Cryptocurrency is an exciting new technology that has many people excited. It’s also a confusing and difficult space for beginners to enter, so we’ve put together some amazing crypto tips to help you get started. Read on for our 10 crypto tips for beginners.
What is cryptocurrency?
Cryptocurrency is a digital currency that doesn’t rely on central banks or trusted third parties to verify transactions and create new currency units. Instead, it uses cryptography to confirm transactions on a publicly distributed ledger called a blockchain.
That definition might seem downright cryptic right now. But, by the end of this overview, you won’t need a decryption key to understand crypto.
There are thousands of different cryptocurrencies in circulation, each with varying values. The first cryptocurrency, Bitcoin (CRYPTO:BTC), was developed in 2009 by a programmer using the pseudonym Satoshi Nakamoto.
In a 2008 white paper entitled, “A Peer-to-Peer Electronic Cash System,” Nakamoto provides the first description of blockchain. Blockchain is the technology that enables cryptocurrency to work like government-issued (fiat) currencies without the involvement of any central bank or trusted third party.
Specifically, blockchain solves the “double-spending problem” associated with digital cash. Since digital information is easily copied, digital money requires a mechanism that reliably prevents a currency unit from being “duplicated” or otherwise spent more than once.
The global financial system, as a collective entity, has historically been responsible for establishing and ensuring the legitimacy of monetary transactions.
The validity of cryptocurrency is established and maintained without any involvement by the world’s central banks. Instead, ledgers of cryptocurrency transactions are publicly maintained. Transactions verified by blockchain technology are immutable, meaning they cannot be changed. That prevents hackers from producing fraudulent transaction records and establishes trust among users.
How cryptocurrency works
To make a cryptocurrency transaction, you need a wallet for that digital currency. A cryptocurrency wallet doesn’t actually hold any currency; it merely provides an address for your funds on the blockchain. A cryptocurrency wallet also includes private and public keys that enable you to complete secure transactions.
You can buy or sell cryptocurrency using a cryptocurrency exchange. Exchanges, which can hold deposits in both fiat and cryptocurrencies, credit and debit the appropriate balances of buyers and sellers in order to complete cryptocurrency transactions. You can also use cryptocurrency to buy something such as a product or service.
Every time you buy cryptocurrency or use it to complete a purchase, you authorize the movement of a specified amount of the cryptocurrency from your wallet address to the wallet address of the seller. The cryptocurrency transaction is encrypted with your private key and pushed to the blockchain.
The cryptocurrency network’s miners access your public key to confirm that your private key was used to encrypt the transaction. Once the block that includes your transaction is confirmed, the ledger is updated to show the new cryptocurrency balances for both your address and the seller’s address. This entire process is conducted by software.
Why is it called a blockchain?
A block is a collection of transaction data on a cryptocurrency network. It basically states that Person A sent this amount of the cryptocurrency to Person B, Person X received this much cryptocurrency from Person Y, and so on.
A block includes a reference to the block that immediately precedes it. The blocks create a chain, linking one to another through references to prior blocks. To change a block in the ledger, a hacker would have to reproduce the entire chain of blocks following it since not doing so would create a chain of invalid references that would not be accepted by the cryptocurrency network.
Blocks include additional information that further enables the cryptocurrency network to verify the validity of the block. The proof-of-work method of establishing distributed consensus relies on cryptocurrency miners using high computing power to add blocks to the blockchain. The computing power solves complex puzzles such as math problems for which solutions are easily verified as being correct. The miners are typically rewarded with cryptocurrency and transaction fees.
New blocks cannot be added to the blockchain without a miner computing a valid solution to the block’s puzzle. With every transaction, the blockchain grows longer and the amount of computing power required to add a new block increases. The blockchain, by design, becomes increasingly tamper-proof; a hacker today would need computing power equivalent to the majority of the computing power on the cryptocurrency network to successfully alter transactions.
Another method of establishing distributed consensus to add to a blockchain is known as proof of stake. Instead of requiring vast amounts of computing power, the proof-of-stake method enables the cryptocurrency holders with the most wealth or the oldest stakes to create blocks by verifying transactions.
Stakeholders are selected semi-randomly. Additional mechanisms are in place to prevent the wealthiest individuals from creating fake transactions or otherwise exerting too much power over the blockchain.
