Very few people have not heard of Bitcoin these days. This cryptocurrency has made the headlines recently, which begs the question, “do we really understand what this is all about?”
Because, if cryptocurrency is the future of money, then we may as well get savvy about it.
How cryptocurrency began
Let’s begin with a simple definition, shall we? What, exactly, is a cryptocurrency?
Cryptocurrencies are a type of digital cash.
They are currencies that allow for instant direct transactions such as buying, selling or trading. Crypto transactions are stored in blockchains, which are digital databases or ledger systems. Volunteers all over the world, called “miners,” keep track of these transactions, in order to make sure that they stay secure and don’t get hacked.
Using cryptocurrencies, you can purchase items or transfer money easily from anywhere around the world, with few or no transaction fees.
If you’re wondering why they’re called “crypto” currencies, it’s because the transactions that are made using this digital cash are encrypted for purposes of security, in a process called “cryptography.”
One might say that cryptocurrency is the next natural step in the evolution of our money processes—i.e. using the credit card more and more in the 80s and 90s led to internet-based payment systems such as PayPal in 1998, which eventually led to the development of cryptocurrencies. The most well-known so far of these cryptocurrencies is Bitcoin.
Today, there are hundreds of other cryptocurrencies, which are all together known as altcoins (a portmanteau of “alternative” and “coins”). Among the better-known altcoins are Ether or Ethereum (ETH), Litecoin (LTC), Dogecoin (DOGE) and Monero (XMR).
Now, I’m sure that we’ve all heard about people who’ve made their fortunes through investing in cryptocurrencies. These digital currencies have not only been used for making purchases online, but people have actually bought these currencies and then sold them at a higher price, at times earning considerable amounts of money.
The Facebook video of that guy who earned more than $400,000 on a $10,000 investment certainly made the rounds in 2017.
What to do before investing in cryptocurrencies
But before you empty your savings or do anything drastic with your money, there are a few things to keep in mind before investing in any of the cryptocurrencies.
- Make sure you understand how cryptocurrencies, especially the one you choose to invest in, work. Get familiar with the pros and cons of this kind of investment. After all, every kind of investment involves risks.
- Do your homework, not just once, but regularly. What do I mean by this? Simply put, don’t stop with just preliminary research. Since things move very fast in the technology and cryptocurrency fields, make sure you stay updated by reading about the latest developments in these fields.
- Don’t be moved by FOMO, or Fear of Missing Out. Fear is never a good motivation to do anything. Just because the people around you have jumped on the crypto bandwagon because of the promise of big investment returns doesn’t mean you jump in with both feet immediately as well. Take your time with due diligence on research before you plunge in with a cryptocurrency investment.
- Start small. Having stressed the importance of doing your research, there’s nothing like hands-on experience to learn the ins and outs of how something works. When you’ve decided on a particular cryptocurrency to invest in, you may want to dip your toes in the water, so to speak, starting with a small investment that you can play around with.Open an account and buy the cryptocurrency of your choice, and then practice some trading. When you are comfortable with a small amount, you’ll be more confident in proceeding with a bigger one. But remember the age-old investment rule: Never invest more than you can afford to lose.
- Try joining a couple of Facebook or Telegram groups about cryptocurrency. One good place to start is the Captain Altcoin Crypto Community—there’s a lot to learn from other people’s experiences, and just even reading answers to questions. Another Facebook group is Cryptocurrency Collectors Club for Beginners, where a lot of newcomers go. On Telegram, check out Bitcoin Bravado or Crypto Guide.
To find out more:Recommend0 recommendationsPublished in