Detailed Breakdown On How To Start Using Cryptocurrency
Everyone who has access to the Internet has repeatedly heard about the “magic” world of crypto-currencies. Their ordinary people become the most real investors and multiply their initial capital.
But there are also those who got there indiscriminately: did not know what to buy, where to store and how to use. Such “investors” quickly lose all their savings and began to shout that bitcoin is a deception and, in general, an attempt of world freemasonry to fool money from honest people.
Therefore, before you start using cryptocurrency, you need to at least learn the basic principles of working with it. For example, read this article.
Types of Crypto-currency
Cryptocurrency is a digital currency built on Blockchain. Cryptocurrency is also called “crypto”, “digital coins”, “virtual money” and any other combinations of these words. The king of the Crypto-currency is Bitcoin, launched in 2009 by a certain Satoshi Nakamoto. The real name of this person (or group of people) is still unknown.
To get Bitcoin, you have to mine it. Mining is the solution of complex mathematical problems on computers. In return for the decisions, the owners of computers receive coins, which are stored in the form of records on the blockade. Blockchain – this is like a digital account book, which is stored on the computers of all users simultaneously.
Blockchain cannot be fooled or faked. Even if you run a computer with a fake entry into the network, other computers will immediately equalize it and refuse to accept it. For successful hacking, you need to fill the network with fakes more than half – and this is almost impossible.
What is Altcoins?
The success of Bitcoin led to the emergence of alternative crypto-currencies (altcoins). The most important of them: Ethereum, Ripple, Litecoin, and Monero. They are also based on the blockbuster but are independent of the original algorithm. Therefore, they can use other types of encryption and process transactions faster.
As a rule, the prices for altcoins depend on the Bitcoin rate. In February 2017, when Bitcoin grew 18 times, the altcoins also significantly increased in price. And when Bitcoin started to fall – fell with him.
What are coins and tokens
Altcoins are a common name for coins (except Bitcoin) and tokens. But there is a difference between them.
Koins are a currency. They can be earned (mining) and spent on goods and services. Constructed exactly on Blockchain.
Tokens are more likely securities (shares), built on an auxiliary platform – for example, Etherium or Waves. They confirm the presence of a share in a project, and their cost depends on the success of the project. Tokens cannot be mocked, you can only buy. You can not directly spend directly, you can only sell for another currency or exchange for services of the company that issued them.
Why tokens are not worse than coins
Prices for coin are stable relative to the market and correlate with it. To invest in the coin is the same as investing in the market. As long as it grows, so does your savings. True, slowly.
Tokens are already shares. Their value is tied to the project they represent. If the project fires, the price of the tokens can grow at times in a few hours. But if it collapses, it will fall below the market.
Therefore, it is worth buying coins for those who just want to use the cryptocurrency and do not want to take risks. And tokens will suit risky investors who want to make money quickly and immediately.
How to spend cryptocurrency
Most people believe that it is impossible to purchase real goods or services for Bitcoin. But this is no longer a problem. Cryptocurrency is accepted by Microsoft, PayPal, Subway, Shopify, Virgin Galactic and dozens of other large companies. The full list is here.
Even if the company you need does not accept cryptocurrency, it can be exchanged for a solid, fiat currency, for example, dollars. The easiest way to do this is with a special bank card for the cryptocurrency.
But before you start using the card, you need a purse.
Choose a wallet
A crypto-currency wallet is an application, a program or a separate device for sending, receiving or storing electronic money. Below are five types, with a brief description of the advantages and disadvantages:
- Software purse (Bitcoin Core, Exodus). These purses store crypto directly on your computer. And there is a lot of room for this. For example, for a minimum installation of Bitcoin Core, you need at least 145 GB of hard disk space – and this is for only one currency;
- Online purse (Blockchain, Wirex). These purses are stored by your coins in the cloud. You can use them from any device, even from your phone. But you need to choose a purse carefully – if someone hacks it, you lose all the money. Therefore, carefully read the reviews of other customers before the final decision.
- Hardware purse (Trezor, Ledger). These wallets are separate devices, so it is much more difficult to hack them than a regular computer. But you need to constantly carry them with you, and also remember the PIN-code. And do not forget, otherwise you will be like Mark Frauenfelder!
- Mobile application (MyCelium, Breadwallet). The application for smartphones on Android or iOS, which allows you to manage your funds. A convenient, easy and fast way to store, but with a low level of security. In addition, if the phone is stolen, thieves will have full access to the wallet.
- A paper wallet (WalletGenerator.net or MyEtherWallet.com). A private and public key generated by means of a special site, which can be printed or written down. It should be remembered that except for a sheet of paper on which keys are written – they are nowhere else, so the loss is equivalent to the loss of all the money that is in such a purse.
Why online wallets are better
Most newcomers on cryptory choose online purses. And that’s why:
- Do not need to store hundreds of gigabytes of history on your device.
- The interface is convenient and understandable, you do not need to study it in addition.
- The level of security is usually higher than in mobile purses.
