If you’re looking to make some extra cash, Cryptocurrency has become a new trend, amazingly popular, among digital users and investors.
At the beginning, it may seem a bit tricky to understand and to keep up with the value and all the functions of digital currency but don’t worry! We are here to help you get started. Furthermore, you don’t need to be an expert on computer programmer, business or finances to follow up on the Bitcoin exchange. However, Cryptocurrency investing still involves some technical and security issues that you need to be aware of before you start.
First, let’s make sure you learn everything you need to know about the world of digital currency before you enter it.
What is Cryptocurrency?
Cryptocurrency is a form of payment that lets you buy goods and services or trade them for profit. But unlike other currencies, cryptocurrencies are digital and use cryptography to secure online transactions. First, you’ll need to exchange real currency for cryptocurrency to be able to access the goods or services you wish to invest on. Many companies provide their own currencies, often called tokens, which can be traded specifically for their products. By using a decentralized technology called ‘Blockchain’, this currency is able to spread across many computers, that manage and record transactions, with security. In this process, cryptocurrency removes central banks from managing their own money supply, which tends to reduce the value of money via inflation and creates a more safe network.
We know it may seem hard to believe that a digital currency could be worth thousands of dollars. But it’s actually pretty simple: Because it generates cash flow, for you to profit, someone has to pay more for the currency than you did. Nevertheless, this cash flow creates price volatility. Why spend bitcoins when they could be worth three times the value, next year?
Bitcoin (the most popular cryptocurrency), for example, has value in part because it has transaction costs that are much lower than credit cards, but they are scarce and are increasingly becoming more and more difficult to obtain, over time. The rate that they are produced is cut in half about every four years, therefore, if the demand for bitcoins exceeds the rate at which it can be produced, the price will increase. Bottom line is that the value of Bitcoin will always depend on the faith of investors, its integration into financial markets, and public interest in using it.
When you purchase using the U.S. dollar, banks and credit card companies verify the accuracy of those transactions. By using a decentralized algorithm, Bitcoin performs this same function at a lower cost using a system called hashing. When the payment is performed using bitcoin, computers on the blockchain rush to check that the transaction is accurate. In order to add new transactions to the blockchain, a computer must solve a complex mathematical problem, called hash. If they succeed, they are rewarded with more bitcoins – this type of computer engineering process is called ‘Mining’.
How do I invest on Cryptocurrency?
For you to enter this world you’ll need: a digital wallet, personal identification documents, a secure connection to the Internet, a method of payment, and an account at a cryptocurrency exchange platform. Privacy and security are the main bases of Cryptocurrency, so you’ll need to have access to a private key. It’s a sophisticated form of cryptography that allows a user to access his or her cryptocurrency, while helping the system to protect them from theft and unauthorized access to funds.
First, a no-brainer: make the private key secret! Also, be aware that anyone you make a transaction with can see the balance in the public address that you use. On the blockchain, only a user’s public key appears next to a transaction, making them confidential, but not anonymous.
Now, before going on board with some investments, always ask yourself these questions:
- Who owns the company? An identifiable and well-known owner is always a positive sign.
- Are there other major investors who are investing in it? If yes, that’s also a safer bet.
- Will you own a stake in the company or just currency or tokens? If it’s the first, that means you get to participate in its earnings, but if you’re just buying tokens you’re only entitled to use them, like chips in a casino.
- Is the currency already developed, or is the company looking to raise money to develop it? The farthest the product is in its production line, the less risky it becomes.
Now that you hopefully have the gist of what you need to understand about the world of Cryptocurrency, especially Bitcoin, let’s narrow it down to 4 simple steps that will help you swim in the adults’ pool!
1. Get a Digital Wallet
This is a wallet to store Bitcoin (or other cryptocurrencies) and, in other words, an online app that can hold your money. In general, you can create an account on an exchange platform, and then transfer real money to buy cryptocurrencies. Sadly, you’re not able to choose the brand of the wallet.
In this business , the options you need to choose from are ‘software’ and ‘hardware’ wallets.
Software wallets are mobile applications that connect with your traditional bank account. They allow you quick and easy access to bitcoin, but the downside is that they put your money in the hands of a third-party company. Although the leading process of software wallets are trustworthy, in the past, popular third-party companies have collapsed, or been hacked, which can create a bit of a risk. So, when it comes to Software Wallets, remember to pick wisely! Coinbase is the most popular app and website for beginners. It is connected directly to a bitcoin exchange, which simplifies the buying and selling process, and stores 98% of customer currencies offline for added security. Blockchain.com is also another top wallet connected to a bitcoin exchange, as well as Mycelium – considered one of the most secure mobile wallets, even though it can be a little bit harder to use.
On the other hand, there’s the Hardware Wallets. They are a bit more old-school but are generally considered to be more secure, mainly due to the fact that they are kept offline. These types of wallets store a user’s private key on a physical hardware device similar to a flash drive, which prevents hackers from accessing that key through an Internet connection.
2. Connect it to a Bank Account
By linking a bank account to your digital wallet, you can buy and sell bitcoin at the same time you deposit that money directly into your account. Transactions using a bank account are generally recommended for beginner investors, even though it can take four to five days to process on Coinbase.
On the other hand, by using a debit or credit card, you’re able to buy bitcoin, almost instantly. However, on Coinbase exchange, debit cards can only be used for purchasing crypto in smaller amounts, as well as the downside of the lack of cooperation between both systems, meaning users aren’t able to sell bitcoin or deposit money into their bank account if their wallet is connected to a debit card.
3. Join a Bitcoin Exchange
These are online marketplaces where you can trade bitcoin for traditional currencies (dollars, euros, etc…) Make sure you analyze the exchange rates before you make a transaction. Now, these platforms can vary in reputation, reliability, security, processing fees, exchange rates, and diversity of cryptocurrencies. Even when two exchanges trade the same cryptocurrencies, they usually offer slightly different services. We’ll offer you our top recommendation apps to get you started in Cryptocurrency, but if you’re looking for a more complex and detailed guide on the best ones of 2020, check out this list.
- Coinbase: An App for beginners who want to make the jump and learn more about some of the most popular options, or just simply want to buy crypto as a fun hobby. As we’ve mentioned previously, here you can use your bank account or a credit card to buy some of the most popular cryptocurrencies. A big plus is that it even has a new education section where you can follow instructional videos and learn more about the business.
- Square Cash: The best for “on the go” kind of app and a leader in peer-to-peer money transfers. The Cash app comes from Square, a company that makes, among other things, mobile credit card readers. Because it has a diversity of products, you can store your bitcoin in your Square Cash Account, rather than a separate digital wallet.
- Robinhood: The best for Bitcoin on a budget. Allows users to trade cryptocurrency without a fee and stores bitcoin in the same Robinhood account that is used for stocks. It’s a mobile version that only recently added a web platform, so it is best for people comfortable managing money from their phone or tablet.
- Crypto News Scoop: It’s the best Crypto News App for traders of any level who want fast and reliable information on the cryptocurrency market.
4. Place Your Order
The final step! By now, you’re ready to go! You should have everything you need to start following up the Crypto world. Don’t forget to always verify the background transactions before buying or trading any cryptocurrency and keep in mind that if it has a lot of detailed information, the more legitimate it is and, consequently, the better are your chances. But even legitimacy doesn’t mean the currency will succeed so make sure you study the market before you make the move and, finally, go get yourself some coins!