Cryptocurrency for beginners. How to start using Bitcoin
Everyone who has access to the Internet has heard more than once about the “magical” world of cryptocurrencies. There, ordinary people become real investors and repeatedly increase their initial capital.
But there are those who climbed indiscriminately: they did not know what to buy, where to store and how to use it. Such "investors" quickly lose all their savings and start shouting that Bitcoin is a hoax and, in general, an attempt by global freemasonry to fool money from honest people.
Therefore, before you start using cryptocurrency, you need to at least learn the basic principles of working with it. For example, read this article.
Cryptocurrency is a digital currency built on Blockchain . Cryptocurrencies are also called “crypto”, “digital coins”, “virtual money” and any other combinations of these words. The king of cryptocurrencies is Bitcoin, launched in 2009 by a certain Satoshi Nakamoto. The real name of this person (or group of people) is still unknown.
Craig Steven Wright, an Australian businessman and scientist, has repeatedly hinted that he is Satoshi Nakamoto. Wright's evidence does not inspire confidence.
To get Bitcoin, you need to mine it. Mining is the solution of complex mathematical problems on computers. In exchange for decisions, computer owners receive coins, which are stored as records on the blockchain. Blockchain is like a digital ledger that is stored on the computers of all users at the same time.
Blockchain cannot be tricked or faked. Even if you start a computer with a fake record on the network, other computers will immediately compare it with theirs and refuse to accept it. For a successful hack, you need to fill the network with fakes more than half - and this is almost impossible.
Etherium and Ripple are the most popular altcoins.
The success of Bitcoin has led to the emergence of alternative cryptocurrencies (altcoins). The most important of them are Ethereum, Ripple, Litecoin and Monero. They are also based on the blockchain, but are independent of the original algorithm. Therefore, they can use other types of encryption and process transactions faster.
As a rule, prices for altcoins depend on the Bitcoin exchange rate. In February 2017, when Bitcoin grew 18 times, altcoins also significantly increased in price. And when Bitcoin began to fall, they fell along with it.
Altcoins are a common name for coins (except Bitcoin) and tokens. But there is still a difference between them.
Coins are the currency. They can be earned (mined) and spent on goods and services. Coins were built specifically on Blockchain.
Tokens are more likely securities (stocks) built on an auxiliary platform - for example, Etherium or Waves. They confirm the presence of a share in any project, and their cost depends on the success of the project. Tokens cannot be mined, you can only buy. It is also impossible to spend directly, you can only sell it for another currency or exchange it for the services of the company that issued them.
Coin prices are stable relative to the market and correlate with it. Investing in coins is the same as investing in the market. As it grows, so do your savings. True, slowly.
Tokens are already stocks. Their cost is tied to the project that they represent. If the project shoots, the price of tokens can rise several times in a few hours. But if it falls apart, it will fall below the market.
Therefore, coins are worth buying for those who just want to use cryptocurrency and do not want to take risks. And tokens are suitable for risky investors who want to earn quickly and immediately.
Most people find it impossible to purchase real goods or services for Bitcoin. But this is no longer a problem. Cryptocurrencies are accepted by Microsoft, PayPal, Subway, Shopify, Virgin Galactic and dozens of other large companies. Full list here .
Even if the company you need does not accept cryptocurrency, it can be exchanged for hard, fiat currency - for example, dollars. The easiest way to do this is with a special bank card for cryptocurrencies.
But before you start using the card, you need a wallet.
Cryptocurrency wallet - an application, program or a separate device for sending, receiving or storing electronic money. The following are five types, with a brief description of the advantages and disadvantages:
From all this, I advise you to choose an online wallet.
Most newcomers to the cryptocurrency market choose online wallets. And that's why:
Online wallets do not store cryptocurrency. They store only public and private keys to your money.
A public key is the address to which other users send you money. In principle, it is similar to email.
Private key - a set of letters and numbers that allows you to access money. If the public key is email, then the private key is the password to it.
Some do not like the fact that the online wallet has their private key. But he is needed so that they can confirm your identity. It’s the same as complaining that Google knows the password for your Gmail - how else can you prevent other users from reading your correspondence?
Getting an online wallet is a matter of a couple of minutes. But first you need to find a reliable service. One that does not lose users' money or does not run away with them to Thailand.
Before creating a wallet, make sure that your coins will be stored in a “cold” wallet - a storage that is not connected to the Internet. It's harder to crack.
