Many people now prefer to use cryptocurrency for various transactions because it has proven to be safer and more secure than traditional fiat currencies. Also, there are currently more than 12,000 cryptocurrencies worldwide, so there are numerous options to explore.
However, while these currencies have become very popular, many people still do not understand the concept and how they can join the trend of this digital currency. If you are one of such people, there is good news for you; this article discusses everything you need to know about cryptocurrencies, including how you can purchase them.
Read also: 8 Best App To Buy US Stocks From Nigeria
What is Cryptocurrency?
Cryptocurrency, commonly called crypto, is a form of encrypted and decentralized currency based on blockchain technology. It is a digital or virtual currency, so it only exists online and has no physical form.
This digital currency does not have a regulating authority or a central issuing body that manages and maintains its circulation and value; instead, it uses cryptography for its transactions, so a decentralized system records its transactions and issues new units.
What is a Blockchain
According to Buchi Okoro, the CEO and co-founder of the African Cryptocurrency Exchange Quidax, when you imagine a book where you write down your daily spending, each page is similar to a block. So all the book’s pages will create a chain to give blockchain.
A blockchain is an open ledger that records digital transactions in codes; the coded transactions are recorded in blocks and then linked together to form a blockchain. So this is the system that cryptocurrencies operate on as they do not rely on banks or physical platforms to verify transactions.
Cryptocurrency Examples
There may be over 12,000 cryptocurrencies in circulation today. However, a few still stand out, and they are not only very popular but have also experienced tremendous growth in value in a short time. Here are some of the cryptocurrencies that fall into this category.
- Bitcoin: was created by Satoshi Nakamoto in 2009; it runs on a blockchain and is said to be the original cryptocurrency because it is the first known cryptocurrency in the world. As of 2016, you could get a bitcoin for $500 or less, but the digital currency has skyrocketed and is currently worth about $19,974.
- Ethereum: is both a blockchain platform and a cryptocurrency; as of 2016, it was worth about $11, but to the surprise of many, the digital currency experienced tremendous growth and is currently worth about $1,568.
- Binance coin BNB: was launched in 2017 as a currency for transactions on the Binance exchange platform but has been integrated into an advanced form which can be used for payments on other platforms, trading and exchange for other cryptocurrencies. Even though BNB was just $0.10 in the year it was launched, by September 2022, it had risen to $276.
- Tether (USDT): this digital currency is slightly different from others; it is backed by some fiat currencies like Euro and US dollars, and it maintains the same value as these fiat currencies, so it is more stable than other cryptocurrencies. One Tether or USDT is worth about $1 currently.
- XRP: ripple was launched in 2012 as a payment processing platform; however, XRP is not the same as a ripple. XRP is a token issued and partly managed by ripple; it was launched in 2017 with a price of $0.006, but in 2022 it is worth $0.32, which is a 5,233% increase.
- Dogecoin (DOGE): is said to be the US most popular meme coin; it gained massive popularity in 2021 when its price skyrocketed by over 10000%. This currency is very accessible and has attained this height with the influence of the popular entrepreneur; Elon Musk.
- Bitcoin cash (BCH): the most popular alternative for bitcoin, it became popular due to its accessibility, affordability and fast transaction speed. Also, most ecommerce and even physical platforms have made it an excellent alternative for bitcoin. It is currently worth about $114.
How Does Cryptocurrency Work
All cryptocurrency transactions are managed on a distributed ledger called blockchain, which has been discussed in this guide.
Cryptocurrencies are created in units with a computer through a process called mining. This process is done by experts who can use computer intelligence to solve complicated mathematical problems to generate coins.
When you own a cryptocurrency, you will not have any tangible money you can touch and spend; instead, you will own a key that allows you to independently move a unit of this currency online from one person to another.
How to Buy Cryptocurrency
For a beginner with no experience in buying and selling of cryptocurrencies, here is how you can buy cryptocurrency without the help of a third party. Also, these guidelines are suitable for anyone from beginners to experts.
Choose a Platform
Choosing the platform you want to buy your cryptocurrency from is the first step and a vital aspect of purchasing digital currencies. Now you need to choose between a broker or a cryptocurrency exchange. The cryptocurrency exchanges offer a simple platform for buyers and sellers to meet and trade crypto; these exchanges all have their own trading rules.
As a beginner, you should look for a cryptocurrency exchange platform with a simple user interface, 24/7 customer support and educational materials. On some platforms, you can trade your cryptocurrencies for another or exchange them for fiat currencies, and the rates are based on the current market value of the coins.
However, buying cryptocurrency from a broker is quite different. Legit online brokers that offer cryptocurrencies are few, and they do not have many options for trading like the exchange platforms. So if you need a wider range of cryptocurrencies, you should consider an exchange platform.
