Judging from the hyped success stories you’ve been hearing, you think it’s time to give a shot of cryptocurrency. However, you’re not sure, yet. That sounds familiar? Before you make a move, it would be wise to understand all the basics and the fundamentals of cryptocurrency trade.
Cryptocurrency is not for every trader – the trade involves significant risk to loss. Because future fluctuations are common in cryptocurrency, a trader is more likely to lose the original investment.
What is bitcoin?
Bitcoin is a cryptocurrency that saw its inception in 2009 in Marketplaces known as “Bitcoin exchanges” that allowed the buying and selling of bitcoins with different currencies.
The creator of Bitcoin is still unknown. However, he/she uses the alias, Satoshi Nakamoto. Bitcoins transactions don’t involve such middlemen as banks. You can use bitcoins to book hotels, shop furniture on Overstock, or purchase Xbox games.
I know- there’s a lot of hype about bitcoin trade making people very rich, this is partly true because their prices hiked to thousands in 2017.
How Does Bitcoin Work
Fortunately, you don’t need to fully understand all the technical bits of cryptocurrency to start trading. You need to install a Bitcoin Wallet in your smartphone or computer, and voila! You’re good to go. The Bitcoin wallet will generate a Bitcoin address and allows you to create more anytime you wish.
You then give your friends these addresses to pay you. Bitcoin works similarly with e-mail; the only difference is Bitcoin addresses are only valid once.
You’ve also probably heard of blockchain – a public ledger shared that all the Bitcoin network relies on. Hence, the blockchain includes every confirmed bitcoin transaction. The blockchain lets Bitcoin wallets calculate spendable balances so new transactions can be verified, thus ensuring the spender owns them. That leads us to yet another critical point, transactions.
The transaction entails value transfer between Bitcoin wallets included on the blockchain. Bitcoin wallets hold crucial information; the Private key also called the seed. The seed is essential in signing transactions to provide mathematical proof that they originated from the real owner.
This signature further prevents altering of the transaction by third parties upon issuance. Every transaction is broadcasted to the network, and confirmation often begins within 10 to 20 minutes of mining. So, what is mining anyway?
Mining is the integrated system used in confirming pending transactions by allowing them as a part of the blockchain, enforcing its chronological order to protect the neutrality of a network, hence allowing various computers to agree on the system state.
For confirmation, transactions are packed in a block to fit strict cryptographic rules that undergo network verification. The rules prevent blocks modification to avoid the invalidation of subsequent blocks. Bitcoin mining is one of the less risky ways to get involved, but mining involves significant investment in hardware and electricity. Some 15+ states have some sort of deregulated electricity, which allows you to shop rates. If you are lucky enough to live in Ohio, or another state with deregulated energy, you can compare rates at places like Akron electric and find rates that make crypto mining more profitable.
Is Cryptocurrency a Smart Investment?
Because you now know the basics, let’s dive in deeper. First, you need to understand that investing in cryptocurrency means saying goodbye to your money and may not be the best method for building wealth.
Forget about the hype. Remember what they said about putting all your eggs in one basket? It’s not worth putting in all your fortune, or you might lose lifetime savings, dream home, or retirement benefits.
Investing in cryptocurrency calls for safety and wisdom. You should, therefore, be cautious before calling the shots.