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Cryptocurrencies: Quick Start Guide

 

Written by our ambassador, Moezz Omair!

Amidst the pandemic, the importance of the digital world is more evident now than ever, in a time where the internet plays a core role in the day-to-day lives of billions of people! Although this transition to the digital world has been occurring in the past, it was sped up during the pandemic. Many businesses rely almost entirely upon having an online platform to show their presence in the market, market their goods/services, and most importantly, make transactions. Currently, these transactions are typically being made using currencies we are very familiar with such as the US Dollar, the British Pound, the Indian Rupee, etc. However, there is an emerging substitute for these currencies in the form of cryptocurrencies.

 

Well, what is cryptocurrency?

Cryptocurrency is a decentralized currency, meaning that it is not controlled by a central bank or government, and it is transferred in a direct peer-to-peer manner. Whenever cryptocurrency is mentioned, the first name that probably comes to our minds is Bitcoin. Nevertheless, cryptocurrency is not limited to bitcoin and it is offered in other forms such as Ethereum, Litecoin, Polkadot, Dogecoin, and many more. Compared to traditional currencies, cryptocurrencies have several unique features that make them an attractive asset:

  • They are stored in digital wallets
  • There are little to no transaction costs
  • You have 24/7 access to your money
  • It is accessible to everyone
  • It allows for rapid transaction of funds internationally
  • It is highly secure

Emphasizing the last point, what makes cryptocurrency secure is the limited risk of theft and fraud. With cryptocurrency, you have a digital wallet with a key that may be stored offline if desired. This greatly limits the ability of a person on the opposite side of the world to gain access to your money. On the other hand, if you are using a credit card, someone can gain access to your credit card information through stealing the card, hidden cameras, or even cleverly designed tools such as the one below.

 

Is there a catch to cryptocurrency?

When it comes to cryptocurrency, there is a major risk to consider, which is the fact that it is a highly volatile investment. The value of cryptocurrencies, such as Bitcoin, fluctuates wildly as you can see in the diagram below. Starting at under $10,000 last year, Bitcoin peaked at around $63 000. This is followed by a sharp drop that cut its value nearly a half to the value it is today.

 

Should I invest? If so, how do I get started?

If you want to invest in a cryptocurrency, you must understand the risk associated with it. Due to the volatile nature of cryptocurrency, it is best to make an investment you can afford to lose. As the most popular cryptocurrency at the moment is Bitcoin, let’s go through the steps of investing in this cryptocurrency:

  1. Choose where you will buy your Bitcoin. Popular platforms to do so include Coinbase, Binance.US, SoFi, and Robinhood.
  2. Decide how you will store your Bitcoin. There are two main options, a hot wallet (a cloud-based storage method) or a cold wallet (encrypted portable device)
  3. Link your digital wallet to the bitcoin exchange of your choice
  4. Make your purchase
  5. Hope Elon Musk does not negatively tweet about Bitcoin

 

Bibliography:

https://www.simplilearn.com/tutorials/blockchain-tutorial/what-is-cryptocurrency

https://www.coindesk.com/price/bitcoin

https://www.nerdwallet.com/article/investing/how-to-invest-in-bitcoin

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