Last updated on July 2, 2019
What is a cryptocurrency?
A cryptocurrency is a form of digital money which is run on a blockchain by secure encrypted code mechanism called cryptography. All transactions record on a public distributed ledger named as blockchain technology. There are a lot of cryptocurrencies such as granddaddy Bitcoin, Ethereum, Litecions, Bitcoin cash and a lot of altcoins( alternative coins) where guide to cryptocurrency article will explain the basics of everything.
A) How does cryptocurrency works?
Cryptocurrency mainly trusted on blockchain technology and cryptography which is a coding method. Cryptocurrency users can receive, send, store, spend money( Cryptocurrency ) through the internet for various purposes such as buying goods, buying services, send money to friends, etc. Cryptocurrency prices depend on the supply and demand then the price fluctuates accordingly. In this case, most investors invest in cryptocurrency but It is too risky than traditional investments such as STOCK and Forex.
Blockchain can be defined as a distributed public ledger where all transaction through peer to peer network.
Public ledger means anybody can store ledger on their computer and access it. In bitcoin blockchain manage by a peer to peer computer networks(nodes) and transactions validated by miners using their computer hash power where validation process called mining( Proof of work or Proof of stake). Other use cases of blockchain technology such as identity management blockchains, supply chains, energy, and real estate sector, etc.
Decentralized means there is no single administration to control such a system. As example Local currency control by central banks. Think about bitcoin,
Bitcoin network and It is decentralized peer to peer digital asset which controls by its community or miners where bitcoin network can’t control government central bank or single administrator. Miners give their computer’s hash power to solve complex cryptographic transaction mechanism and these miners reward new bitcoin. Anyone can become bitcoin miner and these miners are spread all over the world ( Network node). In this case, the bitcoin network is going to become decentralized. Normally all crypto should be decentralized but most of crypto’s centralized.
A wallet is a storage mechanism of cryptocurrency like a bank in the traditional financial industry but wallet and funds are completely controlled by the wallet owners. The wallet has two different keys which are the private key and public key. A public key is used to send and receive cryptocurrency and share with others. Private key unique key to access to the wallet and If lost your private key lost the all funds on the wallet forever. Refer guide to cryptocurrency wallets.
Transaction speed and privacy
Average cryptocurrency transaction speed far higher than the traditional methods like using banks. Reason for this is transaction happens between two parties, there are no intermediaries like banks and money transfers. Also, we can send any amount of money anywhere in the world within a few minutes and transaction privacy remains private.
A transaction fee is relatively far lower than the traditional methods because there are no intermediaries. Small transaction fee charge as network fee for miners and stakes. Transaction fee change with the growth of network popularity and few reasons.
What is Coin/Token?
A coin is a kind of currency which has already own blockchain such as Bitcoin, Ethereum, Ontology, etc. A token is kind of share or issuer to represent of brand or blockchain project which has no own blockchain such as Tether, Maker, BitTorrent, Auger, etc.
A) Popular cryptocurrencies
Bitcoin: Bitcoins is one of the most popular cryptocurrency ever created since 2009. Refer Guide to bitcoin basics for more information.
Ethereum: Ethereum is most popular blockchain base smart contact open source software where developers can build decentralized applications top of the Ethereum software. Ethereum was founded by Vitalik Buterin.
Ripple: Ripple is for payments which are built for enterprise-grade use. Transaction speed and fee are relatively lower than the Bitcoin, Ethereum.
Maker: Maker consist of a decentralized stablecoin, collateral loans, and community governance.
There are thousand of cryptocurrencies and tokens exists in the current market. If you would like to check it refer Coinmarketcap.
What is ICO/IEO?
ICO represents of Initial coin offering or Initial token offering which is a method to raised funds from the community to developing the new blockchain startup. These tokens or coin can issue a share of the blockchain startup where token price and supply decided by the team. ICO funds raise as Traditional currency or BTC or Any altcoin.
