How to Invest in Crypto | The ABC of Cryptocurrency
How to Invest in Crypto?
“How to Invest in Crypto?” is the question so many people are asking now, with Bitcoin thriving at over 56.000 US dollars and Cryptocurrency becoming more popular than ever.
Investing in cryptocurrency is similar to exchanging your money in a new country. Bitcoin, Litecoin, and Ethereum are a few examples of “foreign currencies” that work in a very specific context within certain online communities.
Exchanging any type of currency is built upon shared trust. We value dollars and Euros because we know that we can purchase goods or services with them.
The question is, can you trust cryptocurrencies? And should you jump into the world of crypto investing?
What is Cryptocurrency?
Cryptocurrencies are digital assets people use as investments and for purchases online. You exchange real currency, like dollars or euros, to purchase “coins” or “tokens” of a given cryptocurrency. There are many kinds of cryptocurrencies. Bitcoin is the most famous, but Ethereum, Bitcoin Cash, Litecoin, and Ripple are a few others. All sorts of big tech and finance companies want a slice of crypto pie. Even Facebook has created a cryptocurrency called Libra.
The word cryptography means the art of writing or solving codes. (Sounds like the setup of an Indiana Jones movie, doesn’t it?) Each “coin” is a unique line of code. Cryptocurrencies cannot be duplicated, which makes them easy to track and identify as they’re traded.
You’ve probably heard of people making (or losing!) hundreds of thousands of dollars by investing in cryptocurrencies (this is why you should know the basics of how to invest in crypto). It feels like a modern-day gold rush. But cryptocurrencies have actually been around for about 10 years. The earliest cryptocurrency was Bitcoin, created in 2009 by an unknown person who goes by the name Satoshi Nakamoto.
How does Cryptocurrency Work?
Cryptocurrencies are exchanged from person to person on the web without a middleman, like a bank or government. It’s like the wild, wild west of the digital world. There’s no marshal to uphold the law.
Here’s what I mean: Suppose you ask a friend to cut your hair at home, chances are, you’ll pay in cash. You don’t need to go to the bank to make a formal transaction. That’s what it’s like to exchange cryptocurrencies. They are decentralized: No government or bank controls how they’re produced, what their value is, or how they’re exchanged.
As a result, cryptocurrencies are worth whatever people are willing to pay or exchange for them.
Where do you "keep" your Crypto?
You store your cryptocurrency in a digital wallet—usually in an app or through the vendor where you purchase your coins. Your wallet gives you a private key—a unique code that you enter in order to digitally “sign off” on purchases. It’s a mathematical proof that the exchange was legit.
Cryptocurrencies operate on what is called blockchain technology. A blockchain is like a really long receipt that keeps growing with each exchange. It’s a public record of all of the transactions that have ever happened in a given cryptocurrency.
What Can You Buy With Cryptocurrency?
A lot of people still see cryptocurrencies as an investment. But cryptocurrency spending is becoming more and more popular as these currencies gain trust. There are several online retailers, and even my store, that accept cryptocurrencies. And of course, any two individuals who value the tokens can exchange them for goods or services.
Some major retailers, such as Whole Foods and Nordstrom, now accept Bitcoin as a valid source of payment.