A Beginners Guide To Talking Crypto
As the popularity of cryptocurrencies surges in the investment world and the applications of blockchain technology continue to expand, it's becoming increasingly important to gain an understanding of this emerging technological space. Still, with so much foreign lingo and difficult-to-understand concepts, one cannot be blamed for feeling a little lost when it comes to dealing with the world of cryptocurrency. In order to provide you with the foundation you need to get started on your crypto journey, here are some important concepts that you should know from the get go.
What is cryptocurrency?
Let's start with the basics — where does this peculiar term come from? "Crypto" refers to cryptography, which is the writing and solving of code that enables the secure digital communication of information. The "currency" part of cryptocurrency, on the other hand, is self-explanatory. By merging those two terms together, we learn that a cryptocurrency is a form of digital currency that, thanks to cryptography, can be traded both securely and anonymously. Now that you know what cryptocurrency is, you may be wondering how it is created.
How is cryptocurrency made?
Cryptocurrencies are created using a method known as mining. This is a process whereby powerful computers solve complex puzzles with the aim of determining the authenticity of transactions over a network. By achieving this goal, owners of those computers may be successful at developing a cryptocurrency. Typically, however, potential investors would purchase an existing cryptocurrency, either from an exchange or directly from another user. By this stage, you're probably wondering what some of the most popular cryptocurrencies are that investors are after.
The frontrunners
No matter your level of crypto expertise, chances are that you've heard of Bitcoin. The original cryptocurrency that is still highly sought after, Bitcoin continues to be a popular investment choice for cryptocurrency enthusiasts. Another highly reputable cryptocurrency is Ethereum. In addition to being a highly sought-after asset in and of itself, Ethereum also performs a function outside of being a valuable investment to hold — this cryptocurrency supports financial transactions that are more complex than those that Bitcoin is capable of supporting. Another option that is emerging as a popular alternative to Bitcoin and Ethereum is Litecoin, which was developed to make online payments easier. Amusingly, Dogecoin is a cryptocurrency that was developed as a joke making fun of the speculative nature of cryptocurrencies. Despite becoming known as a "meme" cryptocurrency, Dogecoin has ended up becoming a popular and surprisingly highly-valued cryptocurrency. Let's take a look at some of the other concepts that you need to familiarize yourself with in order to become an expert in this field.
Miscellaneous
Many cryptocurrencies such as Bitcoin rely on a technology called Blockchain. This is a record-keeping system that is constructed from a series of sequential blocks. Another common term you might hear during your cryptocurrency journey is DeFi. This stands for Decentralized Finance and refers to financial transactions such as those involving cryptocurrency that are conducted outside of the formal banking sector. Once you start investing in cryptocurrency, your investment will be stored in a wallet. Much like a physical wallet for cash, your digital wallet stores the information that makes up your cryptocurrency assets. Now, it's time to discuss how you can start investing in cryptocurrency.