What is cryptocurrency?
Cryptocurrency it is an encrypted unregulated digital asset that has no physical expression. It can be called electronic money. This is a new generation payment instrument, which is a mathematical code and exists only in digital form. They cannot be touched, held in hands, but they can be exchanged for quite ordinary money and perform other operations characteristic of various currencies: buy something with them and sell them.
Cryptocurrencies act not only as a means of payment, but also as a way of investing. Over the past months, cryptocurrencies have risen significantly in price, which makes them look at them as a highly risky way to make good money. The most significant disadvantage in this kind of investment is that you cannot predict how much digital money will cost tomorrow.
The unit of cryptocurrency is called “coin”
At the same time, the coin is protected from counterfeiting, since the coin is encrypted information that cannot be copied. By the way, cryptocurrency systems operate on the basis of blockchain technology a chain of blocks. It store information built according to certain rules in a certain sequence. A key feature of cryptocurrencies is the absence of any internal or external administrator. Therefore, banks, tax, judicial and government authorities cannot influence the transactions of any participants in the payment system. This is possible since all data with cryptocurrency wallets and transactions is stored on the blockchain.
How does cryptocurrency work
For simplicity, some of the cryptocurrency data remains open. It can be verified by absolutely anyone. To transfer these numbers, a special technology is used in the network blockchain. It gives the cryptocurrency phenomenal simplicity and resistance to the actions of intruders.
The blockchain represents the rules by which these numbers live. Each action is encrypted into a separate block, which contains the encrypted signature of the previous block. The data is simultaneously stored on the computers of all participants.
Blockchain is a ledger where each record is a secure block of data. At the same time, it is simultaneously found in a large number of people
The cryptocurrency rate is not tied to either oil or gold. The only factor that drives up the price is the limited supply of bitcoins and an increase or decrease in demand. Because the the amount of all bitcoins is limited. It can be compared with such a mineral as platinum – the amount of material in the world is limited, but it cannot be created artificially.
This is the main advantage of cryptocurrency – the impossibility of counterfeiting. However, financial experts continue to talk about the riskiness of such investments. And many states still prohibit operations with cryptocurrencies in their official markets. The central bank is mainly confused by the rate of cryptocurrencies, which is impossible to predict.
There are no concepts that would give the right to regulate сryptocurrency in the law. They are not similar to ordinary currencies. They cannot be called property in the full sense of the word. Also, the domestic regulator does not like the inability to control the cryptocurrency. However, the trends of the modern economy are forcing the authorities to think about the legalization of electronic money.
Only verified investors on exchanges will be able to make transactions with cryptocurrency at the official level. Cryptocurrency will be identified with the concept of “other property”. And owners of capital in cryptocurrencies will be forced to declare digital currency. Security is also a big issue. Cryptocurrencies are often used by criminals to launder money.
Advantages and disadvantages
To understand the essence of cryptocurrency, it is worth to disassemble the next topic.
- Open code. Everyone can mine virtual coins with this function. Despite the complexity of the process, many people still earn their living this way.
- Anonymity. Unlike classic electronic money, transactions with which are easy to track. To complete transactions, the user does not need to provide his personal data. After ranking, only the wallet number and limited data on the amount on the account will be available.
- Decentralization. Cryptocurrency is an independent currency. Nobody regulates its issue and does not control the movement of funds in the account. It is this feature that attracts many members of the Network.
- Limitedness. Сryptocurrency is issued in a limited volume. Cryptocurrencies have a sophisticated inflation prevention mechanism. It is possible to predict in advance how many coins will exist in a certain period of time.
- Reliability. In cryptocurrency transactions, no personal data is transferred to the seller. Therefore, you can be sure that information does not fall into the hands of intruders.
- No guarantees. Each user is personally responsible for their savings. Banks and other supervisory and monitoring bodies do not have the ability to control the operations of the issuance and movement of cryptocurrency.
- Risk of being banned. Government structures are wary of cryptocurrency. Many countries have imposed restrictions on its use, and violators may be fined.
- There is no possibility to revoke the payment.
- Danger of loss. The “key” for access to electronic money is a special password. If you lose it, the crypto coins in your wallet will become unavailable.
- Fluctuations in value. Prices are based on supply and demand. Cryptocurrencies can be traded in the same way as bonds or stocks. But unlike them, it can quickly and significantly change the price.
