You might have been in the loop trying to find some headway in understanding the concept of cryptocurrency and how to get started with one of the biggest trends in 2023. Cryptocurrency is a revolutionary and limitless alternative to the archaic currency. However, it is essential to understand the whole idea behind this digital currency before delving into it. Therefore, this article provides a complete guide to growing your understanding of cryptocurrencies from the beginner level to the more advanced and experienced crypto enthusiasts.
What is Cryptocurrency
Cryptocurrency is a digital currency built on blockchain technology (decentralized peer-to-peer network) that uses cryptography to secure transactions. This digital asset forms a tightening bond with blockchain technology, the driving force enabling its decentralized nature. The core difference between cryptocurrency and other fiat currencies like dollars and pounds is decentralization, which eliminates government interference and control. Cryptocurrency has gained traction worldwide due to its seamless uses that transcend all life essentials, such as healthcare, financial services, manufacturing, etc.
You have to understand the concept of cryptocurrency. But that’s not enough because there are 22,932 cryptocurrencies in circulation with a total market capitalization of $1.1 trillion. It is essential to identify the few popular cryptocurrencies and their abbreviation:
- Bitcoin (BTC)
- Ethereum (ETH)
- Ripple (XRP)
- Solana (SOL)
- Cardano (ADA)
- Stellar (XLM)
- Uniswap (UNI)
- Litecoin (LTC)
- Polkadot (DOT)
- Chainlink (LINK)
How Cryptocurrencies Work
Cryptocurrency operates on a decentralized peer-to-peer network that leverages blockchain technology in recording transactions on the public ledger. This ensures that anyone can view any cryptocurrency transaction on the blockchain database. Although the transactions are visible to everyone, the names of the people running them remain anonymous. The public ledger plays a prominent role in the quick processing of cryptocurrency transactions; this is done by sharing the data across all computer networks, whereby each computer has to verify transactions to prevent fraud or double-spending.
Advantages of Cryptocurrency
The widespread adoption of cryptocurrencies among investors globally has signaled a change in the direction of the currency game state. This can be attributed to the satisfactory outcomes of cryptocurrencies over other fiat currencies. With cryptocurrency, you have the most flexible and efficient currency without government or financial institutions’ restrictions.
- Decentralization and Security
Cryptocurrency relies on blockchain technology; it is a decentralized currency that wrestles power from the big financial institutions and governments and gives it to crypto enthusiasts like you and me. No government can set cryptocurrency rates or the amount of them in circulation. Additionally, cryptocurrency’s security template is uncompromising unless you allow someone to access your wallet’s private keys. Furthermore, every crypto transaction is fully proof against any attack due to the scattered network of computers verifying each transaction before passing.
- Accessibility and Financial Inclusion
Crypto is an all-inclusive currency that allows equal access for everyone, irrespective of where you are. All you need to transact with cryptocurrency is just your mobile phone and internet connection. This differs from the fiat currencies that require a series of bottlenecks like identity verifications, credit checks, and other means before you can access them. The ease of transaction that cryptocurrencies offer enables people in rural areas to key into this idea and serve as a critical driver of financial inclusion.
- Potential for High Returns
Any cryptocurrency investment will surely yield a significant amount of profit. This is an excellent source of portfolio diversification by combining assets with fewer correlations to make stable and consistent returns. For instance, if your stock price decreases, your crypto asset potentially increases, which hedges you against any significant loss. Although cryptocurrencies are volatile currencies, a careful understanding of the crypto market enables safe and profitable investment.
Risks of Cryptocurrency
Some inherent downsides come with crypto investment, which people venturing into this domain should always note to avoid plunging into them.
- Volatility and Investment Risks
Cryptocurrencies are subjected to unexpected changes in the market sentiment, which can lead to devastating consequences if care is not taken. The sudden movement of the crypto price on the market opens you up to loss due to a quick drop in the purchasing price ranging from a few dollars to thousands of dollars.
- Security Concerns and Hacking
There have been various attempts by hackers in recent years that have engulfed the crypto space. The reason was linked to the inability to trace cryptocurrency. Hackers use multiple methods, such as phishing attacks, to access your crypto wallet or steal your private key to transfer your crypto to their wallet.
- Lack of Regulation and Scams
Series of crypto scams like blockchain attacks and fake ICO (initial coin offerings) have become rampant in the crypto space. Digital asset fraudsters capitalize on the lack of regulatory bodies to commit such heinous crimes. For example, the Sam Bankman Fried FTX scam has robbed people of $8 billion worth of crypto assets.
Getting Started With Cryptocurrency in 2023
Becoming a crypto enthusiast in 2023 comprises simple steps that involve choosing a reputable exchange platform, creating a secure wallet, and understanding the potential risks and different crypto investment approaches.
- Choosing a Cryptocurrency Exchange
Crypto exchanges function as banks or stock trading platforms that allow customers to purchase, trade, and exchange their cryptocurrencies for other assets. There are myriads of such platforms that necessitate the consideration of various factors before you select any. Here are some essential things to consider before choosing a crypto exchange platform.
