You may have come across online portals discussing about cryptocurrency some time or the other. These online portals are often filled with jargon which may require additional learning for a newbie to understand the basics of cryptocurrency. Some people who want to start buying or trading in cryptocurrency search for necessary information for self-education purposes. Understanding the basics of cryptocurrency is relatively easy, and this guide aims to make cryptocurrency for beginners easier. Once you have acquired the necessary knowledge, you can consider dabbling in cryptocurrency as and when you consider it appropriate.
What Is the Meaning of Cryptocurrency?
Cryptocurrency has the word currency in it and you know that a currency is a medium of exchange. However, unlike normal currencies cryptocurrency is digital and doesn’t exist in a hard format like notes. Thus, cryptocurrency is a virtual currency that exists only through the digital mode. It is a medium of exchange which you can use to purchase goods and services.
Cryptocurrency also has the word crypto which represents cryptography. Cryptography is the process of encoding information to keep it safe. It involves using codes to protect user data. Cryptocurrencies rely on cryptography to verify transactions and keep them secure. Cryptography also governs the creation of newer units of cryptocurrencies. In summary, cryptocurrencies represent cryptographically secured digital currencies which function as a conduit for exchange and payment.
Bitcoin is the first cryptocurrency that was invented in 2008 by a person or a group of people under pseudonym Satoshi Nakamoto and implemented in 2009. Each cryptocurrency has a ticker symbol, or in other words an abbreviation that uniquely identifies that cryptocurrency. The ticker symbol for Bitcoin is BTC. According to CoinMarketCap price-tracking website there are more than 6000 cryptocurrencies.
There are such cryptocurrencies as Ethereum, XRP, Tether, Cardano, Litecoin, EOS, Tezos, Stellar, Monero, TRON, IOTA, Dash, Neo, and many others.
What is Blockchain? (can insert image of a blockchain)
While reading up about cryptocurrency for beginners, you may have come across this term called ‘blockchain’. This might appear to be jargon but the basic understanding about it is relatively easy. A central bank runs normal currencies within a country along with other commercial banks. These commercial banks are the ones that provide banking services to the people. They also maintain ledgers that record all the transactions being processed. In the case of cryptocurrency, there is no central bank or commercial banks (exceptions are possible like when a cryptocurrency is issued by a governmental agency). The ledgers are public and are stored by the people of the community.
Blockchain is a decentralized public ledger that hosts data about all the transactions that have taken place. This list of transactions is growing and are known as ‘blocks’. Cryptography links all these blocks together to maintain continuity of information. In order to ensure orderly recording, each block has a cryptographic hash belonging to the previous block. To chronologically store data, it also has a timestamp.
Blockchain is a decentralized ledger and hence is considered as relatively secure. It is considered that nobody can backdate transactions and update them once they have been recorded. A single edit in one block requires edits in all subsequent blocks. It is assumed that this cannot be executed without approval from the network majority. Since blockchain is stored in a peer-to-peer format with systems acting as nodes, there are numerous copies of each block. These numerous copies are intended to ensure that nobody can manipulate the data. Thus, a chain of blocks is established that chronologically stores all transaction data. Since there are conventionally no banks involved, cryptocurrency is relatively immune to interference by governments and other institutions. However, some government entities may launch their own cryptocurrencies which can be subject to government regulations.
Who Are Miners?
All the transactions that are done through cryptocurrencies are verified and stamped by miners. Miners act as bookkeepers for cryptocurrency transactions. They use computing power to process cryptographic data. Solving this cryptographic data results in verification of the transactions that occurred. After a transaction is verified, it is then updated on all the blocks stored across the world. Thus, most cryptocurrencies appear to be largely decentralized and run by the people. Some cryptocurrencies, however, may be launched by government entities and these may fall under the ambit of government regulations. Once a transaction is added to the blockchain, it cannot be edited. The miner gets a reward as well as processing fee for solving cryptographic puzzles and verifying transactions.
Advantages of Cryptocurrencies
There are always two sides to every coin. Some people may firmly believe in the advantages of cryptocurrencies while others may be a tad bit sceptical. There are certain perceived advantages of cryptocurrencies that are hard to ignore. You should read about them for yourself and then form an informed opinion about cryptocurrencies.
Certain cryptocurrencies like Bitcoin have increased manifold in value, thus rewarding their investors with good returns. Some supporters of cryptocurrencies may see this as an indication of the times to come. Thus, some people may rush to buy cryptocurrencies right now as they may increase in value later. These are generally people who believe that cryptocurrencies are the future of currencies. While some cryptocurrencies have increased in value, some others have gone down as well. Before investing, you need to look at and assess the cryptocurrency properly in order to come to an informed conclusion. With over 2,200 cryptocurrencies, you have a lot of options to choose from.