Explore the company, its team, reviews about it. In the end, be sure to trust money to a third party. And only then create a wallet.
Fiat money is ordinary, hard money issued by a state. For example, a dollar or a ruble. And since many services do not yet accept cryptocurrencies, we still need fiat money.
There are three main ways to transfer money from crypto to fiat:
Cards are currently unavailable to countries in Europe and the CIS, because the only card provider in Europe has ceased to exist. But many companies promise to release new ones in the next few months.
Trading floors are very safe. But only at first glance. In fact, this is the most risky method of working with cryptocurrencies.
There have already been cases when thieves received bitcoins and did not send transfers with fiat - and vice versa. Or they used someone else's cards for this and the real owner then disputed the transfer. And in a personal meeting, a gun was pointed at users and forced to transfer bitcoins for free.
Therefore, cryptocurrency trading platforms are the last place where it is worth changing the currency.
The world is still trying to understand what kind of beast this is - “cryptocurrencies”. Therefore, it is worth preparing for a wide variety of surprises. The whole market is frankly unstable, and prices change hourly.
For example, in February 2014, when Mt.Gox fell, the price of bitcoin fell almost half from $ 837 to $ 439 in a month. And in December 2017, the price of Bitcoin rose from $ 10,000 to $ 19,000, thanks to hype and high demand. In both cases, there were players who made fortunes on this - but there were also those who went bankrupt.
On the thirtieth anniversary of Black Monday, the day the stock market fell by 28%, Alexander Tapscott said: “In the cryptocurrency market, they would call it just Monday.”
The price of cryptocurrencies is very dependent on the media. Regulatory news, quotes from famous personalities and other publications strongly influence the market. For example, the negative comments of the Minister of Finance of India led to a depreciation of $ 500 .
Even the so-called “experts” are often mistaken. Therefore, it is important to have your own opinion and deeply analyze everything that happens on the market.
Before entering the market, I advise you to read a couple of books to understand why cryptocurrencies are created, how they work and who are the key figures in this area. One such book is Digital Gold by Nathaniel Popper. This book is notable for the fact that it is easy to read and tells a fascinating story about how and why it all began almost ten years ago, and who are the people who stood at the origins of Bitcoin.
Also choose tools that will help you keep abreast of events: news sites ( Forklog , Bits.media ), mobile applications for convenient information retrieval and tracking changes in the market ( Blockfolio , CoinCap ), charts and statistics ( Coinmarketcap ).
Some useful rules to help keep your funds safe:
Cryptocurrency is not just money, but technology, innovation and business. Blockchain gives us an amazing technology, the potential of which we have yet to unlock. It gives us the opportunity to build a completely new world where freedom, privacy and the protection of human rights are indispensable components of everyday life. Investing in cryptocurrency can be a smart step towards such a future.
But there are those who climbed indiscriminately: they did not know what to buy, where to store and how to use it. Such "investors" quickly lose all their savings and start shouting that Bitcoin is a hoax and, in general, an attempt by global freemasonry to fool money from honest people.
Therefore, before you start using cryptocurrency, you need to at least learn the basic principles of working with it. For example, read this article.
Types of Cryptocurrencies
Cryptocurrency is a digital currency built on Blockchain . Cryptocurrencies are also called “crypto”, “digital coins”, “virtual money” and any other combinations of these words. The king of cryptocurrencies is Bitcoin, launched in 2009 by a certain Satoshi Nakamoto. The real name of this person (or group of people) is still unknown.
Craig Steven Wright, an Australian businessman and scientist, has repeatedly hinted that he is Satoshi Nakamoto. Wright's evidence does not inspire confidence.
To get Bitcoin, you need to mine it. Mining is the solution of complex mathematical problems on computers. In exchange for decisions, computer owners receive coins, which are stored as records on the blockchain. Blockchain is like a digital ledger that is stored on the computers of all users at the same time.
Blockchain cannot be tricked or faked. Even if you start a computer with a fake record on the network, other computers will immediately compare it with theirs and refuse to accept it. For a successful hack, you need to fill the network with fakes more than half - and this is almost impossible.
What are altcoins
Etherium and Ripple are the most popular altcoins.
The success of Bitcoin has led to the emergence of alternative cryptocurrencies (altcoins). The most important of them are Ethereum, Ripple, Litecoin and Monero. They are also based on the blockchain, but are independent of the original algorithm. Therefore, they can use other types of encryption and process transactions faster.
