An Introduction to the Crypto World (Simple Language)
A few years age we started hearing about friends talking about bitcoin. When it was about $5000, and now its grown 11 times since we first heard of it. And again we now here other kinds of bitcoin we call Alt Coins which stands for alternative coins. You’ve probably heard of Ethereum, Dogecoin, Tether, Shiba Uni, BNB, BUSD etc. Well you’ve only heard a few, as in 2020 there were a total of 5391 Alternative Coins with different technologies behind them. So what are these so called crypto currencies? And how do you make money out of them. Lets dive into it.
Cryptocurrencies are digital currencies that were created as an advanced way for payment on goods and services online, the advancement was the cryptography technology that is used to make it more secure and decentralized. The mode of operation will take me another article to explain but, personally you don’t need to know the mechanism of a bank to use one or how ATM machine works on the other side to withdraw money from it. All you need to know is how to operate it from costumer side right? Now lets stick to that first.
About not being decentralized, the point is you don’t need a third party to keep these currencies going. A country needs a central bank to issue its currency, in cryptocurrencies you don’t need a central bank to issue these currencies which we call coins, they can be mined by anyone with the right facilities. Mining is a term used to mean anyone who works to create the next block (ledger) in a blockchain is a miner. I know your asking yourself what a blockchain is? In short a blockchain is an online chain of ledgers for recording cryptocurrency transactions which is duplicated and distributed around the whole network making it impossible to hack, change or cheat the system. For someone to complete mining he must be able to generate the next block rightly before everyone else does. There are about 1,000,000 miners of Bitcoin alone. With this the currency has an advantage of not being fraudulent. Cryptos are stored in someplace called wallets some sort of digital accounts. There are three types of wallet online wallet offline software wallet and hardware wallet.
Lets go into the history of Cryptocurrencies. The first cryptocurrency was introduced in 2009 as Bitcoin by Satoshi Nakamoto (No one Knows who he actually is, he hid his identity.). When it was introduced Bitcoin had a value of $0, with a reward of 50 bitcoins to every block mined. There is a limit to how many bitcoins can be mined which is 21,000,000 Bitcoins, where currently about 18,000,000 bitcoins have already been mined. The next cryptocurrencies were Litecoin and Namecoin which were launched in 2012 where others followed. Each with an advancement and technology that would suit the founders ideas. Some coins have high limits while others have no limits at all.
Why do most people anticipate cryptocurrencies as the next world currency, well there are a lot of answers to that but lets talk about a few. It is certain that we must evolve, the world hasn’t always used paper money for currency, it’s always the better system that outlives the other, the more cryptocurrencies are accepted and adopted for transactions the more likely they are to become the next global accepted currency, recently more companies have been accepting Bitcoin for payment which has spiked up its worth to where it is now. With the U.S federal government being one of the major holders of Bitcoin you definitely know the future of crypto is promising. Lately stores have been accepting dogecoin for payment, with rumors that Amazon might soon be accepting it too.
In the meantime most money from cryptocurrencies is being made by trading. With the number of Alternative coins you can imagine how many markets are out there. The difference between forex trading nd Crypto is that in crypto one can buy and hold the coins until they have a higher value and then sell them. With that option these currencies are much more like online money.
What to Consider before investing in Crypto?
- Do not Invest in a crypto you don’t understand. It is not wise to invest in anything that you don’t understand. For crypto its important to dive deep to understand the crypto. A few things you might want to consider is its technology, If it has a supply limit or not and its limit growth. Some cryptos are likely to grow slowly while others have no limit in growing. It is better to seek advice in buying coins from someone with experience.
- Do not invest in your life savings or money you are not ready to risk. Although the future of crypto is promising it is still a new technology and one must consider the possible risks of loosing your investment in crypto. It is irresponsible to invest in crypto with money you aren’t willing to risk.
- Consider it to be a long term investment. If you want to make fast money the chances are 50/50 with crypto most altcoins have made a jump in the recent years others have made major jumps after 7 years which includes Dogecoin. Its much likely that investing your money now will give you a good return in a few years.
- Do not buy coins from people you don’t know. Its better to buy coins from official sites such as Binance, Coindesk Robinhood and others where you are likely to besafe. Buying from un official sites and people might result in loss of funds and no reversal transactions.
- Have a reliable wallet to store your coins. Its impossible to hack the crypto system but not the wallets. Some wallet companies have been attacked by before by hackers and resulted in people loosing their coins. It is advised to store coins in hardware wallets where hackers cant reach them. That is if you have high valuable coins of at least over $1000 worth. For lower value coins just seek the most recommended wallets.
N/B: I personally believe in the future of crypto but take heavy caution dealing with it if you are interested in cryptocurrency please be cautious and be patient with your investments. All the best in your crypto journey. To the moon