How to get cryptocurrency
There are several ways to get cryptocurrency at home:
It is the mining of cryptocurrency, or rather the creation of a new block of virtual money, using the computing power of a computer and a special program downloaded and installed by the user. This type of earnings can be imagined as the work of a mine, where the currency acts as precious metals. And their extraction is mining.
The main task remains the same: buy as cheaply as possible, sell at a higher price and make a profit.
You can trade cryptocurrencies on the exchange. Cryptocurrency exchanges work in much the same way as regular exchanges. The key difference in these platforms is that a person cannot get to a regular exchange without a broker. Then it is possible to trade on a cryptocurrency exchange without involving other people.
The rest of the steps are similar. You need to register, open an account in a specific currency quoted on a specific exchange. And after this you need to make transactions. The main thing to remember is that there are two types of cryptocurrency exchanges. Some cryptocurrencies are bought and sold for “real” money – dollars, euros, pounds and even rubles. And on others – for electronic.
The latter act as cryptocurrency exchangers. You can exchange cryptocurrency at the current rate online and at the same time earn extra money in them. It is impossible to start successful cryptocurrency trading from scratch. If you decide to invest free funds in trade, you should first of all prepare a knowledge base.
The algorithm for carrying out such operations is as follows: on two different cryptocurrency exchanges, quotes differ markedly. Trader will receive his profit by buying an asset on the first exchange at a lower quote and selling it on the second at a more profitable one.
In such transactions, everything is often decided in a split second, or even milliseconds. Therefore, earnings depend on the speed of reaction and simple luck.
The concept of arbitrage came to the cryptocurrency market just a couple of years ago. Whereas on the stock market this strategy has been used for a long time. In general, arbitrage trading can be described as a strategy in which there is practically no market risk. We can say that the trader is speculating on profitability.
Your money will have to be entrusted to manage a crypto broker or a crypto fund. They will decide what to buy and what to sell, when and how. Their earnings are a portion of the profits generated from managing your money. Interest is negotiated by each fund individually. The most common scheme is 50/50.
This are Internet resources, using which you can receive satoshi without investment. It is the smallest unit of bitcoin, like a penny in dollar in payment for performing simple tasks. The tasks are really elementary – entering captcha, watching videos or websites, as well as clicks on ads. This option is suitable only for those who have a huge amount of time and a complete lack of opportunity to invest money.
It is a long-term purchase of any cryptocurrency in order to fix profit after a year, two, or even more. It will important a technical analysis. And a great confidence with facts that the rate of the coin will really grow due to the development of the project.
Investing in platforms is a highly profitable and very risky way to make money on cryptocurrencies. Some platforms have been running for years, while others are shutting down quickly.
On my blog you will find exceptionally high-quality investment platforms for making money online.
You can exchange bitcoins for dollars or euro for bitcoins in cryptocurrency exchangers. These are simple services that allow you to exchange cryptocurrency at the current rate. When choosing an exchanger, remember that the number of scammers has increased recently. Therefore, the choice of a platform for exchange should be approached thoroughly.
You can find all verified exchangers in the full reviews on my blog.
The best and most popular cryptocurrencies:
- Bitcoin. The most popular cryptocurrency today. With its appearance, Bitcoin gave impetus to the development of all other similar currencies. The developer is a hidden group of programmers who call themselves Satoshi Nakamoto.
- Ethereum is a platform for creating decentralized online services based on the blockchain. It based on smart contracts. Implemented as a single decentralized virtual machine. Proposed by the founder of Bitcoin Magazine Vitalik Buterin at the end of 2013. The network was launched on July 30, 2015.
- Ripple (XRP). Ripple cryptocurrency was created in 2012. It is used as a gross instant payment system. The stated goal of XRP cryptocurrency is to conduct transactions that are completely secure as well as instant. The list of goals includes the low cost of financial transactions. It does not depend on the size of the transfer amount.
Do not forget about the risks of losses using one or several ways how you can really earn cryptocurrency. I advise beginners to use free methods to get started, such as: Bitcoin faucets or mining. Take on more serious methods when gaining experience in the future. Happy earnings!
P.S. Be sure that investing with Monetka Blog is profitable. For a quick communication with me, write to me in telegram.