Cryptocurrencies have come to the fore in recent times and many people have simply rushed in to join the bandwagon. Before you do this, it is important to have as much information as possible. This article is a detailed guide to using cryptocurrencies and aims to explain everything that you need to know about cryptocurrency.
As noted, this is a sector that has become the most spoken or written about, concerning finance and investment. Many of these discussions have been about how these cryptocurrencies will democratize and simplify international e-trade, and soon become the mainstream currencies and forms of transaction in the metaverse. The information contained herein will put you in a position to be able to engage and interact on these platforms, using any of the many digital and virtual currencies that are known as crypto.
What Is Crypto?
Cryptocurrency is essentially any digital form of currency that uses cryptography to secure transactions. Cryptography is the ‘secret’ mathematics/messages/code behind the system of money that only the recipient can read. It’s the codes that keep the transactions safe. The codes to access your crypto and the blockchain that records and stores all transaction records are the basis of this virtual monetary system.
Cryptocurrency is a decentralized currency that doesn’t rely on banks for any regulations or fees for the transactions themselves. The control of the transfer of crypto and all the decision-making is done by the owner of the virtual money. It is about creating a trustless system. No one needs to trust or know each other if the transaction can be viewed and seen by everyone who has access to the ledger.
Even though the advertisements and marketing show depictions of coins and actual notes, these currencies are entirely virtual, and are not carried around in a physical state. It makes sense that, as we enter a time in human progress and development where the online space is becoming more important than the real world, we need the means to transact and interact financially that is safe, quick, and efficient. The argument is that Crypto provides this.
When Did Crypto Arise? The History of Crypto
Most people think that cryptos first made an appearance after the 2008 financial crisis, and to a great extent, this is true in terms of when Bitcoin became popular. However, as early as the 1990s, there were whitepapers and online rumors of digital cash and untraceable payments on the internet. E-cash and Hashcash were two of these early initiators, but arguably, were before their time and did not have the blockchain technology to back them up.
The global financial crash in 2008/2009 provided the impetus that crypto needed, and Bitcoin was the standard bearer. It emerged as a niche idea of money that was initially said to be for cyberpunks and techies alone, and was driven by tech-minded coders.
However, it is a currency format and type that then went viral. There were several reasons for this rise of crypto at the time, which need to be understood to provide a detailed account of the cryptocurrency.
At the time crypto became popular, there was a rise of a tech-driven counterculture. Silicon Valley was beginning to show how technology could indeed change the world and the internet had come into its own. It was these counterculture cypherpunks who were responsible for cryptocurrencies and, as such, it had a counterculture approach and wanted nothing to do with the authorities or regulators. It is important to recognize these roots of crypto to be able to understand its current challenges around anonymity and the inability to track the movement of huge sums of money around the dark web.
The Collapse of the Current Economy
As the financial crisis took hold, and spread from US bonds and unsustainable loans to vulnerable economies around the globe, a new way was sought to avoid total worldwide financial collapse. Hyperinflation and the total failure of entire savings and country budgets saw panic in the financial and banking world as had never been seen before. This pushed the crypto development at the time and cemented it as a concept that would avoid any repeat of any such financial meltdowns.
Ability to Go Viral
At the time crypto was emerging, so too was the ability to go viral and social media platforms and channels had begun to spring up. It may have taken a while, but as Gen Z caught on to the trend and the principles behind cryptos, like Bitcoin and many others, they bought into the system in a major way. It is still thought that over 94% of all crypto owners are millennials and Gen Z. It was these early adopters who made millions in crypto, as Bitcoin soared after it had gone viral across the world.
Crypto has since mushroomed into some of the most valuable currencies in existence and just rocketed in its use around the globe. There are even small countries in the less developed world that have taken to cryptos as a national form of exchange and trade.
The Main Cryptos Out There
- Bitcoin (BTC): This is the cryptocurrency that everyone knows about and is arguably the first working version of a cryptocurrency. It was started in 2009 by the world-famous and yet ever-elusive Satoshi Nakamoto, but only really took over popular culture and consciousness in about 2016. Yet, in 2011, a slew of other cryptocurrencies began to emerge that were also built on blockchain, which is an open-source technology. Bitcoin remains the dominant cryptocurrency out there, and with a final production total of 21 million, it was expected to reach its cap, but with each coin having the ability to be split even further, it is expected that there is still a great deal of growth left in the Bitcoin tank.
