Technology has changed the working conditions of people, the methods of their communication, methods of shopping, and even forms of payment for goods. Companies and customers are now far from always choosing cash, preferring contactless payments such as Apple Pay. Using smartphones allows consumers to pay for goods in digital formats. Now a new payment system is gaining popularity – cryptocurrency.
Probably everyone has already heard about bitcoins. It was the first cryptocurrency that became mainstream, but others are growing in popularity. There are over 2,000 different types of cryptocurrencies, and new ones are being developed every day.
Studies show that most people have heard about cryptocurrency, but do not fully understand what it is. So, what is cryptocurrency, is it safe and how to invest in it? Here, in this article we are going to answer these questions. Let it be a kind of training course for beginners: investing in cryptocurrencies for beginners.
What is cryptocurrency?
Cryptocurrency is a digital payment system that does not use banks to verify transactions. This is a peer-to-peer system that allows anyone to send and receive payments anywhere. This is not physical money that they carry and exchange in the real world; Cryptocurrency payments exist exclusively in the form of digital records in an online database that describe specific transactions. When transferring funds in cryptocurrencies, transactions are recorded in open registers. Cryptocurrency is stored in users’ digital wallets.
Cryptocurrency got its name, because encryption is used to verify transactions using it. This means that for the storage and transfer of cryptocurrency data between wallets and in open registers, advanced encoding is used. The purpose of encryption is security.
Is cryptocurrency safe?
Cryptocurrencies are usually created using blockchain technology. The blockchain describes a way to record transactions in “blocks” and timestamps. This is a rather complicated technical process, but the result is a digital cryptocurrency transaction register that is difficult for hackers to crack.
In addition, transactions require two-factor authentication. For example, you may be asked to enter a username and password at the beginning of a transaction. Then, you may be required to enter an authentication code, which is sent as an SMS to your personal mobile phone.
All these protective measures do not mean that cryptocurrencies cannot be hacked. There have been cases when a few hacks cost cryptocurrency startups too expensive. According to Investopedia, in 2018, attackers “heated” Coincheck and BitGrail in the amount of $ 534 million and $ 195 million, respectively. These two security incidents were the largest in the past year.
Four tips for safe cryptocurrency investing
Any investment is always risky, and cryptocurrency is one of the most risky investment options. But at the same time, digital currencies are also perhaps the most popular product. If you plan to invest in cryptocurrencies, these tips will help you make an informed choice.
Before investing in cryptocurrency, study the information on cryptocurrency exchanges. These platforms offer ways to buy and sell digital currencies with the help of bitcoin signals; according to Bitcoin.com, there are 500 such exchanges. Do your research, read the reviews, and speak with more experienced investors before moving forward.
Know-how: how to store digital currency
If you buy cryptocurrency, you need to store it. This can be done on the exchange or in a digital “wallet”, for example, in one of the crypto-wallets, which is described in our blog “Which wallet for cryptocurrency to choose”. There are many different types of wallets, and each has its own advantages, technical requirements and degree of security. As with exchanges, you should consider cryptocurrency storage options before investing in it.
Diversify your investment
Diversification is the key to any good investment strategy. For investments in cryptocurrency, this is also relevant. Do not invest all your money, for example, in bitcoin just because you know the name. There are thousands of options, and it is best to distribute your investment among several currencies.
Get ready for volatility
The cryptocurrency market is volatile, so be prepared for ups and downs. You will probably have to face dramatic price fluctuations. If for your investment portfolio or state of mind this is too difficult a test, it is better not to deal with cryptocurrency.
Cryptocurrency is now in fashion, but remember, it is still in its infancy. Investing in something new is fraught with difficulties that need to be prepared. If you still plan to participate, conduct a study and start investing conservatively.