Cryptocurrency is slowly making its way to mainstream platforms and many investors are attracted to the concept of digital assets. However, some people are still confused as to what crypto really is and how it works. For beginners, crypto trading might seem like a complex system to learn, but it actually is pretty easy once you get to know the basics.
What is Cryptocurrency?
A cryptocurrency is a form of digital currency that uses a decentralized system to verify records and transactions. The assets that you use to transact are recorded in a public ledger, also known as blockchains, and this technology makes the trades completely transparent with the permission of the network members.
You can view cryptocurrency as the alternative to physical money in the real world but instead, crypto is digital entries that exist purely online. Those who have assets in the form of crypto have digital wallets that they can use for storing or trading in various crypto trading platforms.
How do decentralized systems work?
The decentralized systems used in crypto trading are encrypted on a public database ledger called the Blockchain. A blockchain records all the transactions by the asset holders and is shared among the members of a computer network. This makes cryptocurrency trading more secure since it does not need a third party to maintain its fidelity.
The data collected on the blockchain is structured and called ‘blocks’. The blocks each have specific storage capacities, and eventually, they form the blockchain as new information gets added to the existing data. The goal of the development of decentralized systems is to secure transactions by recording them, but never allowing anyone to edit them.
What is crypto mining?
To mint a currency, it first needs to be unlocked by solving complex mathematical problems. This requires computing power, thus the need for mining rigs that have powerful computing capabilities.
Why should I invest in Crypto?
It is hard to deny the presence of crypto in the current world. Everyone and their grandmother is talking about it, whether favorably or otherwise. Here’s why you should invest in crypto:
Diversification
One of the most common pieces of advice in investing is about diversification, not putting your eggs in one basket. Warren Buffett may have put his eggs in one basket, but he admits himself that he was lucky. It is best to diversify to give yourself the best chances of success and limit your losses.
It is possible to diversify within an investment category, like picking different stocks or funds in the stock market, but it is another layer of diversification if you can invest in crypto as well. There have been many cases where crypto has stayed up while the stock market has gone down and vice versa.
Ease of access
Ease of access was something you would associate crypto with a few years ago, however, crypto has become easier to use now more than ever. Trading platforms and wallet apps make the process very intuitive. Simply hop on to a trading platform or download a crypto wallet app and purchase crypto directly and you’re invested!
The crypto markets also never sleep, unlike the strict market opening and closing schedule of stock markets. You can extract your funds any time you please. The more liquid an investment, the easier you’ll be able to extract them in case of emergencies.
How To Buy and Invest in Crypto
If you are planning to buy cryptocurrency and invest, you first have to make sure that your funds are stored in your account (digital wallet). You can do this by linking your bank account to your digital wallet, or by doing a wire transfer using your debit or credit card.
Here are some easy steps to help you understand the process:
Choose a platform or wallet
After you have set up your digital wallet, the next thing you need to do is choose a platform that you will use. For some trading platforms, they might require you to have a verified account before being able to transact, there are also many crypto wallet apps out there for you to use that don’t require identity verification. Do note some currencies may be unavailable for certain wallets and platforms.
Choose a strategy
Before you invest, you need to know that there are multiple factors that you need to take into consideration when buying and investing cryptocurrency. There are courses online that you can sign up for that teach beginners about crypto stocks and the algorithmic tradings in the industry. This will help you avoid losses and make smarter decisions in the future.
Place an order
Once you have chosen your platform or wallet, you can start placing your orders using their mobile application or website. Simply choose the currency you wish to buy and it should prompt an order request. The process is different for every wallet and platform, so we advise you to do thorough research on your method of choice.
FAQs
Here are some frequently asked questions about investing in crypto:
Why is blockchain important in crypto trading?
Blockchains act as a transparent ledger for investors and traders to see. Like any other business trades, crypto depends on how accurate and secure the information is. The blockchains used in crypto trading can track payments, orders, production, and accounts, and since the information cannot be edited, investors can be assured that they won’t be taken advantage of and exploited by business third parties.
What are gas fees?
Gas fees are network fees. It requires energy to process and validate transactions, thus requiring the transactor to pay a fee in order to run the system.
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