly influence a crypto currency’s value. One of the best instances is as is in Venezuela, a place where authorities have been continually arresting all Bitcoin miners on typical made-up charges. As such, many of them have gone underground or shifted their focus on other cryptocurrencies.
It is crucial to take note of ongoing trends with respect to government regulation then subsequently refrain from currencies which would otherwise be deemed illegal by the government institutions.
CRYPTOCURRENCY TRENDS TO LOOK OUT FOR
International Demand is expected to continue growing. Growing interests for crypto
currency particularly Bitcoin in China has seen the crypto currency value rise again. This trend is expected to continue with the interest from numerous nations inclusive of China and other nations. The popularity and use of crypto currencies will also improve courtesy of its prospective answer with respect to challenges that come with cross-border payment which traditional processes and currencies have not been able to solve.
Increase in Investment Involvement of Traditional Bank Rather than simply dismissing or being terrified of incorporating cryptocurrency, customary banks are currently making investments towards researching and developing blockchain and cryptocurrency related application. Major Banks across the globe are collaborating with cryptocurrency firms besides exploring how they can include blockchain into their individual processes, inclusive of global remittance as well as other methods of digital payment they are currently offering.
ADVANTAGES AND DISADVANTAGES OF CRYPTO CURRENCIES OVER FIAT CURRENCY SYSTEMS
1. EASY AND FAST PAYMENTS: Crypto currency payments are generally easy and fast.
The user just needs the address to which he intends to transfer the coins. The transaction would be completed in a matter of seconds.
2. SECURE: By using highly secure cryptography, transactions remain secure. The transactions can be authorized only from the wallet. However, the security of the wallet depends on users plus all steps they have undertaken to protect it.
3. ANONYMOUS TRANSACTIONS: The identity of users and their wallets are private. The addresses created for transactions are also private. However, transactions are public, traceable, and permanently stored on the network. IP addresses of users on the network are also logged. Therefore, it is advisable to use different IP address or hide your computer’s IP address for your transactions, if you want your identity to be kept anonymous.
Cryptocurrency operates on a “push” basis, whereby you send exactly what you want to the recipient or merchant without any further information. This model eliminates the incidences of identity theft. Conventional credit cards employ a “pull’ mechanism, whereby the merchant initiates the payment and obtain the subsequent amount from the holder’s account. When a merchant receives your credit card, they basically have access to your full credit line regardless of whether the transaction is for a small amount.
4. FRAUD IMMUNITY: Crypto currencies are virtual and essentially impossible to counterfeit. In addition, the sender cannot arbitrarily reverse transactions as is common with credit card charge-backs. This means that instances of fraud are significantly reduced or eliminated.
5. IMMEDIATE SETTLEMENT: Buying real property often involves several third parties such as Notary, agents, and Lawyers as well as delays and fee payments. Cryptocurrency blockchain is in many ways similar to a property rights database. For instance, Bitcoin contracts can be developed and enforced in order to add or eliminate third party approvals as well as reference external information. They can be completed at a future data for a fraction of the time and money required to settle traditional asset transfers.
6. ACCESS TO JUST ABOUT EVERYONE: An interesting fact is that currently, more people have access to mobile phones and the Internet than to traditional currency exchange systems. The figure stands at approximately 2.2 billion people. Crypto currencies have the advantage of being able to easily reach these people. A market of this size can only spell good news for the future of virtual currencies.
7. LOWER TRANSACTION FEES: When compared to traditional fiat currency exchanges, crypto currency exchanges exhibit significantly lower fees. Some exchanges carry no transaction fees. The reason for this is the fact that the currency miners currently receive compensation from the network. It is worth noting that charges might be present in the scenarios whereby users engage third-party services that create and operate their own wallets such as Coinbase. These services are likely to charge fees since they provide online exchange platforms for crypto currencies. They play a similar role to the one that PayPal plays for credit and debit card holders.
1. IRREVERSIBLE PAYMENTS: Transactions using crypto currencies are, generally, irreversible as there is no central authority which monitors these transactions for fraud and reversal. The only option of getting a payment back is if the person who received the funds issues a refund.
2. MAINSTREAM ACCEPTANCE AND ADOPTION: Being a relatively new currency form, the acceptance and adoption of crypto currency is limited. Not all (or even many) online merchants accept crypto currencies.
3. VOLATILITY: Since there are no recognized central authorities or bodies that can control the value of cryptocurrencies, they are susceptible to periods of considerable instability. This has often characterized by sharp increase and drop in market value. Bitcoin seems to have somewhat stabilized in recent years but was extremely volatile during its early years.
THE FUTURE OF CRYPTOCURRENCY
In reality, no one can accurately pinpoint exactly what will become of crypto currency but the projected outlook paints a largely positive picture. It would be safe to say that virtual currencies are here to stay and are the future of currency systems. While it is easy to discredit its usability as a mainstream currency especially because it is unregulated, unstable and closely linked to illegal activities, cryptocurrencies like Bitcoin are gradually forging their way into the global economy as a viable substitute for conventional fiat currency as is indicated by the relatively fair share of the global GDP (about $ 20 billion/ 0.025 %) it has control over.
Their usability is not just restricted to the financial sector but also extends to other industries such as Real Estate, Insurance, and even Technology. The fact that its underlying control system (blockchain technology) dispatches, confirms and settles transactions within minutes, has made it an option worth considering as signified by global firms such as Microsoft and IBM that not only seek to boost the transparency and security of their operations, but also want to improve the efficiency of their operations.
Finally, with an incorruptible informational database frameworks that record and safeguard all transactions and its subsequent ease of use, it is no surprise that surveys project a significant increase in the use of crypto currency over the next 10 years with sectors such as banking, insurance, and tech firms being widely linked with this development. Investment-wise, one can get an idea of crypto currency future outlook by analyzing Bitcoin and Etherium. These top disruptive cryptocurrencies aim to leverage blockchain technology to drive innovation within many industries.
Bitcoin can capitalize on its current user base and proven practicality. For this reason, the cryptocurrency is set to experience growth in the coming years. Etherium has a much greater variance due to association with speculation, hype, and news but has a lower expected value. Short-term investors can take advantage of Etherium’s varied outcome range while long-term investors can bank on Bitcoin’s relative value stability.
SHOULD YOU INVEST IN CRYPTO CURRENCIES?
If you are looking to invest in crypto currencies, it is highly advisable that you treat this investment in a similar manner as you would with any other high stake venture. In all simplicity, you have to realize that digital currency investments also exhibit the risks and benefits of decreasing or increasing a great percentage of your investment.
As I mentioned earlier, cryptocurrencies boast no intrinsic value besides what the buyer is ready to pay for. This makes cryptocurrencies prone to significant market swings, a phenomenon that increases the overall risk of losing for the investor. For instance, Bitcoin earlier fell from $ 260 to $ 130 within six hours back in 2013. If you cannot handle this type of volatility, simply refrain from investing in cryptocurrencies.
However, if you are seeking to make significant gains and can stick through the volatility that comes with such investments, the world of cryptocurrency is filled with many opportunities and can be extremely rewarding especially considering the sharp rises in value over short periods of time as exhibited with Ethereum following its release and Bitcoin throughout its 8 year history.