Everything You Need to Know About Cryptocurrency to Get Started

Cryptocurrency has been making headlines in recent years, with its meteoric rise in value and widespread adoption. But what exactly is cryptocurrency, and how does it work? In this article, we’ll cover all the essentials you need to know about cryptocurrency to get started.

What is Cryptocurrency?

Cryptocurrency is a digital or virtual form of currency that uses blockchain technology for secure and decentralised transactions. It is not controlled by any central authority (like a country), making it a decentralised form of currency.

How Does Cryptocurrency Work?

Cryptocurrency works through a decentralised network of computers that use blockchain technology to verify and record transactions. Each transaction is recorded in a public ledger, making it transparent and secure. Cryptocurrency is created through a process called mining, where powerful computers solve complex mathematical equations to verify transactions and add them to the blockchain. Miners are rewarded with new coins for their efforts.

This entire mechanism is known as the proof of work. It is the consensus method that Bitcoin is popularly known for. Of course, since Bitcoin, we have evolved and utilised more environmentally friendly methods such as proof of stake etc.

Altcoins vs. Bitcoin

You might have come across the term “Altcoins”, what is it exactly? The long story short is that altcoin essentially refers to cryptocurrencies other than Bitcoin (BTC) and Ethereum. To date, there are thousands of different cryptocurrencies in existence, with new ones being created all the time.

Why is Cryptocurrency Important?

Cryptocurrency offers several benefits over traditional forms of currency, making it an important and valuable asset.

Decentralisation

As mentioned earlier, cryptocurrency is decentralised, meaning it is not controlled by any central authority. This makes it immune to government interference and manipulation, making it a more stable form of currency.

Security

Cryptocurrency uses advanced encryption techniques to secure transactions and protect against fraud. The use of blockchain technology also makes it nearly impossible to alter or counterfeit transactions.

Anonymity

Cryptocurrency transactions are pseudonymous, meaning they are not linked to real-world identities. This offers a level of privacy and anonymity that traditional forms of currency cannot provide.

Global Accessibility

Cryptocurrency is accessible to anyone with an internet connection, regardless of their location or financial status. This makes it a more inclusive form of currency, especially for those in developing countries.

Utility

Many cryptocurrencies now have real-world functionality beyond just being a possible currency. Some cryptocurrencies support decentralised storage, computing power, internet connection and many more.

How to Get Started with Cryptocurrency

Now that you understand the basics of cryptocurrency, here’s how you can get started with it.

Step 1: Choose a Cryptocurrency Exchange

The first step to getting started with cryptocurrency is to choose a cryptocurrency exchange. These are online platforms where you can buy, sell, and trade cryptocurrencies. Some popular exchanges in Singapore include Coinbase, Crypto.com, and Coinhako.

Step 2: Start Small and Start with Bitcoin

Navigating the volatility of cryptocurrency is an experience best understood firsthand. For those interested in exploring this asset class, we recommend beginning with Bitcoin. It’s not necessarily because it has the highest potential, but it’s generally more accessible for beginners compared to other cryptocurrencies. Of course, don’t invest your life savings—start modestly, even with as little as $100.

Step 3: Once You Know What You’re Doing, Explore Altcoins

Once you feel comfortable with the basics of Bitcoin and understand how cryptocurrency trading works, you can start exploring other cryptocurrencies, known as altcoins. Altcoins are alternative cryptocurrencies launched after the success of Bitcoin and include well-known names like Ethereum, Solana, and Cardano. Each altcoin operates on its own unique technology and offers different features and benefits. Diversifying your portfolio with altcoins can provide opportunities for higher returns, but it also comes with increased risk. Ensure you research each altcoin thoroughly, understand its use case, and evaluate its potential before investing.

Step 4: Store Your Crypto in Exchange then Look for a Cold Wallet

Begin by storing your crypto on an exchange, similar to how you’d keep stocks in brokerage accounts like Syfe Trade or moomoo. This approach is advisable for newcomers due to the steep learning curve associated with cryptocurrency. As you become more familiar or if your holdings increase to a level beyond your comfort zone, consider transferring your assets to a cold wallet. A cold wallet, is like a highly secure “thumb drive” designed for cryptocurrency storage, offers enhanced protection for your digital investments. After all, there’s a saying in crypto “Not your wallet, not your coin”.

Risks of Cryptocurrency

While cryptocurrency offers many benefits, it also comes with its own set of risks.

Volatility

Cryptocurrency is highly volatile, meaning its value can fluctuate significantly in a short period. This makes it a risky investment, and it is essential to do your research before investing in any cryptocurrency.

Security Threats

While cryptocurrency is secure, there have been instances of exchanges being hacked, resulting in the loss of millions of dollars worth of cryptocurrency. It is crucial to choose a reputable exchange and take necessary precautions to protect your digital assets.

Regulatory Risk

The unregulated nature of cryptocurrency presents a significant investment risk, as it’s not backed by any government or financial institution, offering no safety net in case of issues. Additionally, the onset of regulatory measures could spike volatility. Actions like exchanges being compelled to delist a cryptocurrency etc. can impact its price.

Conclusion

Cryptocurrency is a revolutionary form of currency that offers many benefits over traditional forms of currency. While it comes with its own set of risks, it has gained widespread adoption and is here to stay. By understanding the basics of cryptocurrency and taking necessary precautions, you can get started with this exciting digital asset and potentially reap its rewards.