Cryptocurrency for beginners

In the early days of its launch in 2009, several thousand bitcoins were used to buy a pizza. Since then, the meteoric rise of the cryptocurrency to US $ 65,000 in April 2021, after falling from 70 per cent to about US $ 6,000 in mid-2018, has been on the minds of many people. : cryptocurrency investors, traders or just curious who lost the ship.

How it all started

It should be noted that dissatisfaction with the current financial system has led to the development of digital currency. The development of this cryptocurrency is based on the blockchain technology of Satoshi Nakamoto, a pseudonym apparently used by a developer or group of developers.

Despite many opinions predicting the demise of cryptocurrency, bitcoin’s performance has inspired many other digital currencies, especially in recent years. The success with crowdfunding caused by the fever of the blockchain has also attracted those who scammed the unsuspecting public and this has caught the attention of regulators.

Beyond bitcoin

Bitcoin has inspired the launch of many other digital currencies, there are currently over 1,000 versions of digital coins or tokens. Not everyone is the same and their values ​​vary widely, as does their liquidity.

Coins, altcoins and tokens

At this point it would suffice to say that there are good distinctions between coins, altcoins and tokens. Altcoins or alternative currencies generally describe other than the pioneering bitcoin, although altcoins such as ethereum, litecoin, ripple, dogecoin and dash are considered in the “main” category of coins, i.e. they are traded on more cryptocurrency exchanges.

Coins serve as a currency or store of value, while tokens provide assets or utilities, an example being a blockchain service for supply chain management to validate and track wine products from the winery. to the consumer.

One point to keep in mind is that low-value tokens or currencies offer rising opportunities, but don’t expect similar weather hikes like bitcoin. Simply put, lesser-known tokens can be easy to buy, but they can be difficult to sell.

Before entering a cryptocurrency, start by studying the value proposition and technological considerations, such as the trading strategies described in the white paper that accompanies each initial coin offering or ICO.

For those who are familiar with stocks and shares, it is no different from the initial public offering or IPO. However, IPOs are issued by companies with tangible assets and a business history. Everything is done in a regulated environment. On the other hand, an ICO is based exclusively on an idea proposed in a white paper by a company – still in operation and without assets – that is looking for funds to start up.

Unregulated, so buyers count

“Unable to regulate the unknown” probably sums up the situation with digital currency. Regulators and regulators are still trying to keep up with the ever-evolving cryptocurrencies. The golden rule in cryptographic space is “caveat emptor,” which the buyer should be careful about.

Some countries are keeping an open mind by adopting an exclusionary policy for cryptocurrency and blockchain applications, while keeping an eye on scams. However, there are regulators in other countries who are more concerned about the cons than the benefits of digital money. Regulators are generally aware of the need to strike a balance, and some are looking at existing securities laws to try to control the many flavors of cryptocurrencies worldwide.

Digital wallets: the first step

A wallet is essential to get started in cryptocurrency. Think of e-banking but less of the protection of the law in the case of virtual currency, so security is the first and last thought in the cryptographic space.

The portfolios are digital. There are two types of wallets.

  • Hot wallets that are linked to the Internet that put users at risk of being hacked

  • Cold wallets that are not connected to the Internet and are considered more secure.

Aside from the two main types of wallets, keep in mind that there are only one wallet for one cryptocurrency and one for multi-cryptocurrency. There is also an option to have a multi-sign portfolio, a bit like having a joint account with a bank.

The choice of portfolio depends on the user’s preference, whether it is purely interest in bitcoin or ethereum, as each currency has its own portfolio, or you can use a third-party portfolio that includes security features.

Portfolio notes

The cryptocurrency portfolio has a public and private key with records of personal transactions. The public key includes a reference to the account or address of the cryptocurrency, as opposed to the name required to receive a payment by check.

The public key is available for everyone to see, but transactions are only confirmed after verification and validation based on the relevant consensus mechanism for each cryptocurrency.

The private key can be considered the PIN commonly used in electronic financial transactions. This way, the user should never disclose the private key to anyone and back up this data, which should be stored offline.

It makes sense to have a minimum cryptocurrency in a hot wallet, while the largest amount should be in a cold wallet. Losing your private key is as good as losing your cryptocurrency! The usual precautions for online financial transactions apply, from having strong passwords to being alert to malware and fishing.

Portfolio formats

There are different types of wallets available to suit your individual preferences.

  • Hardware portfolios made by third parties to be acquired. These devices work a bit like a USB device that is considered secure and only connects when required on the Internet.

  • Web-based portfolios that offer, for example, cryptographic exchanges, are considered popular portfolios that put users at risk.

  • Software-based wallets for desktop or mobile computers are mostly available for free and can be provided by coin or third-party issuers.

  • Paper wallets can be printed with relevant cryptocurrency data owned with public and private keys in QR code format. They should be kept in a safe place until needed during the cryptographic transaction and copies should be made in case of accidents such as water damage or printed data that fade over time.

Crypto exchanges and markets

Cryptographic exchanges are trading platforms for those interested in virtual currencies. Other options include websites for direct trading between buyers and sellers, as well as brokers where there is no “market” price but is based on a compromise between the parties to the transaction.

Therefore, there are many cryptographic exchanges located in different countries, but with different standards of security and infrastructure practices. They range from those that allow anonymous registration that require only one email to open an account and start trading. However, there are others that require users to comply with international identity confirmation, known as Know Your Customer and Anti-Money Laundering (AML) measures.

The choice of cryptocurrency depends on the user’s preference, but anonymous users may have limitations on the scope of trading allowed or may be subject to sudden new regulations in the home country of the exchange. Minimum administrative procedures with anonymous registration allow users to start operating quickly as they go through the KYC and AML processes will take longer.

All crypto transactions must be properly processed and validated, which can take anywhere from a few minutes to a few hours, depending on the currencies or tokens being traded and the trading volume. Scalability is known to be an issue with cryptocurrencies, and developers are working on ways to find a solution.

Cryptocurrency exchanges fall into two categories.

  • Fiduciary cryptocurrency These exchanges allow the purchase of fiduciary currency by direct transfers from the bank or credit and debit cards, or by ATMs in some countries.

  • Only cryptocurrency. There are only cryptocurrency exchanges that deal with cryptocurrency, meaning customers already need to own a cryptocurrency, such as bitcoin or ethereum, to “exchange” for other currencies or tokens, depending on the market rate.

Fees are charged for facilitating the purchase and sale of cryptocurrencies. Users should do the research to be satisfied with the infrastructure and security measures as well as to determine the rates they feel comfortable with as the different rates charged by the different exchanges.

Don’t expect a common market price for the same cryptocurrency with difference exchanges. It may be worthwhile to spend time researching the best price for the coins and tokens that interest you.

Online financial transactions carry risks, and users should heed warnings such as two-factor authentication or 2-FA, stay up-to-date on the latest security measures, and be aware of fishing scams. A golden rule about phishing is not to click on the links provided, no matter how authentic a message or email is.