There have been hordes of people that have been looking to get into the cryptocurrency market, but they perhaps don’t fully understand how it works, or where to start. In the following article, we will be discussing the steps that you need to take in order to fully understand the cryptocurrency market, so you can be as effective as possible. You may even just to navigate around for pleasure and see how it all works, or maybe you want to make some extra cash in the cryptocurrency markets, it is entirely up to you. However, you do need to do a bit of homework in order to understand the rudimental principles.
What is a cryptocurrency?
Firstly, a cryptocurrency is a form of digital currency that resides on the Internet, but if we strip away the shell and take at it under a microscope, it is nothing more than a few lines of computer code. The first ever cryptocurrency to capture the public eye was none other than bitcoin, and since then the bitcoin price has soared but it has also experienced a few down periods. Cryptocurrencies make it easier to transfer funds to and from different parties, and these transactions are facilitated through the use of public and private keys which represent a person’s identity. Unlike traditional bank transfers, cryptocurrency transactions are completed with minimal processing fees, which allow users to avoid heavy fees charged by banks. The cryptocurrency market is full of different cryptocurrencies all offering a range of different technologies, with some worth more than others, and some with absolutely no purpose at all so you need to do a bit of research in order to understand which cryptocurrencies are worthwhile.
When you navigate the cryptocurrency market you will almost certainly come across a few weird looking words or phrases, and it is important to get to know what these mean. The following words and phrases should be understood in order to be as effective as possible in the cryptocurrency market:
- Altcoin – An altcoin is simply a cryptocurrency that isn’t bitcoin, so for instance; Verge (XVG), Dash (DASH), Monero (XMR).
- Block – Blocks are pages in a ledger and these blocks are the files where unchangeable data related to the blockchain network is permanently stored.
- Fork – A fork is a permanent change or divergence from a current operating version of a blockchain. Forks occur when 51% of the entire network vote to change or move to a new version. However they occur for other reasons like a bug in the system, or more commonly a new set of consensus rules come into existence
- Public & Private Keys – In relation to the cryptocurrency market, your public and private keys are cryptographic keys that can be used by any party to encrypt a message. They are used to send and receive cryptocurrencies to and from each other.
What are exchange platforms?
A cryptocurrency exchange platform is essentially a marketplace for a plethora of different cryptocurrencies that can be traded, sold or bought at a specific price. They also double as wallets to store your cryptocurrencies but it is not recommended that you do this because some exchanges have been subject to theft. These allow you to exchange your fiat cash to cryptocurrencies like bitcoin, ethereum or ripple. Some platforms offer a better price than others, so, for example, the bitcoin price might be cheaper on one platform and slightly more expensive on another. Generally, they all offer roundabout the same price.
What are ICOs?
When a cryptocurrency startup wants to raise the capital they will hold an ICO, which means offer their own tokens in exchange for cash and these investors hope these tokens will be worth something in the future, much like an IPO. The company will create something called a whitepaper that has information on what the project is about and what will be doing in the future with the raised funds. Be warned though, not every ICO is legitimate as many people have fallen victim to fraudulent ICOs and have handed their money over without knowing anything about the company or the people behind the company. If you do feel like investing in an ICO you must conduct an extremely high level of research before you hand over your money, and this is because there are little to no regulations when it comes to ICOs.