The Beginner’s Guide to Cryptocurrency
What is cryptocurrency?
Today, the most famous cryptocurrency is Bitcoin. Its inventor attempted to build a “peer-to-peer electronic cash system”. Many have tried this system many times before. However, the main difference between Bitcoin and the previous efforts, like Digicash, was that it was to be entirely decentralized. Since no overarching entity is controlling the currency, the notion of “trust” would be eliminated from the system.
To combat “double spending”, the major problem in all the digital cash systems at that point, Satoshi Nakamoto, Bitcoin’s inventor, proposed the blockchain technology. The blockchain technology is a revolutionary technology that records all the transactions made with this currency.
For any single balance, transaction, or change to the network to take place, there needs to be a consensus amongst those who validate the network – the miners. Since the invention of Bitcoin, many other programmers who have attempted to use the model and change it to provide what they consider as a form of digital cash that’s more functional.
The other kinds of crypto currencies include Monero, New Economy Movement, Litecoin, and Ether. Many of these cryptocurrency efforts tailor their currency for an individual and particular purpose. Some of the most common purposes are speed, privacy, and price.
What is cryptocurrency used for?
Since crypto currency is such a new technology, it may be that people have not used it yet for its eventual use. Still, today people utilize it for many various purposes. These purposes include, but aren’t limited to the following: trading, remittances, payment for goods and services, investment, gambling, private monetary transactions, and as a hedge against national currencies which are suffering from rapid devaluation (Greece, Venezuela for example).
As the whole cryptocurrency space begins to expand, it’s likely that we will see some additional applications joining the list of purposes for the crypto currency. There are already young services such as SteemIt, which aims to revolutionize the way people pay for content on social media, in addition to services like Musicoin which attempts to find a more equitable way to pay artists without the need for a middleman.
What is the difference between Bitcoin and Ethereum?
All cryptocurrencies have their own characteristics. However, recently one coin has come to challenge Bitcoin more than ever before. Ethereum is the new player on the market. The reasons that it is a challenge to Bitcoin are easy to understand.
Ethereum emerged as an effort to try to correct some of the main criticisms made towards Bitcoin – especially regarding security.
What Ethereum has accomplished to do was to provide transactions that are safer, more flexible contracts that are compatible with any wallet, with short block times for negotiating (where the confirmations are easier). Also, Ethereum is available more than Bitcoin. Whereas more than two-thirds of Bitcoin has already been mined, access to ethereum is still widely available. Another main difference between these two cryptocurrencies is that Ethereum allows for different developers to raise funds for their projects. It can, therefore, be in itself a Kickstarter for some projects.
One of the main advantages to Ethereum is that it’s a more secure, easy to use, flexible, and transact coin. In addition to this advantage, it has brought innovations in terms of entrepreneurship and investment. And this is posing a serious challenge to Bitcoin’s market cap.
What is the difference between an exchange and a broker?
Platforms that allow traders to buy and sell cryptocurrencies are cryptocurrency exchanges. Dues to the fact that it is a very recent – and booming – market, the majority of these platforms are relatively new. But, of course, one of the essential questions that people ask is how to know if a particular platform is safe or not.
The only way that you can find out is to check if the exchange provides transparent data of the coins that are in cold storage. What this means is, whether it has the reserves that it requires to provide liquidity to its activities. You can find check this easily by checking whether an exchange is regulated or not.
You can invest in Cryptocurrency in two ways. First, cryptocurrency can be bought and sold at a cryptocurrency exchange and stored in a digital wallet. The second method would be to invest in crypto as a CFD with regulated cryptocurrency brokers. With CFD trading, the digital currency is treated as a speculative investment and traded as a contract for difference (or CFD), through brokers.
A CFD is a tradable instrument that moves in tandem with the underlying asset and is considered a contract that is negotiated between the cryptocurrency brokers and customer. With CFDs, you don’t own the underlying asset. However, you would profit or loss when the underlying asset moves in relation to the position taken.
How to Choose the Best Cryptocurrency Brokers
Because there’s so much competition in the cryptocurrency market as well as having countless brokers to choose from, it can be difficult to know which cryptocurrency broker will be best for you. Here are a few key points we suggest keeping in mind when deciding how to best invest:
Each country has its own regulatory body. The regulatory body develops rules, services and programs to protect the integrity of the market, traders, and investors as well as the cryptocurrency brokers themselves, and to help members meet regulatory responsibilities. Due to potential safety concerns regarding deposit, you should exclusively open accounts with regulated firms.
Cryptocurrency trading takes place 24 hrs a day, so customer support should be available at all times. Ideally, you will want to speak with a live support person rather than a time-consuming auto-attendant. Give a call to the customer service centre to get an idea of the type of customer service provided. Check on wait times and find out the representative’s ability to answer questions regarding spreads and leverage, their trade volume, as well as company details.
Your ideal broker should be able to offer either multiple account options or an element of customizability. Look for cryptocurrency brokers that offer competitive spreads and easy deposits/withdrawals.
Cryptocurrency brokers can provide a selection of cryptocurrency pairs. However, it is most important is that they provide the variety of pairs that interest you. While there are many digital currencies available for trading, there are only a few get the majority of the attention, and as the result, trade with the highest liquidity.
The trading platform is the investor’s portal to the markets. With that in mind, look for a platform that’s easy to use, straightforward and offers an advanced collection of analytical and technical and tools. These features will help to enhance your trading experience.
For more information on cryptocurrencies, please see our tutorial: The Basics of Cryptocurrency