As a rule, prices for altcoins depend on the Bitcoin exchange rate. In February 2017, when Bitcoin grew 18 times, altcoins also significantly increased in price. And when Bitcoin began to fall, they fell along with it.
What are coins and tokens
Altcoins are a common name for coins (except Bitcoin) and tokens. But there is still a difference between them.
Coins are the currency. They can be earned (mined) and spent on goods and services. Coins were built specifically on Blockchain.
Tokens are more likely securities (stocks) built on an auxiliary platform - for example, Etherium or Waves. They confirm the presence of a share in any project, and their cost depends on the success of the project. Tokens cannot be mined, you can only buy. It is also impossible to spend directly, you can only sell it for another currency or exchange it for the services of the company that issued them.
Why are tokens worse than coins?
Coin prices are stable relative to the market and correlate with it. Investing in coins is the same as investing in the market. As it grows, so do your savings. True, slowly.
Tokens are already stocks. Their cost is tied to the project that they represent. If the project shoots, the price of tokens can rise several times in a few hours. But if it falls apart, it will fall below the market.
Therefore, coins are worth buying for those who just want to use cryptocurrency and do not want to take risks. And tokens are suitable for risky investors who want to earn quickly and immediately.
How to spend cryptocurrency
Most people find it impossible to purchase real goods or services for Bitcoin. But this is no longer a problem. Cryptocurrencies are accepted by Microsoft, PayPal, Subway, Shopify, Virgin Galactic and dozens of other large companies. Full list here .
Even if the company you need does not accept cryptocurrency, it can be exchanged for hard, fiat currency - for example, dollars. The easiest way to do this is with a special bank card for cryptocurrencies.
But before you start using the card, you need a wallet.
Choose a wallet
Cryptocurrency wallet - an application, program or a separate device for sending, receiving or storing electronic money. The following are five types, with a brief description of the advantages and disadvantages:
- Software wallet ( Bitcoin Core , Exodus ). These wallets store crypto right on your computer. And a lot of space is needed for this. For example, for a minimum installation of Bitcoin Core, you need at least 145 GB of hard disk space - and this is only for one currency;
- Online wallet ( Blockchain , Wirex ). These wallets store your coins in the cloud. You can use them from any device, even from your phone. But you need to choose a wallet carefully - if someone breaks it, you will lose all the money. Therefore, carefully read the reviews of other customers before the final decision.
- Hardware wallet ( Trezor , Ledger ). These wallets are separate devices, so they are much harder to crack than a regular computer. But you need to always carry them with you, and also remember the PIN code. And do not forget, otherwise you'll be like Mark Fraunfelder !
- Mobile application ( MyCelium , Breadwallet ). An application for smartphones on Android or IOS, which allows you to manage your funds. A convenient, easy and quick way to store, but with a low level of security. In addition, if the phone is stolen, thieves will have full access to the wallet.
- Paper wallet ( WalletGenerator. Net or MyEtherWallet.com ). The private and public key generated by using a special site, which can be printed or recorded. It should be remembered that, in addition to the sheet of paper on which the keys are written - they are nowhere else, so the loss is equivalent to the loss of all the money that is in such a wallet.
From all this, I advise you to choose an online wallet.
Why online wallets are better
Most newcomers to the cryptocurrency market choose online wallets. And that's why:
- No need to store hundreds of gigabytes of history on your device.
- The interface is convenient and clear, no need to further study it.
- The security level is usually higher than in mobile wallets.
- You can use it either from a PC or from a mobile phone.
How does an online wallet work?
Online wallets do not store cryptocurrency. They store only public and private keys to your money.
A public key is the address to which other users send you money. In principle, it is similar to email.
Private key - a set of letters and numbers that allows you to access money. If the public key is email, then the private key is the password to it.
Some do not like the fact that the online wallet has their private key. But he is needed so that they can confirm your identity. It’s the same as complaining that Google knows the password for your Gmail - how else can you prevent other users from reading your correspondence?
How to choose an online wallet
Getting an online wallet is a matter of a couple of minutes. But first you need to find a reliable service. One that does not lose users' money or does not run away with them to Thailand.
Before creating a wallet, make sure that your coins will be stored in a “cold” wallet - a storage that is not connected to the Internet. It's harder to crack.