No Central Bank
Another perceived advantage that a publicly launched and held cryptocurrency has is that there is no central bank regulating it. Central banks can manipulate the flow of currency and this may cause inflation or deflation. Both these incidences lead to a change in the value of money. Inflation reduces the value of national money over time. Most cryptocurrencies however, are not under the strict regulation of any central bank.The only exception to this being cryptocurrencies launched by governments and central banks themselves. Thus, they can be largely immune to manipulation by government entities. Reliability of cryptocurrencies depends on many factors and people need to make their own weighed decisions and consider possible risks. Regulation of cryptocurrencies depends on a jurisdiction. Traders may need to get familiar with their national cryptocurrency legislation.
By using blockchain, cryptocurrencies appear to be more secure to some of its supporters. Unless the cryptocurrency is launched by a government or a central bank, no centralized ledger is maintained. A decentralized ledger exists in nodes across the world that store data using blockchain technology. This makes it harder to manipulate.
All the transactions end up stored in decentralized blocks that have a link to each other. Different nodes across the world then store these blocks. This possibly makes it a truly public currency with decentralized and apparently more secure ledgers. Thus, the supporters of cryptocurrency believe that it is more secure than traditional payments. The technology behind cryptocurrency itself is considered to be used not only in the field of finance, but in a public sector and other fields as well. E-payments and information technology are two burgeoning sectors that have seen an increased use of cryptocurrencies.
Some people may see cryptocurrency as an investment opportunity. These people are more concerned about the return on investment potential of cryptocurrencies rather than their everyday use. They end up leveraging the price differences in the cryptocurrencies in order to try and make profits. The fact that the value of some cryptocurrencies like Bitcoin and Ethereum have risen in value should not be treated as their credibility, as prices of cryptocurrencies can unpredictably change and affect the people’s investment intentions.
Where Do You Trade Cryptocurrencies?
The buying and selling of cryptocurrencies happen through cryptocurrency exchanges. These exchanges bring together the buyers and sellers of cryptocurrency and facilitate the exchange. They match potential buyers with potential sellers and fulfil the trades if the price bands of their orders match. You need to have an account with any one or more cryptocurrency exchanges in order to trade in cryptocurrencies. You can then use this account to buy and sell cryptocurrency units. This is a peer-to-peer transaction so buyers and sellers both need to be available to complete trades.
The Torex Trading Platform
You can trade directly at the exchanges if you like but there is an alternative option available. You can use contemporary trading platforms like Torex to trade cryptocurrencies. Torex allows you to integrate your accounts with some of the major exchanges with its own platform. This happens using API keys. After entering your API keys on Torex, you may take advantage of the trading solutions they have to offer. Torex allows you to use their integrated data analytics tools to analyze and assess cryptocurrencies and their prices.
Torex allows you to place a host of order types like limit orders, market orders, trailing stop orders or take profit orders. It also allows you to buy from one exchange and sell at another within your Torex account in case the accounts at exchanges are integrated to Torex using API keys. This can be convenient for your positions since you may access a wide berth of possible trades. Torex has also launched TOR utility tokens that are going to be integrated within its functionality. Using Torex, you can track rates of different cryptocurrencies across multiple exchanges using just one console. This can make it easier to find better trades through enhanced price monitoring.
Torex is not just a multi-exchange platform, but also a multi-coin platform. You can trade in multiple cryptocurrencies across different exchanges. The diverse trading options like copy trading, crypto betting and crypto arbitrage trading aren’t available directly on the exchanges. Their advanced cryptocurrency arbitrage tool assesses the depth of order books as well as the prevailing liquidity in the market. Torex will soon be launching an application which will make crypto trading accessible to you, on the go. You can open an account with Torex if you wish to explore these features further.
A cryptocurrency is a largely decentralized digital currency. You can exchange it for goods and services. It may also be a good investment option provided you make well-informed decisions backed by valid data. The blockchain technology maintains a decentralized public ledger which gives unique opportunities to investors and buyers of cryptocurrency. This blockchain technology may ensure that no government or non-government entities manipulate the books. You too can start dabbling with cryptocurrency now that you know some information about cryptocurrency for beginners. You now can consider learning the basics of crypto trading, investing in cryptocurrencies or buying cryptocurrency coins for personal use.
Our Torex cryptocurrency trading app is available at Google Play Store. You can download today!