Road to Financial Freedom: Beginner Crypto Guide for an idiot- Part 1
So, you want to invest? Beginner Crypto Guide for an idiot- Part 1
This is not financial advice, please do your own further research
Key words
Cryptography: The art of writing or solving codes
Currency: A system of money in general use in a country
Fintech: Financial technology- Computer programs and other technology used to support or enable banking and financial services
Encryption: The process of converting information or data into a code.
Decryption: The process of transforming encrypted data back into a format that is readable by a user or machine.
Altcoin: All cryptocurrencies other than Bitcoin (BTC)
Peer to Peer: The direct exchange of some asset, such as a digital currency, between individual parties without the involvement of a central authority.
Market Capitalization: The total value of a cryptocurrency
Blockchain: Is a decentralized ledger of all transactions across a peer-to-peer network (useful to know, but don’t pay too much attention if you’re just starting out)
Fiat money: is a legal tender, which is a currency declared legal by the government, and its value is backed by the issuer (the government).
Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments. It gives power back to the people instead of relying on banks to store and control your money.
At the time of writing this blog the total market capitalisation is: over 9 Trillion GBP
Cryptocurrency examples
There are thousands of cryptocurrencies. Some of the best known include:
Bitcoin: Founded in 2009, Bitcoin was the first cryptocurrency and is still the most commonly traded. The currency was developed by Satoshi Nakamoto – widely believed to be a pseudonym for an individual or group of people whose precise identity remains unknown.
Ethereum: Developed in 2015, Ethereum is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum. It is the most popular cryptocurrency after Bitcoin.
Ripple: Ripple is a distributed ledger system that was founded in 2012. Ripple can be used to track different kinds of transactions, not just cryptocurrency. The company behind it has worked with various banks and financial institutions.
Non-Bitcoin cryptocurrencies are collectively known as “altcoins” to distinguish them from the original.
Is Crypto Currency safe?
Cryptocurrency also presents some unique risks that you should be aware of as follows:
Volatility: Crypto markets can be volatile, meaning that prices can change rapidly. You can mitigate this risk by building a diversified portfolio and buying crypto for the long term (rather than attempting to profit from short-term cryptocurrency trading).
Investment hype: Cryptocurrencies can be subject to intense hype and buzz, which can cause their prices to surge (and then crash). This is particularly true for lesser-known coins and “joke” coins like Dogecoin. (This risk can be mitigated by sticking to well-established coins, such as Ethereum and Bitcoin)
Phishing: Phishing attacks may target crypto-owners, attempting to obtain passwords or private keys. You can mitigate this risk by not opening suspicious emails and direct messages and not clicking on unknown links.
Regulation: Cryptocurrency is largely unregulated by world governments, at least so far. This could change, and we could see governments crack down on cryptocurrency.
China declared cryptocurrency transactions illegal in 2021, essentially banning Chinese citizens from buying crypto. While such actions are unlikely in democratic countries like the United States, it’s difficult to predict the future of crypto regulation.
Okay, so how do I invest?
Before you invest in a cryptocurrency, you must do a little research about it. Pay attention to the following key components when you do your crypto research:
The crypto’s white paper: A white paper is something like a business proposal for new cryptocurrencies. It includes everything potential investors need to know about the crypto, such as technology, purpose, financial details, and so on. Think of it as your crypto’s resume.
The team behind the crypto: No one really knows who created Bitcoin, but the rest of the cryptocurrencies out there normally have a team behind them who guide the company and its blockchain technology. Make sure to find out about team members’ experience in the field, their motivations, and their authority.
Partnerships: If you’re not willing to take a lot of risk, seeing who in the industry has put their trust in the hands of the cryptocurrency you’re considering buying is very important. Another good thing about having partners in the traditional world is that the cryptocurrency may have a higher chance of being accepted by the masses.
The crypto’s technology: Many cryptocurrencies are tokens from blockchain companies with multiple products. The more you get to know the products and the technology behind the cryptocurrency, the better.
The crypto’s contribution to society: What problem is this cryptocurrency trying to solve? Does it matter to you? Is the team behind the cryptocurrency just trying to get rich quick, or does it have a long-term plan for the betterment of society? Finding answers to these questions can help you decide whether you should consider buying this cryptocurrency.
The road map: Many companies behind cryptocurrencies have sections on their websites dedicated to their road maps: where they come from, what they’ve achieved, and what they’re planning to accomplish in the future. If available, road maps are a great way to discover a ton of fundamental information about the crypto in a few minutes.
