What is cryptocurrency? What are the easiest cryptocurrencies to mine? What influences the price of cryptocurrency? These and other common questions about crypto will be tackled in this beginner guide.
While previously a mystery to many, cryptocurrencies are now on the verge of becoming a mainstream way of doing commerce. Many experts predict that they will soon join traditional assets such as stocks, fixed-income investments, and commodities as staples in investors’ portfolios. All cryptocurrencies, sometimes referred to as digital assets, have two critical characteristics:
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- First, they are based on blockchain technology. Blockchain is a relatively new digital technology that can disrupt nearly every sector and even the internet itself.
- Second, they represent a belief that digitization is here to stay. Indeed, bitcoin, the most popular cryptocurrency, has piqued the curiosity of large investors. They regard it as a form of “digital gold.”
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Getting to Know Cryptocurrency
A cryptocurrency is a digital asset built on a network of computers. So, unlike traditional currency, it is independent of governments and central authority.
The term “cryptocurrency” comes from the encryption methods used to safeguard networks. Cryptocurrency is digital money. It’s an alternative form of payment produced through the use of encryption techniques. Cryptocurrencies serve as both a medium of exchange and a virtual accounting system.
But in order to use cryptocurrency, you first need to have a cryptocurrency wallet. A crypto wallet is required when using cryptocurrencies of various kinds. They are the devices that contain the encryption keys that verify your identity and connect you to your cryptocurrency. Some wallets are online–exchanges like Microwallet provide in-app wallet services. Alternatively, wallets may be saved offline on a hardware device, such as a USB drive, that you can access from anywhere.
Microwallet is used by crypto faucets to store your pending coins when transactions are confirmed. What is a faucet? A crypto faucet is a rewards system that pays crypto holders for performing activities on websites like donation platforms. These cryptocurrency donation platforms often provide us with the easiest cryptocurrencies to mine.
Types of Cryptocurrencies
Generally, cryptos fit under one of two categories:
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- Coins, which may include Bitcoin and other cryptocurrencies
- Tokens, which are programmable assets that reside on a platform’s blockchain
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While many people use the terms cryptocurrency, coin, and token interchangeably, it’s critical to understand how they vary. Any cryptocurrency other than Bitcoin that is built on the blockchain is referred to as an altcoin.
The following is a list of the ten largest cryptocurrencies by market capitalization, as determined by CoinMarketCap at the time of writing. Since many cryptocurrencies are available at widely disparate values, market capitalization assists in identifying those with the highest valuation. Please take note that the blockchain platform’s name may differ from the name of its digital currency.
Bitcoin (BTC)
Bitcoin was the first cryptocurrency established in 2009. It was started by an individual under the pseudonym Satoshi Nakamoto.
Ethereum (ETH)
While Ethereum is a blockchain network similar to Bitcoin, Ethereum was built as a programmable blockchain, not to support a currency.
Credit Cardano (ADA)
Cardano markets itself as third-generation blockchain technology to position itself as a game-changer.
CoinBinance (BNB)
Binance is now one of the largest cryptocurrency exchanges worldwide, and Binance Coin (BNB) is a cryptocurrency token designed to be used on Binance as a medium of exchange.
Bitcoin and other cryptocurrencies are produced through a process called mining. In stark contrast to mining minerals, mining cryptocurrency requires robust computers to solve complex issues. Until 2011, Bitcoin was the sole cryptocurrency. Then, when Bitcoin fans began to notice problems, they sought to develop alternative coins. These coins, commonly known as altcoins, attempt to improve upon the design of Bitcoin in areas like speed, security, and anonymity. More than 8000 cryptocurrencies are now available, and the number is expected to grow in the future.
Uses of Cryptocurrencies
Now that you know what cryptocurrency is, what can you do with it? Here are some of the main uses of cryptocurrency:
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- Low-cost money transfers
- Fast and instant transaction
- Peer-to-peer transactions
- No central authority or reserve bank
- A censorship-resistant alternative store of wealth
- A way to earn interest in Bitcoin and other cryptocurrencies with cryptocurrency donation platforms
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What Are the Easiest Cryptocurrencies to Mine?
Today’s market is flooded with hundreds of mineable cryptocurrencies, each with its own set of standards, laws, and restrictions. Given the unique nature of cryptocurrencies, each requires a distinct strategy for mining. The easiest cryptocurrencies to mine include:
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- Ethereum
- Aeon
- Dogecoin
- Vertcoin
- Ravencoin
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Beginners in cryptocurrency can start off mining any of these coins as they don’t require a tremendous quantity of technical know-how to start. These coins are the easiest cryptocurrency to mine because they don’t need a high-tech mining rig to get started. They use GPU or ASIC in their mining process.
What Influences the Price of Cryptocurrency?
The price of cryptocurrency is largely determined by supply and demand. But there are several additional factors at play, such as:
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- Level of utility
- Mass adoption
- The number of competing cryptocurrencies
- The exchanges it trades on
- Regulations governing its sale
- Its internal governance
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As a beginner, you should understand these fundamental factors when buying cryptocurrency.
What are Pips in Cryptocurrency?
Pips are the metrics used to describe the fluctuation of a cryptocurrency’s price, and they correspond to a one-digit change in the price at a given level. In general, valuable cryptocurrencies are traded at the dollar level. A change in price from $111.00 to $112.00, for example, indicates a single pip movement. For lower-value cryptocurrencies, a pip may represent a penny or even a fraction of a cent.
Pros of Cryptocurrencies
Cryptocurrency has the potential to simplify payments by:
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- Eliminating the need for a third party, such as a bank or credit card firm, to act as an intermediary.
- Providing public and private keys and other types of incentive schemes, such as Proof of Work and Stake, in order to ensure the security of the transactions.
- Providing diversification and greater liquidity.
- Lower transaction fees. Cryptocurrencies allow fund transfers to be performed with the bare minimum of processing fees, allowing customers to avoid the high fees banks and financial institutions charge when transferring funds by wire transfer.
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Cons of Cryptocurrencies
While there are positive attributes of cryptocurrencies, here are some possible drawbacks:
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- It is possible to lose or erase your virtual wallet. Additionally, theft has occurred on services that allow you to store your cryptocurrency remotely.
- Because the value of cryptocurrencies such as Bitcoins is volatile, some individuals believe it is risky to convert ‘real’ money into Bitcoins.
- Because the cryptocurrency market is not regulated by the Financial Conduct Authority (FCA), there are no rules protecting your investment.
- If businesses or customers switch to another cryptocurrency or stop using a particular cryptocurrency altogether, your cryptocurrency may lose value and become useless.
- Exchanges of cryptocurrencies are susceptible to cyberattacks, which might result in the irreversible loss of your money.
- Scams involving cryptocurrency are still possible.
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Final Thoughts
Whether you’re looking to buy cryptocurrency or just stay informed, it’s important to understand what cryptocurrency is. Make sure you weigh the pros and cons of your specific situation. Used carefully, cryptocurrency can be a vital asset for your financial health.
Featured Image: Twenty20