- You can use it either from a PC or from a mobile phone.
How the online wallet works
Online purses do not store cryptocurrency. They keep only public and private keys to your money.
A public key is an address to which other users send you money. By principle, it looks like an email.
Private key – a set of letters and numbers that allows you to access the money. If the public key is email, then the private key is the password to it.
Some do not like that the online wallet has their private key. But it is necessary for them to verify your identity. It’s like complaining that Google knows the password from your Gmail – how else can you prevent other users from reading your correspondence?
How to choose an online wallet
Get an online wallet – it’s a couple of minutes. But first, you need to find a reliable service. One that does not lose money to users or does not run away with them to Thailand.
Make sure before creating a purse that your coins will be stored in a “cold” pursue – a store that is not connected to the Internet. This is more difficult to crack
Study the company, its team, reviews about it. In the end, be sure that you are ready to trust money to a third party. And only then create a purse.
How to exchange cryptocurrency for fiat money
Fiat money is ordinary, hard money issued by a state. For example, a dollar or a ruble. And since many services do not yet accept crypto-currencies, we still need fiat money.
There are three main ways to transfer money from crypto to fiat:
- Currency exchange (Coinbase, GDAX). Choose an exchanger is as carefully as an online wallet. Check security, read reviews and reviews of other people who understand this. One unpleasant story that happened with the large exchange Mt.Gox, has already been discussed on the SmartSpate.
- Crypto-currency trading platforms. At these sites, sellers can find buyers – and vice versa. After the initial “meeting” on the site, users themselves decide how they will transfer each other’s funds. Usually, they meet personally or use bank transfers.
- Crypto-currency cards (Bonpay, Spectrocoin). Special bank cards for payment directly or withdrawing money from the ATM.
Maps are now unavailable for Europe and the CIS because the only card provider in Europe has ceased to exist. But many companies promise to release new ones in the next few months.
Why do not you believe the trading floors
Trading floors are very safe. But only at first glance. In fact, this is the riskiest method of working with crypto-currencies.
There have already been cases when thieves received bitcoins and did not send a translation with Fiat – and vice versa. Or they used for this purpose other people’s cards and the real owner then challenged the transfer. And at a personal meeting, users were instructed with a pistol and forced to transfer bitcoins for free.
Therefore, the crypto-currency trading platform is the last place where it is worth changing the currency.
What you need to know before entering the market Crypto-currency
The world is only trying to understand what kind of beast it is – “crypto-currencies”. Therefore, it is worth to prepare for the most different surprises. The whole market is frankly unstable, and prices change hourly.
For example, in February 2014, when Mt.Gox fell, the price of bitcoin fell almost half from $ 837 to $ 439 within a month. And in December 2017, the price of Bitcoin increased from $ 10,000 to $ 19,000, thanks to high-tech and high demand. In both cases, there were players who made a fortune – but there were also those who went bankrupt.
The price of a cryptocurrency is very much dependent on the media. News about regulations, quotations of famous personalities and other publications strongly influence the market rate. For example, the negative comments of the Minister of Finance of India led to a fall in the rate of $ 500.
Even the so-called “experts” are often mistaken. Therefore, it is important to have your own opinion and deeply analyze everything that is happening in the market.
How to learn more about the Cryptocurrency
Before entering the market, I advise you to read a couple of books to understand why crypto-currencies are created, how they work and who are the key figures in this field. One such book is Nathaniel Popper’s Digital Gold. This book is remarkable in that it is easy to read and tells a fascinating story about how and why it began almost ten years ago, and who are the people who stood at the origins of Bitcoin.
Also, choose the tools that will help you stay up-to-date: news sites (Forklog, Bits.media), mobile applications for easy information search and tracking changes in the market (Black folio, CoinCap), graphics and statistics (Coinmarketcap).
How to safely store cryptocurrency
A few useful rules that will help keep the money safe:
- Always make a backup of the private key. You can store it on a USB flash drive, but be careful, as many cases are known when such a USB flash drive was lost or damaged due to children or pets. Or write a private key on paper (it is not recommended to use the printer and print), but, again, store such a record in a safe place. The Winklevoss Brothers, famous crypto billionaires used this method, but in a more sophisticated way: they cut the key printed on paper and stored in different cells in the bank.
- Usually, private keys can be recovered using a passphrase, which consists of 12 or 24 words. Make a copy of this phrase as well.
- Create a mailbox that will only be used for this purse. Only for THIS WALLET.
- Use two-factor authentication wherever possible. Just install an application that will generate a password for your accounts and enjoy another level of protection.
- Choose reliable exchanges and exchangers, with a good reputation to avoid unpleasant consequences.
- Update the software regularly and install the latest version of the wallet that you are using.
Cryptocurrency is not just money, but technology, innovation, and business. Blockade gives us an amazing technology, the potential of which we still have to disclose. It gives us the opportunity to build an entirely new world where freedom, privacy and the protection of human rights are indispensable components of everyday life. Investing in the cryptocurrency can be a reasonable step towards such a future.