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 increase their initial capital many times over.
But there are also those who went there indiscriminately: they didn’t know what to buy, where to store and how to use it. Such “investors” quickly lose all their savings and begin to shout that Bitcoin is a fraud and, in general, an attempt by global Freemasonry to swindle 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.
To get Bitcoin, you need to mine it. Mining is the process of solving complex mathematical problems on computers. In return for their decisions, computer owners receive coins, which are stored as records on the blockchain. Blockchain is like a digital ledger that is stored on all users' computers at the same time.
Blockchain cannot be deceived or counterfeited. Even if you put a computer with a fake entry on the network, other computers will immediately compare it with their own and refuse to accept it. For successful hacking, you need to fill the network with fakes more than half - and this is almost impossible.
The success of Bitcoin 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 increased 18 times, altcoins also increased significantly in price. And when Bitcoin began to fall, they fell along with it.
Coins are a currency. They can be earned (mined) and spent on goods and services. Coins are built on Blockchain.
Tokens are more like securities (shares) built on a supporting platform - for example, Etherium or Waves. They confirm the presence of a share in a project, and their value depends on the success of the project. Tokens cannot be mined, they can only be purchased. You can’t spend them directly either, you can only sell them for another currency or exchange them for the services of the company that issued them.
Tokens are already shares. Their cost is tied to the project they represent. If the project takes off, the price of tokens can increase significantly in a few hours. But if it falls apart, it will fall below the market price.
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 money quickly and immediately.
Even if the company you need does not accept cryptocurrency, you can exchange it 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.
Out of all this, I advise you to choose an online wallet.
The public key is the address to which other users send you money. In principle, it is similar to email.
A private key is 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 for it.
Some people don't like the fact that an online wallet has their private key. But it is needed so that they can confirm your identity. It's like complaining that Google knows your Gmail password—how else can you prevent other users from reading your emails?
Before creating a wallet, make sure that your coins will be stored in a “cold” wallet - storage that is not connected to the Internet. This one is more difficult to hack.
Study the company, its team, reviews about it. Finally, make sure you are willing to trust a third party with your money. And only then create a wallet.
There are three main ways to transfer money from crypto to fiat:
Maps are currently not available for Europe and the CIS countries because the only map provider in Europe has ceased to exist. But many companies promise to release new ones in the next few months.
There have already been cases where thieves received bitcoins and did not send fiat transfers - and vice versa. Or they used someone else’s cards for this and the real owner later disputed the transfer. And during a personal meeting, users were pointed at with a gun and forced to transfer bitcoins for free.
Therefore, cryptocurrency trading platforms are the last place where you should change your currency.
For example, in February 2014, when Mt.Gox crashed, the price of Bitcoin fell by almost half from $837 to $439 within 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 from it - but there were also those who went bankrupt.
On the thirtieth anniversary of Black Monday—the day the stock market fell 28%—Alexander Tapscott said, “In the crypto market they would just call it Monday.”
The price of cryptocurrencies is highly dependent on the media. News about regulations, quotes from famous personalities and other publications greatly influence the market course. For example, negative comments from the Indian Finance Minister led to a drop in the exchange rate by $500.
Even so-called “experts” are often wrong. Therefore, it is important to have your own opinion and deeply analyze everything that happens in the market.
Also choose tools that will help you stay up to date with events: news sites (Forklog, Bits.media), mobile applications for conveniently finding information and tracking market changes (Blockfolio, CoinCap), charts and statistics (Coinmarketcap).
But there are also those who went there indiscriminately: they didn’t know what to buy, where to store and how to use it. Such “investors” quickly lose all their savings and begin to shout that Bitcoin is a fraud and, in general, an attempt by global Freemasonry to swindle 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. Cryptocurrency is also called “crypto”, “digital coins”, “virtual money” and any other combination 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.To get Bitcoin, you need to mine it. Mining is the process of solving complex mathematical problems on computers. In return for their decisions, computer owners receive coins, which are stored as records on the blockchain. Blockchain is like a digital ledger that is stored on all users' computers at the same time.
Blockchain cannot be deceived or counterfeited. Even if you put a computer with a fake entry on the network, other computers will immediately compare it with their own and refuse to accept it. For successful hacking, you need to fill the network with fakes more than half - and this is almost impossible.
What are altcoins
Ethereum and Ripple are the most popular altcoins.The success of Bitcoin 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 increased 18 times, altcoins also increased significantly in price. And when Bitcoin began to fall, they fell along with it.
What are coins and tokens
Altcoins are the general name for coins (except Bitcoin) and tokens. But there is still a difference between them.Coins are a currency. They can be earned (mined) and spent on goods and services. Coins are built on Blockchain.
Tokens are more like securities (shares) built on a supporting platform - for example, Etherium or Waves. They confirm the presence of a share in a project, and their value depends on the success of the project. Tokens cannot be mined, they can only be purchased. You can’t spend them directly either, you can only sell them for another currency or exchange them for the services of the company that issued them.
Why are tokens no 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 shares. Their cost is tied to the project they represent. If the project takes off, the price of tokens can increase significantly in a few hours. But if it falls apart, it will fall below the market price.
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 money quickly and immediately.
How to spend cryptocurrency
Most people believe that it is impossible to purchase real goods or services with Bitcoin. But this is no longer a problem. Microsoft, PayPal, Subway, Shopify, Virgin Galactic and dozens of other large companies accept cryptocurrency. Full list here.Even if the company you need does not accept cryptocurrency, you can exchange it 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.
