Brian Wallace, Founder & President, NowSourcing
Cryptocurrency has been a hot topic in 2017 and I’m sure at least one of your friends has mentioned Bitcoin or cryptocurrency. If you’re anything like me, ‘cryptocurrency’ might sound complicated and confusing. I was going to leave it for when I had more time to investigate, but if you didn’t know already, cryptocurrencies are on the rise.
If this year is anything like last year, there will be even more people looking to get into the cryptocurrency game. The truth about cryptocurrencies is that they are not hard to understand. If you can grasp the basic concepts of how money works, then you already have what it takes to be a successful crypto investor.
Let’s start with some very basic terms, phrases, and concepts that you will need to know in order to get started.
What is a Cryptocurrency?
A cryptocurrency is a currency with no physical form – it only exists with digital transactions. The most well-known cryptocurrencies are Bitcoin, Ethereum, and Litecoin. These currencies have different ‘values’ that may change over time, but you can use them to purchase various services or products.
How to Purchase?
How do you purchase bitcoin? Well, there are many different ways to accomplish this. You can use exchanges like Coinbase or Kraken to purchase Bitcoin or alternative currencies, but you need an account after signing up.
Now that you have your currency of choice (preferably Bitcoin) you can send it to online wallets like the Edge Wallet. Once it’s in your wallet, you can use it to pay for items online or cash out at any number of banks that offer cryptocurrency services.
What is a Wallet?
A cryptocurrency wallet is essentially the same as your online banking account. It holds all of your digital currency (so long as it’s supported by the wallet) and allows you to make transactions with people who accept cryptocurrencies. There is a large variety of wallets available, and most support multiple currencies.
What Makes Cryptocurrency Different from My Bank Account?
The difference between a cryptocurrency wallet and your online banking account is that you do not need to give any personal information to the person on the other side of the transaction. Cryptocurrencies are ‘pseudonymous’, meaning that they function similarly to cash, where you can see the transaction but not the identity of the sender. This makes it a secure way to make transactions without revealing your personal details and decentralizes currency so it cannot be shut down by any single entity.
Are there Fees for Using Cryptocurrency?
There are fees for cryptocurrency transactions, but they are extremely low compared to the bank fees that you may be used to. The reason behind this is that there are no banks involved in cryptocurrency, meaning there is little to no overhead.
When sending a transaction over the blockchain, it needs to be validated before it can be added to the digital ledger. Miners, or computers on the blockchain network, perform this function in return for fees paid by users to validate their transactions.
How do you Protect your Cryptocurrency?
When it comes to digital wallets, they are not inherently safe. Even though they have built-in encryption methods that attempt to protect against viruses and theft, users still need to protect their wallets.
The best way to do this is by using two-factor authentication, meaning that after entering a password, the user must also enter a secondary code sent to his/her phone. It is recommended that users set up an authenticator app like Google Authenticator or Authy for this reason.
Enjoying the Benefits of Cryptocurrencies
The world of crypto is still very new, so there are many benefits to enjoy. A great benefit is the fact that most cryptocurrencies are decentralized, meaning they don’t belong to anyone bank or government. When you use them, they actually help others because transaction fees are lower than what banks charge.
Looking for Success in Cryptocurrencies
Even if cryptocurrency is still new to the world, that doesn’t mean that there aren’t ways to make money using it. Many people have already started to invest in cryptocurrencies. You can too if you want, but it’s important that you learn about the industry first so that you are prepared when it does boom. There are many resources online where beginners can start learning more about how cryptocurrency works and the benefits of using them.
About the Author: Brian Wallace is the Founder and President of NowSourcing, an industry leading infographic design agency in Louisville, KY and Cincinnati, OH which works with companies ranging from startups to Fortune 500s. Brian runs #LinkedInLocal events, hosts the Next Action Podcast, and has been named a Google Small Business Adviser for 2016-present. Follow Brian Wallace on Linked