What
Are Cryptocurrencies?
Cryptocurrencies are digital currencies that use cryptography. The first and best-known crypto is bitcoin, and there are now thousands of coins.
Nowadays, everyone has cryptos - from your neighbor to the market around the corner. But what exactly is it? And what can you do with it? Time to dive in!
What Should You Know About Cryptocurrencies?
1. What are cryptocurrencies?
2. What types of cryptocurrencies exist?
3. How do you get cryptocurrencies?
4. What should you pay attention to when you start with cryptocurrencies?
5. What can you do with cryptocurrencies?
6. When to invest in cryptocurrencies?
7. Which cryptocurrencies to buy?
8. Long and short term
9. Risks of cryptocurrencies
10 Are cryptocurrencies safe?
1. What Are Cryptocurrencies?
Cryptocurrencies are digital currencies that use cryptography. Many of these coins have their blockchain.
A
blockchain sounds complicated, but the principle is simple. It is a digital ledger where you can find all transactions and balances of users. All information is stored chronologically in blocks. Those blocks are cryptographically linked.
How does that work? Compare a blockchain with a freight train. A block in the blockchain contains a wagon of information. Do you want to change information from an older block? Then you have to disconnect the whole train.
Most cryptos are decentralized to a greater or lesser extent. That means anyone can participate, and no one is in charge. Take bitcoin. Anyone may process, check, receive and send transactions.
That is a big difference from the money you are used to, such as the Dollar $. The American Central Bank prints the money, and commercial banks check and process the transactions. Cryptocurrencies give that power back to the individual.
2. What Types of Cryptocurrencies Exist?
Bitcoin is the first crypto, but coins come in all shapes and sizes. There are now thousands of cryptos, each with its focus and function. However, you can divide most cryptos into categories. So what should you think about it?
Payment Method
Bitcoin started as a decentralized alternative to money such as the euro and the dollar. This crypto is used as a means of payment or to store digital value. Plenty of other cryptocurrencies also focuses on payments, like Ethereum, Litecoin, Ripple, and Dash.
Applications
In addition to payments, cryptocurrencies can also have other functions. The
Ethereum team has the ambitious goal of building a world computer on the blockchain. Instead of money, applications should be decentralized. Such a different focus!
Cardano and Solana are other examples of cryptocurrencies targeting decentralized applications (dApps).
Scalability
Due to the popularity of cryptocurrencies, it is sometimes busier on the blockchain than at a Snollebollekes concert. Transactions going from left to right put a lot of pressure on the Ethereum blockchain. That is why there are also crypto projects that relieve other cryptos. An example of this is Polygon (formerly Matic).
Another solution is to split a blockchain into multiple side blockchains. This is what Polkadot does. An additional advantage: every side-chain can be adjusted as desired!
Metaverse
The metaverse is a collective term for digital worlds in which you can walk around and talk to others. Crypto can play an important role in this. With cryptocurrencies, you buy and sell digital pieces of land or accessories. Well-known examples of metaverse coins are Decentraland, The Sandbox, and Axie Infinity.
NFTs
If you're interested in cryptocurrencies, you've probably heard of NFTs. These are tokens that represent a unique object. That could be anything - you can think of it as crazy as there is an NFT of it.
Artwork, football pictures, or even houses can be an NFT. With this unique token, you can prove that you are the owner of these objects. This is recorded on a blockchain, for example, that of Ethereum. Popular crypto projects dealing with NFTs include Enjin Coin and Origin Protocol.
Stablecoins
Stablecoins are a bit of an odd one out. These are coins with a value linked to a traditional currency, such as the euro or the dollar.
Traders use stable coins to trade faster, among other things. It's like this: suppose you trade on a cryptocurrencies exchange, and you expect a decline. Then you can sell your cryptocurrencies for stable coins and hold them in the exchange. Has the bottom been reached? Then you use your stable coins again to buy cryptocurrencies.
Well-known examples of stable coins are Tether (USDT) and BUSD. Both are worth the same as the dollar. Do you use the cryptocurrencies app
Binance? The USDT/BUSD in your locker is just real dollars. But you can also use those very quickly if you see a beautiful moment!
Decentralized Finance
The demand for crypto is growing, and that requires tailor-made products. Do you want to trade, borrow or lend cryptocurrencies, and do you not trust a third party? Then you can do this decentrally, from person to person. Decentralized Finance DeFi is the collective name for projects that offer this type of service. Popular DeFi coins include Uniswap, SushiSwap, Aave, and Synthetix Network.
3. How Do You Get Cryptocurrencies?
Owning cryptocurrency is simple! Download the handy all-in-one app
Binance, and you can get started in three simple steps, within 1 minute and from 1 dollar.
A. How does it work in short?
B. Download
Binance and open a free account.
C. Deposit from 10 Dollars to get started trading.
D. Start trading Cryptocurrencies!
4. What Should You Pay Attention To When You Start With Cryptocurrencies?
You now know the basics, but how do you start with crypto? Below we give you some general tips. We recommend that you understand the basics fundamentals of crypto first.