These are the five largest cryptocurrencies:
|RANK||COIN NAME||MARKET CAP|
|3||Binance Coin||$93 billion|
Crypto Tips you Should Know
1. Be patient and never leave money on the exchange.
It’s tempting to think you can chalk up somemoney by leaving your tokens on exchanges long-term instead of withdrawing them.
Exchanges have been hacked in the past, and whilst it’s unlikely to happen to you personally you should make sure your is safely stored in a wallet like ledger nano s.
2. Take care when entering your private key into any website.
Many exchanges market themselves as ‘online wallets’ which store your tokens securely on their servers instead of on hardware equipment like ledger nano s.
3. Do Your Own Research
Always obtain 3-5 different opinions before making any investment decisions.
Don’t ask yourself too many questions when choosing what to invest in. Cryptocurrency Isn’t a get rich quick scheme. Although it has already has proven its worth in places of high economic uncertainty, but it comes with just as many risks as any other investment so don’t invest money you can’t afford to lose.
4. Don’t spend it all at once in an investment
There is no guarantee that prices for any coin will go up forever, so if you invest money into currency make sure you can afford to lose it all – never put your life savings on or moneys that you cannot afford to lose.
The market is still an emerging market and currencies are volatile, making them a risky investment. Currencies have seen massive rise in value over the last year but this may not always be the case – learn to take profits and cut your losses.
5. Choose the right wallet when trading
Currency wallets are software or hardware tools that store on your computer and facilitate transactions,currency experts suggest you need to choose wisely when selecting a wallet as the security of your will depend on it.
Currency users can opt for desktop, mobile or online wallets to house their investments, however only use verified crypto exchanges. There is no such thing as an official bitcoin wallet but using the right website can help make sure your investment is secure by choosing one that has been recognized by other investors.
7. Don’t expect to get rich quickly
The price of coins like bitcoin has seen massive appreciation over the past few years but this is not a get rich quick scheme. Currency investors should expect to hold currencies for the long term, for them to be worth any value, this means you need to see considerable fluctuation over time before they can appreciate in price
8. Only invest what you can afford to lose
Don’t put more money into currencies than you can afford to lose I.E if you have $5000 then only use $2000 for your investment, currencies are still seen as high risk investments despite their popularity and interest from large financial institutions– remember if you do take a bigger risk with currencies you can earn a greater return, currency investors should be prepared that are still not as stable as real cash.
9. Read Cryptocurrency news
News is important to follow for news because it portrays the market in various ways, this determines what people think about currencies and what their value might be in the future which means traders need to pay attention to news.
10. Avoid forums or some websites that contain code that can be used to obtain access to your personal details
These types of sites should be avoided at all costs especially if they’re asking for personal information such as verification documents. Never give up any private information such as private key or passwords to cryptocurrency exchange websites.
How to mine cryptocurrency
Mining cryptocurrency is the process of using your computing power to verify transactions on the blockchain. When you verify a block, you receive a reward and collect some fees from the transacting parties.
In order to get started mining cryptocurrency, you’ll need to have a computer you can dedicate to the process. You’ll need a computer with energy-efficient processors in order to make sure you don’t spend more on electricity than you earn from mining.
There are really only two viable processor options to mine most cryptocurrencies: GPUs or ASICs. A GPU is a graphics processing unit typically found in gaming PCs or high-end PCs used for graphics rendering. ASIC stands for application-specific integrated circuit. It’s a chip designed specifically for one task — mining a certain cryptocurrency.
The advantage of ASICs is that they’re far more efficient. The disadvantage is that they’re much less flexible at what you can mine using them, and they’re more expensive than GPUs.
Once you have the hardware, it’s just a matter of setting up a cryptocurrency wallet and some mining software. Be sure to store your mining computer in a cool and well-ventilated part of your house since it will generate a lot of heat. And make sure you keep it connected to the internet in order to mine all day.
Once everything is set up, it’s a pretty hands-off process. However, you need to keep an eye on the cryptocurrencies you mine. A sharp drop in price could make the operation unprofitable.
With these crypto tips, you should be set to go and start investing in crypto. If there are any other questions not covered here that you can’t find the answer to, please use the comment box to ask questions. We will always do our best to provide a helpful response as soon as possible.