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Rasesh Rathi

Crypto 101: Understanding The Basics of Cryptocurrency

You might have heard the terms “Bitcoin” or “Crypto” before, but you may not be sure what they mean. Well, if this is you, you’ve come to the right place.


Cryptocurrency, also known as crypto, is a digital currency that is not regulated by any authority such as the government or the bank. It relies on a peer-to-peer system that enables transactions between anyone. Unlike money, cryptocurrency does not need to be carried around physically and is instead carried around in a digital wallet. So, you may be wondering why someone chose such an odd name for a currency. Well, it got its name “Cryptocurrency” because it uses encryption for transactions, which means complex codes are used to store and exchange it. But what does this have to do with “Bitcoin”?  In 2009 the first cryptocurrency, “Bitcoin”, was introduced, and it remains the most widely known as of today. However, there are also other well-known cryptocurrencies out there, such as Ethereum, which was developed in 2015, and Ripple, which was founded in 2012 and so on. 


In light of all the fame that cryptocurrency has gained in the previous years, you may wonder- is it a safe investment? The simple answer is no; it is not the safest. It has gained a reputation as an unstable investment due to the high investor losses from scams, hacks, bugs and volatility. Unlike traditional financial transactions it cannot be reversed. Additionally, the markets are extremely unstable with influential people and organizations operating in a questionable manner.


Now, you may be scratching your head and thinking: If cryptocurrency isn’t the safest investment, then why do people still invest in it? Well, with any investment, the hope is that the value will rise, and you will gain a profit from the investment. In theory, if people widely adopted the regular use of cryptocurrency, demand for it would increase, which would in turn increase the price. If you had purchased it before that increase in demand, you could potentially sell it for more than what you bought it for.


Now that we’ve covered the basics, how do you start investing? There are 3 basic steps:


  1.  Create and fund your account. Choose a broker or exchange, open your account (usually with some form of verification, and fund it. )

  2. Buy Crypto! You can make your first transaction when your account is set and verified. You can purchase as much or as little as you want. 

  3. Select a storage method. Most of the time you will store your currency in a digital wallet. You have 2 options: a hot wallet or a cold wallet. A hot wallet offers online storage which you can access from any electronic device like a Laptop, phone etc. But it is riskier as it is stored on the internet, and hence more vulnerable to cyber-attacks. The second option is a cold wallet which is not connected to the Internet. You can store your cryptocurrency in an external drive like a USB device protected by a code. If you lose the code, however, you may lose access to your wallet.


In short, investing in Cryptocurrency is both risky and exciting at the same time. Some currencies can yield high returns, but the uncertainty definitely requires careful consideration.

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