- Ethereum (ETH): This is the second-largest cryptocurrency platform. It is based on a smart contract and was set up initially to allow its users to make and trade in dApps (decentralized Apps). These are apps that run on blockchain technology and can be shared and amended and created to be shared, bought, and sold using Ether the currency of the Ethereum platform. As the world of dApps grew, so too did Ethereum, leading to Ether becoming the world’s second-largest cryptocurrency.
- Tether (USDT): This is a stablecoin and is based on a constant value to the US dollar. The idea was not to offer a means of investment, but rather a means of rating and trading other cryptos into established currencies, such as the US Dollar. Tether was the world’s first stablecoin, and these have become important to hedge against the volatility of other cryptos out there, providing a seamless way to change crypto into dollars and vice versa.
How to Get Involved in Crypto: A Step-By-Step Process
For many people out there, it can be a daunting task to get involved in a digital or virtual currency. Spending ‘actual’ money on something that you will never see, nor touch, may be a bridge too far for many. However, crypto is not too complicated and can be accessed in an amazingly simple manner. Simply follow these steps, and you will be well on your way to both an improved understanding of crypto, as well as a simple way to interact and transact in the metaverse.
Step 1: Decide on a Crypto
From the many cryptos out there, you will need to establish which one is for you and then do your due diligence around the currency. Now, this may take a while as there are now over 12000 cryptos out there. Decide what you want to do with the cryptocurrency, as this may determine exactly which crypto you decide to invest in. Only the top three have been included herein, but this may be different for you and will depend on what you want the crypto for.
Step2: Get a Crypto Wallet
You will need a crypto wallet to be able to convert cryptocurrency, and you will need to have a wallet in which to store the code key. The crypto wallet will provide access to your crypto account.
Step 3: Keep in Touch with Crypto Prices and Values
Knowing exactly what crypto is trading for and when is critical if you are going to be a successful trader and investor. Crypto is incredibly volatile and, as such, you need to know the value and prices of the crypto you have invested in regularly.
Step 4: Trade or Use the Crypto
The entire idea of having these currencies is to trade or use them. Once you have the crypto, look to use it or trade. Buying crypto is an investment decision or it is bought to be able to simplify online shopping. Either way, you will need to ensure that it is used to make it worth your while. Hoarding cryptocurrency will only end badly.
Step 5: Look to Buy Other Crypto or Digital Assets
Once you have been on a crypto journey, you will have the know-how to be able to buy other cryptos, as well as being able to venture into NFTs and other e-tokens.
Why Do We Need to Accept the Volatility?
Cryptocurrency is incredibly volatile with even the bigger currencies, such as Bitcoin and Ether, seeing huge spikes and drops in a matter of minutes. It has become one of the defining stories of the crypto rise and there are several reasons for this.
- Demand and Supply: This has been one of the main reasons for crypto volatility. For many cryptos, there is a limit to the number of coins or tokens that will be produced and, as such, there is a high demand for these limited cryptos such as Bitcoin, whereas the cryptos that have unlimited supply have not seen their value surge just yet.
- Speculation: The initial period of excitement when new crypto launches are one of the main reasons crypto has been so volatile. There is a rush to buy, a viral surge on social media platforms, the general public, and those in the specific sector rush to buy, causing prices to move upwards in noticeably short spaces of time.
- New Products: The fact that blockchain is open-source means that, as long as you have a credible idea and the wherewithal to design and develop, then you could design and release a cryptocurrency or token. With over 12000 variants of crypto now available, and this number growing all the time, we should expect some continued volatility.
The crux of the matter, however, is to be able to plan an investment journey in crypto that considers the inherent volatility and uncertainty of crypto. If you start from this premise, then the investment journey is likely to be more enjoyable.
Crypto Is a Monetary Revolution
To conclude, this introductory guide on crypto it is important to realize that crypto has been a type of financial and monetary revolution. These are currencies that have changed the way we think about money. There will also be further changes and the revolution is not yet over.
Cryptocurrency is here to stay, and although there may be some ups and downs, uncertainty, volatility, and misunderstanding, it is arguably the future of money and digital financial transactions. Many in the know argue that the market will stabilize and cryptos will provide for the same type of long-term investment that stocks, shares, and even the money market provide. There may be some uncertainty related to the continued rise of crypto values and the continued release on the market of new and innovative crypto and blockchain-based ideas. However, crypto is not just a flash in the pan or a temporary experiment. The future of crypto is bright and it is here now. The information contained in this article should allow you to engage in the sector should you now want to. Just remember to do some research before investing in any cryptocurrencies, to ensure that the one you choose aligns with your needs.