Technology has changed the way people work, communicate, buy and even pay for goods. Businesses and consumers no longer like cash, and this behavior is giving way to contactless payments such as Apple Pay. With the quick swipe of the smartphone, consumers can pay for their items on the digital cash register. Now, a new payment system is emerging: cryptocurrency.
Now everyone may have heard of Bitcoin. It was the first cryptocurrency to become mainstream, but other cryptocurrencies are also becoming more and more popular. There are more than 2000 different types of cryptocurrencies, and more are being developed every day.
Research shows that most people have heard of cryptocurrency but do not fully understand what it is. So what is it, is it safe, and how do you invest in it? To help, we will answer these questions. Think of this as an investment in cryptocurrency 101.
What is a cryptocurrency?
Cryptocurrency is a digital payment system that does not depend on banks to verify transactions. It is a peer-to-peer system that allows anyone to send and receive payments anywhere. Cryptocurrency payments are not physical currencies that are transported and exchanged in the real world but exist purely as digital entries in online databases that describe specific transactions. When you transfer funds in cryptocurrencies, the transaction is recorded in the public ledger. Store cryptocurrencies in a digital wallet. Cryptocurrency gets its name because it uses encryption to verify transactions. This means that advanced encryption involves storing and transferring encrypted monetary data between the wallet and the public ledger. The purpose of encryption is to provide security and protection.
How safe is cryptocurrency?
Cryptocurrency is generally built using blockchain technology. Blockchain describes the way transactions are recorded in “blocks” and timestamps. This is quite a complicated technical process, but the result is a digital ledger of cryptocurrency transactions, which is difficult for hackers to manipulate.
In addition, the transaction requires a two-factor authentication process. For example, you may need to enter a username and password to initiate a transaction. Next, you may need to enter the verification code sent to your phone via SMS.
Although the securities are in place, this does not mean that the cryptocurrency cannot be cracked. Various high-priced techniques have cost crypto startups a lot. In 2018, hackers attacked Coincheck for USD 534 million and BitGrail for USD 195 million. According to Investopedia, this makes them the two largest cryptocurrency hacking in 2018.
Tips for Safely Investing in Cryptocurrency
According to Consumer Reports, investment is always risky, but some experts say that cryptocurrency is currently one of the riskiest investment options. However, digital currencies are also some of the most popular commodities. Earlier this year, CNBC predictsing that by the end of 2018, the value of the cryptocurrency market is expecting to reach US$1 trillion. If you plan to invest in cryptocurrency, these tips can help you make an informed decision.
Before investing a dollar, let’s learn about cryptocurrency exchanges. According to Bitcoin.com, these platforms provide a way to buy and sell digital currencies, but there are 500 exchanges to choose from. Before moving on, do research, read reviews, and talk to more experienced investors.
Know how to store your digital currency
If you buy cryptocurrency, you must store it. You can store it in an exchange or a digital “wallet,” such as one of the crypto wallets described in our blog post, which crypto wallet to choose. Although there are many different wallets, each has its advantages, technical requirements, and security. As with exchanges, you should research your storage options before investing.
Spread your investment
Spread is the key to any good investment strategy, and it is effective when you also invest in cryptocurrencies. For example, don’t put all your money in Bitcoin because that is the name you know. There are thousands of options, and it is best to spread your investment across multiple currencies.
Prepare for volatility
The crypto market is volatile, so prepare for the ups and downs. You will see dramatic price fluctuations. If your investment portfolio or mental health can’t cope, cryptocurrency may not be your smart choice. Cryptocurrency is all the rage right now, but remember that it is still in its infancy. Investing in new things comes with challenges so be preparing. If you plan to get involved, do your research and invest conservatively to get started.