Explore the company, its team, reviews about it. In the end, be sure to trust money to a third party. And only then create a wallet.
How to exchange cryptocurrency for fiat money
Fiat money is ordinary, hard money issued by a state. For example, a dollar or a ruble. And since many services do not yet accept cryptocurrencies, we still need fiat money.
There are three main ways to transfer money from crypto to fiat:
- Cryptocurrency exchangers ( Coinbase , GDAX ). Choose an exchanger as carefully as an online wallet. Check security, read reviews and reviews of other people who understand this. One unpleasant story that happened with the large exchange Mt.Gox was already discussed on the hub
- Cryptocurrency trading platforms. At these sites, sellers can find buyers - and vice versa. After the initial “meeting” on the site, users decide how they will transfer funds to each other. They usually meet in person or use bank transfers.
- Cryptocurrency cards ( Bonpay , Spectrocoin ). Special bank cards to pay directly or withdraw money from an ATM.
Cards are currently unavailable to countries in Europe and the CIS, because the only card provider in Europe has ceased to exist. But many companies promise to release new ones in the next few months.
Why you should not trust trading floors
Trading floors are very safe. But only at first glance. In fact, this is the most risky method of working with cryptocurrencies.
There have already been cases when thieves received bitcoins and did not send transfers with fiat - and vice versa. Or they used someone else's cards for this and the real owner then disputed the transfer. And in a personal meeting, a gun was pointed at users and forced to transfer bitcoins for free.
Therefore, cryptocurrency trading platforms are the last place where it is worth changing the currency.
What you need to know before entering the cryptocurrency market
The world is still trying to understand what kind of beast this is - “cryptocurrencies”. Therefore, it is worth preparing for a wide variety of surprises. The whole market is frankly unstable, and prices change hourly.
For example, in February 2014, when Mt.Gox fell, the price of bitcoin fell almost half from $ 837 to $ 439 in a month. And in December 2017, the price of Bitcoin rose from $ 10,000 to $ 19,000, thanks to hype and high demand. In both cases, there were players who made fortunes on this - but there were also those who went bankrupt.
On the thirtieth anniversary of Black Monday, the day the stock market fell by 28%, Alexander Tapscott said: “In the cryptocurrency market, they would call it just Monday.”
The price of cryptocurrencies is very dependent on the media. Regulatory news, quotes from famous personalities and other publications strongly influence the market. For example, the negative comments of the Minister of Finance of India led to a depreciation of $ 500 .
Even the so-called “experts” are often mistaken. Therefore, it is important to have your own opinion and deeply analyze everything that happens on the market.
How to learn more about cryptocurrency
Before entering the market, I advise you to read a couple of books to understand why cryptocurrencies are created, how they work and who are the key figures in this area. One such book is Digital Gold by Nathaniel Popper. This book is notable for the fact that it is easy to read and tells a fascinating story about how and why it all began almost ten years ago, and who are the people who stood at the origins of Bitcoin.
Also choose tools that will help you keep abreast of events: news sites ( Forklog , Bits.media ), mobile applications for convenient information retrieval and tracking changes in the market ( Blockfolio , CoinCap ), charts and statistics ( Coinmarketcap ).
How to safely store cryptocurrency
Some useful rules to help keep your funds safe:
- Always back up your private key. You can store it on a USB flash drive, but be careful, as there are many cases where such a flash drive was lost or damaged due to children or pets. Or write a private key on paper (it is not recommended to use a printer and print), but, again, keep such a record in a safe place. The Winklevoss brothers , famous crypto-billionaires used this method, but in a more sophisticated way: they cut a key printed on paper and stored in different cells in a bank.
- Typically, private keys can be recovered using a key phrase that consists of 12 or 24 words. Also make a copy of this phrase.
- Create a mailbox that you will use only for this wallet. Only FOR THIS WALLET.
- Use two-factor authentication wherever possible. Just install an application that will generate a password for your accounts and enjoy another level of protection.
- Choose reliable exchanges and exchangers with a good reputation to avoid unpleasant consequences.
- Update the software regularly and install the latest version of the wallet you are using.
Conclusion
Cryptocurrency is not just money, but technology, innovation and business. Blockchain gives us an amazing technology, the potential of which we have yet to unlock. It gives us the opportunity to build a completely new world where freedom, privacy and the protection of human rights are indispensable components of everyday life. Investing in cryptocurrency can be a smart step towards such a future.