It seems just like yesterday that we started hearing of cryptocurrencies. Most people believed it was a big scam and they would lose all of their money. But now, more than 10 years later, it is still a craze, and one of the biggest investment opportunities available.
If you have been living under a rock, and are just now wondering how to invest in cryptocurrencies, we will give you the investment 101. But first, we shall explain what cryptocurrencies are. Cryptocurrencies are assets designed to work as a medium of exchange, and they use cryptography to secure transactions that create additional units and verifies the transfer of assets.
Does this sound like Greek to you? Well, don’t worry, we will explain a few things that you need to know and look at how to invest in cryptocurrency. You can continue reading to find out more.
Terminology And Terms Commonly Used In Cryptocurrency.
- Blockchain – This is a system that allows the creation of a catalog of all of the transactions online.
- Blocks – These are pages in the catalog or files where data is stored and cannot be changed.
- Mining – This refers to discovering mathematical problems and solving them within a blockchain. When a problem is solved, a reward is given. These are called mining rewards.
- Node – This is a computer connected to the mining network.
- P2P – This refers to Peer and it is a link or connection to a blockchain.
- POW – This refers to Proof of Work. It removes spam emails and prevents attacks. It is very costly and can be verified simply by a third party.
- POS – This refers to Proof of Stake and it is simply a way of proving that the money belongs to you or ownership to a specific amount of work.
- Signature – This is a mathematical operation that proves ownership of a specific wallet or coin.
Here is the procedure for investing in cryptocurrencies. From time to time, we will be mentioning Bitcoin. Bitcoin is one of the currencies in cryptocurrencies. It is the most expensive and most famous currency.
1. Cryptocurrency Wallet
It is much easier today, to buy cryptocurrencies as a beginner than it was a couple of years ago. The first step is to sign up for a wallet. This wallet is a digital account that allows you to easily buy, store and even sell your cryptocurrencies. It is like a universal checking account.
It takes less than a minute and can be done online very easily. It only requires your name, email address, and a password. Log on to sites such as Blockchain.info, Coinmkt.com, Coinbase.com or Hivewallet.com. These are the most user-friendly and reliable websites for beginners to set up their wallets.
The wallet has a digital key and a secret number which is a 256-bit string that will give you access to your currency. The private key will allow you access to different marketplaces. If you bought your Bitcoin from one market, you don’t have to stay in that market alone, you can check out other markets as well. This is what the private key allows you to do.
There are different types of wallets; software and hardware wallets.
These are apps that you will need to download and connect with your bank account (we explain this below). You can choose from a wide variety such as; Coinbase, which offers an extremely convenient wallet, as it is directly linked to its exchange service. Others include Mycelium with is very popular, and Electrum.
These are used to store private keys and other information on secure devices that look like a flash disk. These wallets are known to be extremely secure, as they allow you to disconnect from the computer once you are done using them.
2. Linking Your Wallet To Your Bank Account
Once your wallet is set up, then you need to fill it with cryptocurrencies. In order to buy them, money needs to be transferred from your bank account. It is the same procedure you go through when buying from online stores such as Amazon. It is a very normal and easy process, where you input details from your real bank account, the same way you do while setting up a PayPal account.
You will need your bank account number, a routing number for the bank, and your full name as it shows on your bank account. You may be asked for contact information like a phone number.
Do not be scared of linking your bank account to your wallet. It is very similar to shopping online. The information is secure. Most of the reputable companies offering cryptocurrency services ensure high standards of security of customer data through encryption.
3. Buy Cryptocurrencies With Money From The Linked Bank Account
Once your banking information has been verified by the Cryptocurrency service provider, it is now very easy to start buying cryptocurrencies and adding them to your wallet. In your wallet, there will be an icon labeled “buy Bitcoin or any other type of currency.” When you click on this icon, it will take you through the process of purchasing one of the cryptocurrencies you may have chosen using money from your bank account.
You should be aware that the price of the cryptocurrencies changes daily. This is because the currencies are yet to stabilize. While purchasing, you will be informed of the price at that particular time.
4. Use Your Cryptocurrencies To Purchase Products From Retailers
Many businesses in recent years are accepting the use of Bitcoin and other famous cryptocurrencies as a valid form of payment for their products and services. These businesses include Amazon, Overstock.com, WordPress, Victoria’s Secret, Bitcoin.travel, Zappos, Subway, Whole Foods, etc.
5. Sell Your Cryptocurrency To Another User
It is unfortunately not easy to make a quick ‘cash out’ when you need money immediately and receive it in your bank account. You will have to find a buyer who is willing to pay for them with money or services.
The easiest way to do this is to sign up for a Bitcoin marketplace, such as CoinCola, LocalBitcoins, and Coinbase, which allow you to find a buyer online and complete the transaction. You will use the website for all this, making it secure, with minimal chances of encountering fraud.
6. Sell Your Cryptocurrencies As An Exchange
You can also opt to use a Bitcoin exchange. In this case, the site will pair the sellers with buyers, and once they find a buyer, the website will act as an intermediary, where they hold on to the money, till both of the parties have been verified and the transactions are completed. Please note that this is not an immediate process. It may take a long time to complete a single transaction of buying and selling Bitcoins.
Investing in cryptocurrencies can be a scary thing if you do not have all the information. Please note that, other than Bitcoin, there are many other cryptocurrencies that you can invest in that are much cheaper.
Finally, ensure you stay up to date on all the trends in the Bitcoin world. This is because it is extremely difficult to predict. Your best hope of making good money is to monitor what is happening. The Bitcoin market fluctuates rapidly, and money-making opportunities, such as a spike in the exchange rate can rapidly appear and disappear in just a few days.
You should also consider joining a Bitcoin discussion forum to keep up to date on any happenings.