New to the wonderful world of cryptocurrencies? Start small, for example, with 10 Dollars. You can always build up.
Determine your strategy. A popular strategy is Dollar Cost Averaging (DCA). Periodically invest a fixed amount in cryptocurrencies, for example, 50 dollars per month in bitcoin.
5. What Can You Do With Cryptocurrencies?
The short answer: a lot. Of course, this also differs per cryptocurrency. Below we give you some common use cases of cryptocurrencies.
Pay
You can use cryptocurrencies to pay for products and services. The best-known example of this is home delivery. They have been accepting bitcoin as a payment method for years. And actually, almost every restaurant in the United States is connected. Secretly you can pay indirectly at many restaurants with bitcoin!
Do you want to pay with cryptocurrencies in other places in other countries? Then you have to search well. Fortunately, there are more and more locations where you can go with your crypto coins.
Investing
In addition to paying, you can also trade in cryptocurrencies. You can compare that to the stock market. You try to make as much profit as possible by buying or selling at the right times.
That is how it works with cryptocurrencies. For example, do you see that bitcoin is falling, but ethereum is rising? Then you exchange your bitcoin for usdt/busd and buy ethereum for it. And if the crypto market is in a dip, you can also exchange your cryptos back for usdt/busd.
With the handy crypto
Binance, you can trade at lightning speed. With a small disclaimer: the market is young and very volatile. Therefore, only invest what you are willing to lose and always do your research.
Save
With cryptocurrencies, you can achieve nice returns if you trade well. But did you know that you can also save with it? For example, the value of bitcoin continues to rise in the long run. Therefore, more and more investors buy cryptocurrencies to hold them for a long time. That generally yields more than your savings account.
Due to inflation, your dollars are worthless and less every year, even if you may not notice it so quickly. By saving in crypto coins, you can maintain or increase the value of your savings. That is not financial advice, by the way, because you can also lose money with cryptocurrency. Here too, the following applies: read carefully before investing.
6. When To Invest In Cryptocurrencies?
There are thousands of cryptocurrencies, and dozens of coins are added every day. How do you see the forest through the crypto trees? At
Binance, you trade in more than 55 popular cryptos. Of course, we do not give you financial advice, but we list many good coins mentioned in this article.
7. When To Buy Cryptocurrencies?
The best moment? That's today. No kidding, determining the right moment is incredibly difficult. Ideally, you want to buy at the bottom and sell at the top. But there's more luck in that than wisdom! However, there are tools that you can use to strike at the right point.
8. Long or Short Term?
If you invest in cryptocurrency, you must have a strategy. Ask yourself some questions first. Do you want to be busy trading a lot or a little? Do you want quick results, or is your focus more on building wealth in the long term?
Day trading is popular if you have a focus on the short term. Day trading means that you trade actively daily: you buy at a low price and sell at a high point. But the risk, if you trade a lot, is that it is difficult to determine the bottom or the top.
Buy and hold is a great strategy if you have a long-term focus. You don't have to worry about daily price movements. However, the disadvantage is that it can sometimes take longer before getting a nice profit.
9. What Are The Risks Of Cryptocurrencies?
Investing is always a risk. Crypto is no exception. So what do you have to think about?
Volatility
The cryptocurrency price sometimes moves up and down more than a rodeo bull at the fair. This volatility is also known as volatility. Expect 10 or 20 percent movements in a day, both up and down. This is a risk but, at the same time, an opportunity.
Regulation
Cryptocurrency is a new development. Governments sometimes find cryptocurrency difficult to place. Is it a means of payment or an investment? Do you have to charge tax on it, and how?
For example, some countries charge a high tax on profits from crypto trading, like
India's Imposed 30% Tax on Proceeds of Digital Assets. Or take China, which has banned bitcoin mining. Such developments in many countries can have a negative effect on cryptocurrencies.
But regulation can also be an opportunity. Will there be clear laws and regulations? Then that gives legitimacy to the crypto sector. That can be a motivation for some investors to invest.
Scams
Where there is money to be made, there are always pirates on the coast. Platforms that promise you sky-high returns may be fake and only after your money. Do you want to invest in bitcoin? Then make sure that you do this with a reliable platform. For example, a reliable World Well Known Biggest Exchange is
Binance US.
10. Are Cryptocurrencies Safe?
In general, most major cryptocurrencies are safe. Coins are secured by blockchain technology. To hack a blockchain, you need more than half of the total computing power of a network.
The bigger a network is, the harder it is to hack. Think of Bitcoin, ethereum, and Binance Coin (BNB) coins. So it is virtually impossible to attack a cryptocurrency network, especially when it comes to large coins.
Know What You Spend
We recommend that you only invest an amount in cryptocurrency that you are willing to lose. Cryptocurrency prices are very volatile. You can make a lot of money, but you can also lose it. At the same time, we believe that crypto is one of the most attractive investments you can make.
If you want to buy cryptocurrencies, do your research. Read news articles, view technical analysis and find out how crypto works. And who knows, you might convince your relatives at the next dinner!