Chances are good that even if you aren't familiar with cryptocurrencies, you've at the very least heard of Bitcoin. But, unfortunately, the idea of digital currencies can be intimidating for some people, which is why they avoid them altogether. Plus, understanding all the different technologies and terminology can be confusing.
But don't worry, we're here to help. With our cryptocurrency 101 guide, you'll learn what cryptocurrency is, how to find the right crypto to invest in, and where you can buy the crypto you want. So, if all of that sounds good to you, read on to learn more.
Cryptocurrency is a broad and generic term. It's an all-encompassing word for digital assets that are transacted on a decentralized blockchain. This is in comparison to a centralized entity, like a traditional bank or credit card. The most popular cryptocurrency in the world is Bitcoin (BTC), which boasts more than $40 billion in daily volume.
Like the U.S. dollar, traditional or fiat currency is a physical currency backed and printed by governments. On the other hand, cryptocurrencies exist only in digital format, have no physical form, and reside on the blockchain. Bitcoin is the original cryptocurrency, and all other digital assets are referred to as altcoins.
Similar to stocks, bonds, and other financial investments, cryptocurrencies can decrease and increase in value. This is a big reason many people are interested in investing in the crypto market.
Before you decide which cryptocurrency you want to buy, you might want to determine why you should invest in crypto at all. The crypto market is very volatile — susceptible to dramatic ups and downs that can occur in a matter of hours. For every story you hear about someone making millions in the crypto market, there is another person who has lost their entire savings.
Why invest in crypto? Let's take a look at a few reasons people use their hard-earned money in a market known for its volatility and unpredictability.
Many investors believe cryptocurrencies are the future of currency as we know it. This would include the potential replacement of all fiat currencies with digital currency, which would be accepted around the world. If this happens, you want to have the experience and education necessary to be prepared.
When you truly believe in something, you are willing to invest in it, which is what many people are doing with cryptocurrency. It doesn’t hurt that they’re seeing returns that are much better than anything they get with traditional finance.
One of the driving factors behind the creation of cryptocurrency is a decentralized currency that the people control. If your money is in a bank account, then it is part of the current centralized system. Replacing the bureaucracy of central banks and returning complete control to the people is a key component of digital assets.
Cryptocurrency wants to be the currency of the people. There are millions of people around the world that are labeled as “unbanked.” This is viewed as a huge opportunity by the world of crypto, as many projects aim to reach those who don’t have access to traditional banking.
The more tech-savvy users and investors see and understand blockchain technology. They realize that it offers a secure and confident method of performing transactions. Not only that, but they see the value in peer-to-peer transactions that the blockchain provides.
Again, the belief in blockchain technology and its benefits leads to serious users investing in the industry. Innovative projects and companies are taking the capabilities of the blockchain and running with it. This is evidenced by the new and creative applications that regularly launch within the market.
There are thousands of cryptocurrencies available in the market right now, which makes choosing the right one a challenge. Some of the more popular digital assets investors like to buy include Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Litecoin (LTC), and Ripple (XRP). But, of course, just because everyone else buys cryptocurrency, it doesn't mean you have to.
But how do you go about picking the right crypto? There are a few factors to consider as you decide which digital asset makes the most sense for you and your digital wallet. Here are a few ways you can determine the right cryptocurrency to invest in.
The market capitalization of a cryptocurrency is not the end-all be-all for making the decision to invest in a project, but it can help. CoinGecko is a great place to gauge the total market cap of a cryptocurrency. If you're not familiar with market capitalization, it's the price of a project's coin multiplied by the number of coins in circulation.
Coin Market Capitalization is a good way to get a snapshot of a project, but don't stop researching there. For example, it's also good to know how many crypto exchanges support the coin so you can easily buy, sell, or trade it.
After you check out a project's market capitalization, take a moment and look at its white paper. A white paper is an authoritative document that tells you all about the project. It informs investors and users about the complex issues and technical details surrounding the cryptocurrency. A white paper aims to identify a problem, provide a solution, and drive a decision.
By reading a project's white paper, you'll gain two excellent benefits. First, you'll learn everything you need to know about the project’s token and the value it brings to the project's ecosystem. Second, if the paper is poorly written, it's a good indicator that the project may not be worth investing in. If the team can't properly convey the sound utility and purpose of the cryptocurrency, it's probably not worth your time and money.
A third factor to consider as you decide which cryptocurrency to choose is its value. Is it providing practical utility to its ecosystem? A great example of value added by a project is Ethereum. For the first time in the crypto market, developers had a way to build and create their own decentralized apps — or dApps — on the blockchain.
Additionally, keep in mind that there are many issues the world of crypto is attempting to solve. The chief of these includes scalability, interoperability, and privacy. A good way to find a project worthy of your investment is to identify one attempting to find a solution to these problems.
When evaluating a cryptocurrency, it also makes sense to perform due diligence on the project's leadership team to evaluate their credibility. Ask key questions like, “What type of experience do they have?” or “Have they been successful in past endeavors?” A quick Google search will tell you more about individuals on the team, so you can arm yourself with the knowledge you need to make a good, informed decision.
Now that you've identified the cryptocurrency you want to invest in, it's time to buy some. But how do you go about getting your fiat money into your cryptocurrency wallet? The most popular method for new investors is through a centralized exchange. Let's walk through the process.
The first thing you want to do is find the right trading platform. Look for a cryptocurrency exchange that supports both the fiat currency you want to use and the digital asset you want to own. Popular trading exchanges include Binance, Coinbase, Kraken, and Gemini.
Most centralized exchanges require users to complete Know Your Customer (KYC) or Anti-Money Laundering (AML) processes to confirm their identity. This allows the platform to know who is online and using the exchange at any given time while obeying rules and regulations set forth by governing authorities.
Once you receive confirmation that your identity is verified, you can start using the exchange. Send your fiat currency to the platform via bank transfer or credit card (or whatever option the exchange accepts) and wait for your funds to be processed. Once your account has funds, you can purchase your crypto right on the exchange, then move it to your crypto wallet.
Some users prefer to hold their crypto in the wallet provided by the exchange, while others move their digital assets to an external, more secure method of storage. This would include hardware wallets like Ledger or Web3 wallets such as Metamask.
Decentralized Finance — also known as DeFi — has experienced significant growth in the crypto world over the past few years. The backbone of the DeFi market is the smart contract, which resides and functions on the blockchain. These contracts are capable of performing specific functions and executing instructions without the need for human interaction.
At its core, DeFi aims to remove barriers that exist within the current world of traditional finance. It wants to provide financial services like borrowing and lending to everyone. It doesn't rely on a central authority to determine who is and isn't eligible. Simply put, DeFi is for anyone who wants to participate in the crypto market without restrictions.
With decentralized finance, anyone can take part in advanced financial services to benefit from earning interest yields, taking a cut for providing liquidity, taking out loans, and many more. Plus, when you use DeFi, you have complete control of your crypto. That means you have the final say in exactly where and how it's used.
The great thing about cryptocurrency is that you can stay as shallow or get as deep as you want. There are plenty of opportunities available in the world of crypto, no matter what your experience or comfort level is. If you just want to get your feet wet, that's fine. If you want to dive right in, there is no shortage of ways to do so.
And Unagii is just one way you can make your digital assets work for you. You'll get a much better return than you'd ever see from traditional financial institutions, and Unagii does all the heavy lifting for you. Just deposit your funds and let Unagii do the rest.