Choosing a wallet
Cryptocurrency wallet is an application, program or separate device for sending, receiving or storing electronic money. Below are the five types, with a short description of the advantages and disadvantages:- Software wallet (Bitcoin Core, Exodus). These wallets store crypto directly on your computer. And you need quite a lot of space for this. For example, the minimum installation of Bitcoin Core requires at least 145 GB of hard drive space - and that's just for one currency;
- Online wallet (Blockchain, Wirex). These wallets store your coins in the cloud. You can use them from any device, even your phone. But you need to choose your wallet carefully - if someone hacks it, you will lose all your money. Therefore, carefully read reviews from other customers before making your final decision.
- Hardware wallet (Trezor, Ledger). These wallets are separate devices, making them much more difficult to hack than a regular computer. But you need to carry them with you at all times, and also remember the PIN code. And don’t forget, otherwise you’ll be like Mark Fraunfelder!
- Mobile application (MyCelium, Breadwallet). An application for smartphones on Android or IOS that allows you to manage your funds. Convenient, easy and fast storage method, but with a low level of security. Plus, if the phone is stolen, the thieves will have full access to the wallet.
- Paper wallet (WalletGenerator.net or MyEtherWallet.com). A private and public key generated using a special website, which can be printed or written down. It should be remembered that, except for the sheet of paper on which the keys are written, they are not found anywhere else, so the loss is equivalent to the loss of all the money that is in such a wallet.
Out of all this, I advise you to choose an online wallet.
Why online wallets are better
Most newcomers to the crypto 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 understandable; there is no need to study it further.
- The level of security is usually higher than in mobile wallets.
- You can use it both from a PC and from a mobile phone.
How does an online wallet work?
Online wallets do not store cryptocurrency. They only store public and private keys to your money.The public key is the address to which other users send you money. In principle, it is similar to email.
A private key is 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 for it.
Some people don't like the fact that an online wallet has their private key. But it is needed so that they can confirm your identity. It's like complaining that Google knows your Gmail password—how else can you prevent other users from reading your emails?
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 won’t lose users’ money or run away with it to Thailand.Before creating a wallet, make sure that your coins will be stored in a “cold” wallet - storage that is not connected to the Internet. This one is more difficult to hack.
Study the company, its team, reviews about it. Finally, make sure you are willing to trust a third party with your money. And only then create a wallet.
How to exchange cryptocurrency for fiat money
Fiat money is regular, hard money issued by a government. For example, dollar or 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). You should choose an exchanger just as carefully as you choose an online wallet. Check the safety, read reviews and reviews of other people who understand this. One unpleasant story that happened with the large exchange Mt.Gox has already been discussed on Habré.
- Cryptocurrency trading platforms. On these platforms, sellers can find buyers - and vice versa. After the initial “meeting” on the site, users decide for themselves how they will transfer funds to each other. Usually they meet in person or use bank transfers.
- Cryptocurrency cards (Bonpay, Spectrocoin). Special bank cards for paying directly or withdrawing money from an ATM.
Maps are currently not available for Europe and the CIS countries because the only map provider in Europe has ceased to exist. But many companies promise to release new ones in the next few months.
Why you shouldn't trust trading platforms
Trading platforms are very safe. But only at first glance. In fact, this is the riskiest method of working with cryptocurrencies.There have already been cases where thieves received bitcoins and did not send fiat transfers - and vice versa. Or they used someone else’s cards for this and the real owner later disputed the transfer. And during a personal meeting, users were pointed at with a gun and forced to transfer bitcoins for free.
Therefore, cryptocurrency trading platforms are the last place where you should change your currency.
What you need to know before entering the cryptocurrency market
The world is still trying to understand what kind of beast this “cryptocurrency” is. Therefore, you should prepare for a variety of surprises. The entire market is downright volatile, with prices changing hourly.For example, in February 2014, when Mt.Gox crashed, the price of Bitcoin fell by almost half from $837 to $439 within 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 from it - but there were also those who went bankrupt.
On the thirtieth anniversary of Black Monday—the day the stock market fell 28%—Alexander Tapscott said, “In the crypto market they would just call it Monday.”
The price of cryptocurrencies is highly dependent on the media. News about regulations, quotes from famous personalities and other publications greatly influence the market course. For example, negative comments from the Indian Finance Minister led to a drop in the exchange rate by $500.
Even so-called “experts” are often wrong. Therefore, it is important to have your own opinion and deeply analyze everything that happens in 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 were created, how they work and who the key figures in this area are. One such book is Digital Gold by Nathaniel Popper. This book is remarkable because it is easy to read and tells a fascinating story about how and why it all began almost ten years ago, and who the people were at the origins of Bitcoin.Also choose tools that will help you stay up to date with events: news sites (Forklog, Bits.media), mobile applications for conveniently finding information and tracking market changes (Blockfolio, CoinCap), charts and statistics (Coinmarketcap).
How to safely store cryptocurrency
A few useful rules to help keep your funds safe:- Always make a backup copy of 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 has been lost or damaged due to children or pets. Or write the private key on paper (it is not recommended to use a printer or print it out), but, again, keep this record in a safe place. The Winklevoss brothers, famous crypto-billionaires, used this method, but in a more sophisticated form: they cut the key printed on paper and stored it in different cells in the bank.
- Typically, private keys can be recovered using a passphrase, which consists of 12 or 24 words. Make a copy of this phrase as well.
- 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 your software regularly and install the latest version of the wallet you are using.