- Carry Out Your Research
The ads churned out by different crypto exchanges might try to fool you into picking them. But it’s important not to fall for that and conduct a background check. You can research any crypto exchange by checking what others say through published articles online. Look into their history and see if they have security issues and how the exchange addresses them. Avoid any platform that doesn’t fit into these criteria and go for any that have an upright history of no security breaches.
- Select Exchanges With High Security
Any crypto exchange that doesn’t have a proper KYC (know your customer) protocol is terrible. There should be security and verifications needed before anyone can open an account. Any platform that falls short of that standard and allows people to open an account easily is unsafe. Therefore, you should look into these exchanges’ security levels before storing your crypto assets.
- Check for the Transaction Charges and Gas Fee
Gas fees are the charges required to conduct a transaction or other activity on the exchange. The price varies depending on transaction size, level of action, and the blockchain network you use for transactions. It would be best if you read up about the charges on these exchange platforms to understand how much they charge as transaction fees and their impact on your crypto exchange journey.
Popular Exchanges in 2023
Listed below are the most popular crypto exchanges in 2023 for beginners.
Essential Steps For Setting Up an Exchange Account.
Although there is no general process for setting up an account on all crypto platforms, with years of experience in this realm, each forum’s registration process is similar. I’ll outline some steps to guide you through creating an account on a crypto exchange platform using crypto.com as an example.
- Visit the crypto.com exchange website and click on the signup button.
- An onscreen instruction will pop up asking for necessary information such as your email, nationality, date of birth, etc. Then click on continue after filling in the boxes.
- Check your email box for a one-time password (OTP) sent to you.
- Return to the exchange platform to enter the OTP in the space provided. Then click on verify.
- Create your password and click the submit button.
- Verify your phone number by your country of origin. Select your country area code and insert your number in the drop-down by your left side. Check your phone for the verification code, input the code, and click on submit.
- At this stage, you have successfully created a crypto account and can have primary access to the exchange features.
Note: Depending on your goals, you might be asked to verify your account further to enjoy some advanced functionalities.
Types of Cryptocurrency Wallets
A crypto wallet is the medium of interaction between you and your chosen crypto exchanges. This allows you to store, manage, and trade cryptocurrency assets. The following are examples of crypto wallets.
- Hot Wallets
Hot wallets are faster and the easier option to trade your cryptocurrencies. The only downside is that they are connected to the internet, making them susceptible to hack attacks.
- Cold Wallets
A cold wallet is the most secure crypto wallet, which requires physical possession or access before you can spend or trade with it. They are not connected to the internet; therefore, it is tough for anyone to steal your funds.
Buying Your First Cryptocurrency
Purchasing your first cryptocurrency is a surreal experience that everyone should try to have a bite in. I will simplify this exciting process with five simple steps to get you started.
- Choose Your Favourite Crypto Exchange
To start purchasing cryptocurrency, you need to select a crypto exchange platform. Each decentralized exchange allows you to buy crypto easily, but they come with unique requirements that you must abide by.
- Create and Verify Your Account
Sign up on your chosen exchange, then verify your account with your details, email address, and phone number. The verification level required depends on the amount of crypto you plan to purchase. Federal regulations and security do this.
- Fund Your Crypto Account
There are two ways to do this: you can fund your account with a wire transfer or pay through your credit or debit card. Some processing periods go for hours or minutes and even days, depending on your credit card companies.
- Place Your Crypto Order
You should place your order once the money has been reflected in your account. Just hover on the token you want to purchase or enter its ticker symbols. Select the crypto you want to buy and write the amount you wish to purchase.
Real Life Cryptocurrency Use Case
Cryptocurrency has changed the way people see financial markets in the world. This was possible with each crypto’s unique use cases, enabling its widespread acceptance and use in various sectors of the world economy. The following are the most significant use cases of cryptocurrency.
- Crypto Staking
This is one of the best ways to earn passive income from your crypto assets. You must only participate in a blockchain consensus mechanism by staking your crypto assets. This allows you to validate a crypto block on that chain to earn a reward.
- Online Payments
You can pay for life essentials like cars, food, electronics, designers, jewelry, and more through cryptocurrency. Significant enterprises like Tesla, Mastercards, McDonald’s, Visa, and others have accepted crypto payments in recent years.
- Crypto Gaming
The recent boom in the crypto gaming industry has created another avenue for people to utilize their crypto assets. Popular NFT games like Axle Infinity and other allows you to gain endless fun by making in-game purchases with their cryptocurrencies.
- Store of Value
You can hedge against loss with crypto, most especially Bitcoin. Since they work on a supply mechanism and frequent burn measures, a limited amount of crypto is in circulation, which restricts any form of inflation. Buying crypto for future gain is an excellent investment since the value of crypt will increase with increased demand over time.
Cryptocurrency is a broader space with endless opportunities and possibilities. Getting into such a realm can be a game-changing experience for anyone with this simplified guide that brings you to teen with the introduction to cryptocurrency and paves the way for you to own one, invest, and use it. Follow the guide above to learn how to get started with cryptocurrency in 2023.
Disclaimer: “The articles on this website reflect the opinions of the respective writers and are not the opinion of Museigen.io. In addition, nothing in this article should be considered as financial advice. It is essential to conduct your independent research and consult with a qualified financial advisor before making any financial decisions.”