IEO represent of Initial exchange offering. In this case blockchain startup project launch on cryptocurrency trading exchanges such as Binance, Bittex, etc where the token or coin can buy through the exchange.
Look for ICO/IEO rating websites in Best cryptocurrency resources
What is an airdrop?
Airdrop is a marketing technique to attract the cryptocurrency community for a blockchain project. Airdropping is sending out some coin/token for their community for various propose.
Why do airdrops the token/coin: There are a few reasons such as promoting the project, holding the existing coins/tokens on the wallet. Promoting can be like the facebook page, Follow their twitter account, sharing the social media project, etc.
What is a bounty?
When launching a new blockchain project, They want to promote their project for Initial coin/token offering. Then they will market the project by,
- Marketing can be done by themselves
- Cryptocurrency bounty hunters promote the project and initial coin offering
These hunters will promote the project by doing a various task such as making tweets, sharing a post, making YoTube videos, writing articles, running a signature program on Bitcointalk website, finding bugs on their software, etc. Bounty hunters will receive payments as their own token or Eth, BTC for promoting the such a project. Most of the project sent payments to bounty hunters upon completion of initial coin offering.
A lot of beginners start earning some $$ by completing Airdrops and bounties. Look for Airdrops and bounties listing website in Best cryptocurrency resources
How to invest in cryptocurrency!
There are lot of methods invest in cryptocurrency field as beginners not recommend to experienced without proper knowledge. Best way to start is earning some free $$ from the airdrops and bounties to get experienced with how to use a wallet, how to make a wallet, experienced the private key and public key, etc.
A) Investing on ICO/IEO
Investing ICO is the best method to invest in cryptocurrency but there is a lot of scam blockchain project involving. So you need to research the project yourself before taking any action. Let’s look at how much can gain from the good blockchain project.
Think ONT coin( Ontology) which is a high-performance public blockchain project and a distributed trust collaboration platform. ICO price was 1 ONT = 0.20 USD and Now price is 1 ONT = $1.60. Total gain is the 8X period of 1.5 years.
B) Holding the cryptocurrency( Hodl)
Here, buy lower price and sell higher price withing holding some period of time. Also, you want to research before buying any coin/token. Holding period can be short term, mid term, long term.
Think bitcoin, January 2017 bitcoin price was 960$ nearly and end of the year bitcoin prices were hitting nearly 20000$. Total gain was 20X within one year period.
That was bitcoin, There was a project called Bitconnect Price hit nearly 500$ and suddenly price fall nearly 0$ now.
If you want to buy Bitcoin or nay other coin, Refer Beginners guide to buy Bitcoin
C) Cryptocurrency trading( Margin and Leverage trading)
Like a traditional trading cryptocurrency also can trade. There are many margin/leverage cryptocurrency trading platforms such as Bitfinex, Bitmex, etc. Cryptocurrency trading also involves high risk and high return.
Before starting any trading activities, Learn yourself, from the cryptocurrency community and professionals, etc.
An investor can invest in cryptocurrency mining equipment to earn money from mining. Nowadays, If you can access cheap electricity with good equipment, then you can profit he cryptocurrency mining without doing anything.
Guide to cryptocurrency safety precautions
01. Don’t lose private key and don’t exposure to any others
02. Please check the website domain before doing any cryptocurrency transaction to avoid phishing attacks. A phishing attack is showing similar domain with similar web interface for collecting a valuable piece of information from the website users. Also, this can be an email or advertisement
03. Don’t keep money in the cryptocurrency exchanges where you don’t own private key
04. Regularly update the wallet which has your funds
05. Use virus guard installed in your computer
These are the basic safety precautions to safe your funds from the malware, virus, being hacked.
Cryptocurrency is changing the world revolutionary way where we transact each other and now it began mass adoption. Guide to cryptocurrency basics article consists of an introduction to the cryptocurrency, Introduction to blockchain technology, Whats is decentralization, Coins/tokes, Initial coin offering, Beginners guide to investing crypto, etc.