I considered titling this article “Everything you need to know about crypto”. Then I realized that that would be misleading since you cannot capture everything you need to know about crypto in a 5 minute read. Not even books and journals cover all of that.
Therefore, I decided to provide just the right amount of information to kick start your cryptocurrency journey. You will discover that there is always more to learn; even experienced crypto investors have to study to stay abreast with the market changes. So without further ado, let’s jump in.
Cryptocurrencies have become wildly popular in the recent past. This can be attributed to many things including its decentralized nature, its high transaction speeds, its universal nature, and its low transaction rates.
What is Cryptocurrency?
Contrary to popular opinion, cryptocurrency and Bitcoin are not synonyms. Bitcoin, as you are about to find out, is a cryptocurrency.
A cryptocurrency is a digital form of money whose operation is fully online. Most cryptocurrencies operate on blockchain technology. It has similar uses to our traditional currencies. For instance, cryptocurrency is a store of value as well as means of exchange just like the dollar or the euro.
Even though people no longer confuse cryptocurrencies for in-game virtual currencies like Robux in Roblox; it is a point worth noting.
There are thousands if not hundreds of thousands of cryptocurrencies in the market. Some of the popular ones include Bitcoin, Ethereum, Litecoin, Dogecoin, Cardano, BNB, Tron, and Bitcoin Cash.
Each one of these coins is unique for different reasons; some because of their use case, others because of their Blockchain among many other reasons.
Common Cryptocurrency Terms
There are a few crypto terms that stand out; for example, ‘decentralisation’. That word itself is responsible for most of Bitcoin’s success. If you have never come across that term before, it simply means that cryptocurrency is not controlled by any central authority, be it a bank or a government.
- Blockchain – a decentralized ledger that stores information publicly and permanently. It is probably the most exciting invention of this century and is right at the forefront of the 4th industrial revolution.
- Bitcoin – the first cryptocurrency ever invented; it is also the most valuable and popular coin of its kind. Its inventor is an alias by the name Satoshi Nakamoto who has since opted to stay anonymous.
- Coin – The native currency of any blockchain or crypto network, they often have the same name as the network. Its main and only application is the transfer of value on a given blockchain.
- Token – it is a unit of value that has more applications than just being a transfer of value. A token’s worth is attached to another crypto or blockchain asset.
- Crypto mining – the process through which cryptocurrencies are created and released to the market.
- Crypto trading – the process of buying and selling cryptocurrency on the appropriate channels.
- Exchange (DEX) – a decentralized platform that facilitates the buying and selling of cryptocurrencies.
- Altcoin – Any cryptocurrency that is not Bitcoin, people keep arguing on whether or not Ethereum is an altcoin. What do you think?
- Digital wallet – a software that safely stores the keys you need to access your cryptocurrency.
- HODL – a common cryptocurrency term that means to buy a coin or token and hold on to it as you wait for the price to surge.
- Market capitalisation – commonly known as market cap, is the total value of all coins that have been mined and consequently traded.
Top Cryptocurrencies by Market Cap
If you are new to crypto, it is advised that you limit your investment to the top 30 cryptocurrencies by market cap. These coins tend to be more reliable as they have a track record to maintain.
Here are the top cryptocurrencies by market cap:
Benefits of Crypto
Now that you have an understanding of cryptocurrencies, it is time to delve into their benefits.
- They are decentralised –the user is in full control of their money. They don’t have to ask for permission from a bank to use their money.
- Their pseudonymous nature – while they are not anonymous, the user’s details are certainly protected. You are identified using only a blockchain address and you can multiple addresses.
- P-2-P transaction – Crypto transactions are conducted directly between willing customers. This is not only faster but also more effective than banks because the user is at the driver’s seat of the transaction.
- No banking fees – say goodbye to overdraft charges, returned deposit fees, account maintenance, minimum balance fees, and so many others.
- Low transaction fees – the crypto transaction fees are often only a few cents.
- Borderless transaction – crypto transactions are not limited by geographical or social factors like borders or language barriers.
- Highly secure transactions – blockchain has ensured that a hacker cannot access your money without your private key. Your safety is your responsibility, so you need to be very careful.
Common cryptocurrency uses
As already mentioned, Cryptocurrencies have the same applications as fiat currencies:
- Store of value
- Medium of exchange
- Unit of account
- A standard of deferred payment
You should therefore expect to use them in the following ways in the future:
- Payment for school fees and tuition
- Payment for goods and services in retail stores
- Booking of hotels and airplane tickets
- Buying property (land, houses, luxurious cars, art)
- Investment (you can find some strategies here)
How do you make money from Crypto?
When most people think of making money from crypto, they immediately think of how to make money from Bitcoin. Once again, it is completely valid considering Bitcoin has created literal Billionaires, however, there is more to the trade.
A few years back before people started exploring crypto, there were only two ways to make money from crypto. You either had to undertake crypto trading or crypto mining specifically Bitcoin trading or Bitcoin mining. However, a lot has changed since then and there are a bunch of other ways to make money from crypto. Some of them include:
- Crypto mining – you solve a complex mathematics computation to create a new coin and are paid in crypto.
- Crypto trading – it involves a careful analysis of the market followed by selling low and buying high.
- Offering goods and services in exchange for Crypto – Blockchain and crypto uses are expanding into other industries. You can sell your art, property, or skills in exchange for crypto.
- Taking up a crypto related career – we have blockchain engineers and full-time crypto traders. They are paid in crypto
- Crypto gaming – the money that you earn in-game can be converted into crypto and used in the real world
- Crypto gambling – the explanation is in the name really; it is gambling using cryptocurrency.
- High Yield investments – due to the decentralization of crypto, most high yield investment opportunitie will only take deposits via crypto.
Get Started With Crypto
Ready to get started with crypto? Find out how you can earn $40+ in free crypto with Coinbase here.
Once you’ve done that, check out our top strategies on how to invest using crypto for daily returns here.