In the early days of its launch in 2009, several thousand bitcoins were used to buy pizza. Since then, the meteoric rise in cryptocurrency to US $ 65,000 in April 2021, after a heartbeat in mid -2018 of about 70 percent to almost US $ 6,000, has baffled the minds of many people – investors in cyptocurrency, traders or simply curious who. missed the boat.
How it all is
Keep in mind that discontent with the current financial system has led to the rise of digital currency. The development of this cryptocurrency is based on blockchain technology by Satoshi Nakamoto, a pseudonym apparently used by a developer or group of developers.
Despite the many opinions predicting the demise of the cryptocurrency, the performance of bitcoin has inspired many other digital currencies, especially in recent years. The success of crowdfunding caused by blockchain fever has also attracted the scammers of the unsuspecting public and it has come to the attention of regulators.
More than bitcoin
Bitcoin has inspired the launch of many other digital currencies, There are now more than 1,000 versions of digital coins or tokens. Not all of them are the same and their values vary, as does their liquidity.
Coins, altcoins and tokens
Suffice it to say at this point that there are good differences between coins, altcoins and tokens. Altcoins or alternative coins often describe other than pioneering bitcoin, although altcoins such as ethereum, litecoin, ripple, dogecoin and dash are considered to be in the ‘main’ category of coins, meaning they are traded. on more cryptocurrency exchanges.
Coins serve as a currency or store of value while tokens offer goods or equipment, for example a blockchain service for supply chain management to validate and track products. of wine from the winery to the consumer.
One point to note is that tokens or coins with short values offer upside opportunities but don’t expect the same meteoric rise as bitcoin. Simply put, lesser-known tokens can be easy to buy but can be hard to sell.
Before entering a cryptocurrency, start by studying the value proposition and technological considerations viz-a-viz of the commercial strategies outlined on the white paper that accompanies each initial coin offering or ICO. .
For those familiar with stocks and shares, this is no different than an initial public offering or IPO. However, IPOs are issued to companies with tangible assets and a track record of business. This is all done within a regulated environment. On the other hand, an ICO is based solely on an idea proposed in a white paper by a business – which is not yet operational and has no assets – that is looking for funds to start.
Not regulated, so beware buyers
‘One cannot control the unknown’ probably sums up the digital currency situation. Regulators and regulators are still trying to keep up with cryptocurrencies that continue to thrive. The golden rule of crypto space is ‘caveat emptor’, let the buyer beware.
Some countries remain open-minded in adopting a hands-off policy for cryptocurrencies and blockchain applications, while looking at direct scams. Yet there are regulators in other countries who are more concerned with the cons than the benefits of digital money. Regulators are often aware of the need to balance and some are looking at current securities laws to try to have a handle on the many flavors of cryptocurrencies around the world.
Digital wallets: The first step
The wallet is essential to get started with cryptocurrency. Think e-banking but minus the legal protection in the case of virtual currency, so security is the first and last thought in the crypto space.
Wallets are digital type. There are two types of wallets.
Hot Internet-connected wallets put users at risk of being hacked
Cool wallets that are not connected to the Internet and are considered safer.
In addition to the two main types of wallets, it should be noted that there are wallets for only one cryptocurrency and others for multi-cryptocurrency. There is also an option to have a multi-signature wallet, somewhat similar to having a joint account with a bank.
The choice of wallet depends on the user’s preference whether the interest is pure bitcoin or ethereum, because each coin has its own wallet, or you can use a third -party wallet with security features.
The cryptocurrency wallet has a public and private key with personal transaction records. The public key includes mentioning the cryptocurrency account or address, unlike the name required to receive a check payment.
The public key is available for all to see but transactions are only confirmed for verification and validation based on the consensus mechanism associated with each cryptocurrency.
The private key can be considered a PIN that is commonly used in e-financial transactions. It follows that the user should never disclose the private key to anyone and make back-ups of this data which should be stored offline.
It makes sense to have a small amount of cryptocurrency in a hot wallet while a larger amount should be in a cold wallet. Losing the private key is as good as losing your cryptocurrency! The usual precautions about online financial transactions apply, from having strong passwords to being alert to malware and phishing.
Different types of wallets are available to suit individual preference.
Hardware wallets made by third parties that must be purchased. These devices act like a USB device that is considered secure and connected only when required to the Internet.
Web -based wallets provided, for example, through crypto exchanges, are considered hot wallets that put users at risk.
Software-based wallets for desktops or mobile are usually available for free and can be provided by coin issuers or third parties.
Paper-based wallets can be printed carrying relevant data about publicly owned cryptocurrency and private keys in QR code format. It should be stored in a safe place as long as necessary in the course of the crypto transaction and copies should be made in case of accidents such as water damage or printed data being lost over time.
Crypto exchanges and markets
Crypto exchanges are trading platforms for those interested in virtual currencies. Other options include websites for direct trading between buyers and sellers as well as brokers where there is no ‘market’ price but it is based on compromise between the parties to the transaction.
Thus, there are many crypto exchanges located in different countries but with different standards of security and infrastructure practices. They vary from those allowed for anonymous registration that only require an email to open an account and start doing business. Yet there are others that require users to comply with international identification verification, known as Know-Your-Customer, and anti-money laundering (AML) measures.
The choice of crypto exchange depends on the user’s preference but unknowns may have limits on the amount of trading allowed or may be subject to sudden new regulations in the country of residence. exchange. Small administrative procedures with anonymous registration allow users to start trading immediately while going through the KYC and AML processes will take many hours.
All crypto trades must be processed and validated which can take from a few minutes to a few hours, depending on the coins or tokens being transacted and the number of trades. Scalability is known to be an issue with cryptocurrencies and developers are working on ways to find a solution.
Cryptocurrency exchanges fall into two categories.
Fiat-cryptocurrency Such exchanges provide for the purchase of fiat-cryptocurrency by direct transfer from a bank or credit and debit card, or through ATMs in some countries.
Cryptocurrency only.There are crypto exchanges that deal with cryptocurrency only, meaning that customers must already have a cryptocurrency – such as bitcoin or ethereum, – to ‘exchange’ for other coins or tokens, based on the market rate
Fees are paid to facilitate the purchase and sale of crypto currencies. Users need to do research to be satisfied with the infrastructure and security measures as well as to know the fees they are comfortable with such as the different prices charged on different exchanges.
Don’t expect a common market price for the same cryptocurrency with differential exchanges It can be worthwhile to take the time to research the best price on the coins and tokens that will interest you.
Online financial transactions carry risks and users have to resort to caveats such as two-factor authentication or 2-FA, which are constantly updated with the latest security measures and known phishing scams. A golden rule of phishing is not to click on the links provided, no matter how genuine a message or email is.