Fund Your Account
If you have chosen a broker or a cryptocurrency exchange platform, it’s time to fund your account to proceed with the purchase. Some platforms may allow you to fund your account with fiat currencies, but you must be careful with platforms that request funding with credit cards.
Platforms accepting transfers as a payment method are safer. Another thing to consider is the fees for funding the account, which will vary from platform to platform, so you should go for one with lower transaction fees.
Purchase the Cryptocurrency
This step is usually very simple; after funding your account, you can purchase a cryptocurrency by selecting the coin you want to buy, entering the order type, choosing the amount of crypto you want and clicking on the buy button.
The same process is applicable when you want to sell your cryptocurrency, and different platforms have various ranges of fees for these transactions.
Provide a Storage for Your Asset
Crypto is a good investment, and many of them are very expensive, so you must make sure you store them properly in a safe place to protect them from hackers. To do this, you need to get a crypto wallet; a wallet is usually a software or device used to store the unique keys to your cryptocurrency.
You may find a secure wallet in the exchange platform you used to buy the cryptocurrency, but if you do not, you can choose from a variety of crypto wallets.
How to use cryptocurrency
While you patiently followed the step of buying cryptocurrencies, you may have one question in mind; how do I use this digital currency?
Cryptocurrencies like bitcoin were initially intended to be a medium for all daily transactions making it possible to buy anything with it, from small to big items. However, that goal has not been completely accomplished; some institutions and businesses still do not accept cryptocurrencies as payment.
Nevertheless, the usability of cryptocurrencies is constantly growing and increasing; even so, you can now use this digital currency for numerous things, including purchasing luxury goods, insurance, cars, and many other websites that have included it in their payment methods.
So if you buy cryptocurrency, you can either keep it as an investment for the future or use it as payment wherever it is allowed. All you have to do is transfer the required amount of crypto to the wallet address given by the website, shop or company you made a purchase from.
Pros and Cons of Cryptocurrency
Now that you have a basic understanding of cryptocurrency, are you wondering if it is an excellent choice to buy and use crypto instead of the traditional fiat currencies you are used to? Then check out the pros and cons of cryptocurrency.
Pros
User Anonymity and Transparency
Compared to the traditional fiat currency system, in which your personal details can easily be leaked from a bank, you do not need personal information to conduct crypto transactions. This gives you a high level of privacy.
Although crypto transactions are not completely anonymous, users are only identified by numerical codes, no transactions can be traced back to a user, and still, the transactions are viewable, giving transparency.
Secure and Private
This has been one of the most notable benefits of crypto; the blockchain ledger runs on a variety of mathematical puzzles which can not be decided by anyone, making cryptocurrency safer than regular electronic transactions.
In addition, cryptocurrencies use pseudonyms that are not affiliated with user accounts, so they are far more secure and safer than other currencies.
Cost-effective Transactions
Many people now prefer to use cryptocurrency as a means of monetary transactions across borders because the transaction fees are very low; it does not require the help of third parties to verify transactions, thereby eliminating any extra costs.
Accessibility and Liquidability
The fact that it only takes a few minutes to move your cryptocurrencies from one place to another makes this digital currency a better option in terms of accessibility and liquidability. You can easily spend money in another country, purchase items and make payments in places where crypto is accepted with no fees attached.
Independent of Central Authorities
Crypto is a decentralized currency, so any central authorities do not regulate it; you would not have fears of authorities freezing or ceasing your coins for any reason. In addition, these digital currencies are not taxable, so you will have complete control and autonomy over your assets.
Cons
Irreversible
Cryptocurrencies are not regulated by any authorities, and they are anonymous; while this can be a great advantage, it can also be a disadvantage because there is no way to cancel or reverse transactions done with crypto, even if you made a mistake with the transaction.
The irreversibility of cryptocurrencies can lead to great loss for its users. For example, you could transfer the wrong amount of coins or send coins to the wrong address, and there will be nothing you can do about it unless the recipient agrees to cooperate.
No Government Regulations
Some cryptocurrencies are affiliated with the regulating bodies of some fiat currencies, but most popular crypto like bitcoin and ethereum are not in this category. Decentralized coins like this do not have any legal protection, making them highly susceptible to scams.
This crypto decentralization can also affect its value as it can drop at the slightest change in the market and cause major losses for those with a large number of digital currencies.
Risk of Data Loss
The creators of crypto wanted to make sure the coins were well secured and safe, so they made private keys for every user; this is a great idea. Still, you should know that once you lose your private keys, you will no longer have access to your cryptocurrencies, and there is no way to reverse this or get them back.
So it’s a wrap with this guide on cryptocurrencies; if you were a novice, congratulations; you now have the essential knowledge to help you enjoy faster and safer transactions and invest in your future with crypto.
However, It is important to know that even though cryptocurrency is a trend right now, it may take a while to fully understand the market. Therefore, if you plan to dive into the fantastic world of crypto, you must expect some challenges, be consistent and stay patient.
