An intro to crypto, what is it and how does it work?
So crypto has taken the world by storm. For some, it has been life-changing and for others, it’s been a fun hobby. Sadly though, for the rest, you might as well by talking a foreign language. It saddens me that some people see the word crypto and immediately get turned away, there are so many good opportunities that people are missing out on.
Stick with me and have a read down below, I want to try and demystify cryptocurrency and give you an introduction that leaves you feeling confident in your knowledge and who knows, maybe have you waiting to dip your toes into the crypto pool.
So what is crypto?
Good question, there is no better place to start than defining what a cryptocurrency is. A cryptocurrency is a decentralised digital coin or token with no physical presence but with an associated varying monetary value. Digital money that doesn’t have to travel through a bank. Crypto tokens work through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.
Hmm ok, now what is a blockchain?
A blockchain is a series of digital databases that store cryptocurrency transaction records, think of it as a big online ledger that everyone is able to read. I could tell you a lot more about blockchain but for now, there is no need to overload your mind with the nitty-gritty, I'm just trying to whet your appetite.
Joe, you have mentioned coins and tokens, but what is the difference between the two?
Ah, see now you are asking the right questions. The two most common blockchain-based digital assets are cryptocurrencies and tokens. The biggest differentiation between the two is that cryptocurrencies have their own blockchains, whereas crypto tokens are built on an existing blockchain.
Ok, I understand, now what are some of the main types of crypto?
So as of January 2021, there were over 4000 different cryptocurrencies, but don’t worry, no one expects you to know the ins and outs of all of them. If you were to head to a website like CoinMarketCap (https://coinmarketcap.com/) you would see a list of what many would consider the most relevant coins. Now, this list of coins is hundreds of pages long and the further back you go, the more obscure the coins will become, so take your time, learn about the coins on page one and when you feel like you are experienced enough, head a bit deeper in a and start learning about other less known coins.
Ok, I'm starting to get it, how do I actually buy coins?
So first you are going to want to choose a Broker or Crypto Exchange such as Binance or Coinbase. Now you are going to want to create and verify your account. Once you have done that you’ll need to add a card and deposit some money to start buying with. Now you can place your order. The last step is to select a storage method.
Crypto exchanges aren’t backed by any financial body, so they don’t have the same level of protection as traditional financial services. They are potentially more vulnerable to hacking or cyber-attacks, so what a lot of people choose to do is have an offline wallet. Now, this all depends on how you buy your coins or tokens, if you’re buying cryptocurrency via a broker, you may have little to no choice in how your cryptocurrency is stored. If you purchase cryptocurrency through an exchange, you have more options.
Wow, thanks joe. I feel like I have a good understanding of cryptocurrency now!
I'm glad! It’s a really interesting market and I would love it if everyone understood it. If you have any questions, please feel free to get in touch here on LinkedIn or better yet, you can head over to https://www.mynaaccountants.co/ and give one of the team a message there.
