It seems like every second day cryptocurrencies, Bitcoins and so on are in the news, but what is this strange phenomena? Is it real money? Can you spend it in shops? And where can I get some?
We aim to answer these questions and more in our beginner’s guide to cryptocurrencies.
So, what is cryptocurrency?
A cryptocurrency, or coin, is a valid form of currency and, once earned, can be used to purchase goods and services; however, it exists in the virtual world, and is a form of, essentially, digital cash. In the majority of countries, using cryptocurrency is legal, but you may have to check, as its status is constantly updated due to increased usage.
There is no central authority to acts as a ‘guardian’, like banks, credit card companies, and so on, do, and you have complete control over your crypto finances. Transactions are seamless, rapid, and direct, and by eliminating a central database, the vulnerability to be hacked, disappears.
Digital ‘wallets’ are used to manage your transactions, and these are locked with incredibly complex passwords, known as a ‘keys’, which cannot be hacked, and are only known by you. Crypto wallets are currency specific, and can only be filled with the matching currency.
You are free to spend, or save, your bitcoins however you wish, just like cash – lending it, paying for goods or services, or going dutch on a meal, but unlike cash, this can all be carried out digitally, on your smartphone, laptop and so on. Just open the wallet app and carry out your transaction.
There are many cryptocurrencies, but the two main ones are:
- Bitcoin (BTC) – this is the original currency, and currently consists of about 60% of the market. Lots of stores accept it, and Amazon vouchers can be bought with BTC
- Ethereum (ETH) – is becoming better known and is used, amongst other things, for online gambling.
How to Fill Your Virtual Wallet
You don’t need to be a tech nerd to use bitcoins, and in fact, more and more Joe Bloggs’s are using them, but why would you want them, and how do you get hold of them?
When people invest in Bitcoin, it usually means that they are buying in for the long term. In other words, they believe that the price will ultimately rise, regardless of the ups and down that occur along the way. Usually, people invest in Bitcoin because they believe in the technology, ideology, or team behind the currency.
Okay, so firstly, you need one of those wallet things; this is a good place to start looking – Cryptocurrency Wallets 2018 , but briefly a wallet can be hardware based, similar to USB sticks, or virtual software wallets.
Here’s where it gets a bit more complicated. A ‘blockchain’ is your virtual ledger, or account book. Every single transaction is permanently and transparently stored here. Think of it as a communal Excel spreadsheet, and it’s the silent, brilliant technology that keeps everyone honest. This is distributed across a vast network, protecting your coins from hackers.
In order to get your first coins, you need to get your credit card out; look at buying Bitcoin as this is widely recognised and available. There are several good sites through which to do this, Coinbase being one. Once the purchase is completed, your coins will be transferred to a virtual wallet, and this first transaction will be noted on your blockchain.
Buying into cryptocurrency really means investing in a commodity—a commodity that can fluctuate wildly, dropping and rising by thousands of dollars in a single day. And since there’s no governing body to step in if the floor falls out, it’s helpful to liken buying and trading bitcoin to gambling.
Cryptocurrencies were created by super nerds, and as with Linux, there is still quite a bit of technical know-how that is required if you wish to trade them. While you don’t need to know how to code, if you are not good with computers you may want to stay away from cryptocurrency trading, at least until they start building more user-friendly interfaces. So, if you aren’t tech savvy, but still want to get involved, find someone you trust to trade for you.
There are lots of crypto currency trade exchanges, and we’ll refrain from recommending any one in particular, as it depends on a variety of factors, including where you live and what you want to trade. There is a vast amount of information online as to which exchange to pick, so it’s time to get busy researching, and asking questions.
Cryptocurrency is a fascinating area, and one that will only increase in scale as experience, knowledge and the market grows, and you, Mr and Ms Bloggs can jump on the merry go round at any time.