Everything can be done on the internet! It made life a lot easier and more convenient but it also gave way to the rise of digital money such as cryptocurrency. So, what is cryptocurrency? You might have heard of Bitcoin or XRP in online forums and the news or maybe you’ve seen it while paying for something.
Crypto has taken the world, especially its banking sector, by storm. Many finance experts discuss how it can be the future of money so it’s always a good idea to find out what the hype is all about. Learn everything you need to know about cryptocurrency in this complete guide for beginners!
History of cryptocurrency
Before you look into the answer to the question ‘What is cryptocurrency’, let’s go back to where it all began first. The starting point of cryptocurrency dates back to the early 1980s when American cryptographer David Chaum devised a ‘blinding’ algorithm which became the basis of web-based encryption today.
It gave way to secure and fixed transferring of data between two parties which is later known as ‘blinded money’. This process is now the basis of modern electronic currency exchange. In the late 1990s, software engineer Wei Dai created a white paper on b-money that put forward the concept of complex anonymity and decentralization.
In the following years, a handful of virtual currencies were developed but most of them never took off. The first modern cryptocurrency is considered to be Bitcoin which was outlined in 2008 by Satoshi Nakamoto.
By 2013, Bitcoin made headlines when unsuspecting holders became instant millionaires. Since then, crypto gained traction as more virtual tokens and altcoins break out in the market.
What is cryptocurrency?
In the most basic sense, cryptocurrency is a mode of online payment for any goods and services. It uses cryptographic protocols or complex code systems to encrypt and secure the exchange of sensitive data.
With advanced math and computer principles, it also masks the identities of crypto users as they also dictate the supply and value of crypto instead of a central influence. This decentralized tech that serves as the master ledger across many computers is called blockchain.
As the name suggests, every crypto transaction is permanently added to the blockchain, linking together its first trade to the most recent one. This prevents double-spending or the exploit of its code.
Its other safety feature is the use of public and private keys. A public key is the crypto code that facilitates the transfer of crypt from one account to another. It is used to confirm the digital signature of the crypto and prove ownership of the private key.
On the other hand, a private key is used to verify a holder’s ID and transact with other people. It’s composed of numbers between 1 and 78 digits long. Only those with a private key can use their virtual assets so losing it means losing your holdings forever.
On the other hand, crypto mining allows new coins to be brought into the current supply. A miner collects, verifies, and sorts data into blocks for public record. This process involves solving complex math problems done by high-powered computers. For this, miners are given tokens such as BTC as a block reward.
How to invest in cryptocurrency?
As crypto is one of the topics of intense discussions today, many people are trying to invest in it. If you are a total novice in the market, you may not be able to obtain crypto through mining.
For beginners, the most popular way to get started with crypto is buying it on an exchange site. There are also crypto wallets that allow users to buy and sell a range of virtual currencies. It also allows you to send these assets to an exchange site for trade.
Crypto exchanges are online platforms where you can trade digital currencies for other assets such as fiat or vice versa. Some of the top exchanges in the market today are:
- Coinbase – It’s the largest Bitcoin broker that also allows the purchase of other coins such as Ethereum and Litecoin. It has high liquidity and buying limits with a straightforward process perfect for beginners.
- Binance – It has a wide range of digital assets you can buy and sell at the lowest fees. It also accepts more than 40 fiat currencies to trade for crypto tokens and altcoins.
- Bisq – It’s a decentralized and highly secure exchange that supports peer-to-peer trade whether it’s in crypto or fiat-crypto.
- Gemini – It’s the first licensed Ether exchange that also accepts other tokens such as Bitcoin and XRP, and even fiat money.
Meanwhile, crypto wallets can store public and/or private keys, as well as view and transact with your virtual holdings. There are different types of crypto wallets you can choose from such as:
- Hardware wallet – It is also known as cold storage as crypto is stored offline. It appears like a USB flash drive with built-in advanced security features so other people cannot access it.
- Software wallet – It is also called a hot wallet because you can access it on the internet. Unlike hardware wallets, you can download and use this wallet for free.
- Mobile phone wallet – It is an app-based wallet available for Android and iOS users.
- Web wallet – It is a short-term platform for moving crypto that can be accessed via the web.
- Paper wallet – It is another offline method of holding crypto where you print QR codes of your public and/or private keys. It is also considered the safest wallet, especially for long-term investors.
Examples of cryptocurrencies
Today, there are more than 6,700 different crypto tokens and altcoins that are publicly traded. Here are some of the top crypto you can invest in:
- Bitcoin (BTC) – It is the most widely used token that brought the crypto movement into mainstream finance. Its supply limit is about 20 million units.
- Litecoin (LTC) – It is the second most popular crypto with a supply limit of 84 million units.
- Ripple (XRP) – It is one of the most easily convertible tokens and a fast transaction confirmation and blockchain creation times.
- Ethereum (ETH) – It fuels smart contracts meant for peer-to-peer trading. Its supply is not capped but is determined by the members of its community.
Bitcoin (BTC) $ 34,448.00 0.44%
Ethereum (ETH) $ 2,150.36 1.82%
Tether (USDT) $ 1.00 0.25%
Binance Coin (BNB) $ 298.23 2.22%
Cardano (ADA) $ 1.21 2.69%
XRP (XRP) $ 0.599203 3.06%
USD Coin (USDC) $ 1.00 0.24%
Dogecoin (DOGE) $ 0.197555 1.43%
Polkadot (DOT) $ 13.44 3.63%
Binance USD (BUSD) $ 1.00 0.26%