An Introduction to Cryptocurrencies and How to Use Them

An Introduction to Cryptocurrencies and How to Use Them

The number of different cryptocurrencies available has been increasing at a notable rate since the first, Bitcoin, was launched a decade ago. Finance sites and news stories continually report on the significant returns enjoyed by some investors, but as a relatively new market, there is still concern about the security of cryptocurrency investments. Alongside the success stories, there are reports on the volatility of the market and cautions not to be too over-enthusiastic with purchases of cryptocurrencies. If you’re new to the field, how do you know whether Bitcoin or its alternatives are worth considering as an investment?

What is a cryptocurrency?

The concept grew from a desire to release people from the traditional banking industry by creating a decentralized, digital cash system. It means that rather than having transactions recorded by a single institution, e.g., a bank, the ledger system cryptocurrencies use records transactions in an open database that cannotbe altered once the transaction is entered. So in essence, cryptocurrencies work exactly like a bank in the way they control money, yet differin that the recording system is accessible to its users. Each confirmed transaction becomes part of the blockchain that makes up the recorded history of the currency. The system is protected by secure cryptography(hence the name!)and the transactions are just as safe, if not more so, than when using traditional banking.

Making money from cryptocurrencies

First, you need to buy Bitcoin or an alternative currency like Ethereum. As a beginner, one of the easiest ways to do this is through a broker specializing in cryptocurrencies. They will provide you with a wallet to store your currency, and make the process of using and trading your money straightforward and safe. You can use Bitcoin or other cryptocurrencies to make purchases in exactly the same way as with cash or a credit card, providing the supplier accepts this form of payment – which is becoming ever more common. Trading in Bitcoin is very similar to buying stocks and shares, in that you buy your currency at a price you feel happy with, in the expectation it will increase in value and earn you a healthy return. In fact, you could think of it as being like gold; a commodity that can increase or decrease in value according to the market. The value of cryptocurrencies can fluctuate rapidly, so timing your purchasing and selling decisions is a tricky balancing act, but it can be fruitful if you get it right.

If you haven’t traded in these alternative currencies before, take some advice from industry experts and don’t invest too much cash,to begin with. Spreading your investments is the soundest way to secure your money, rather than putting everything you have into one or two prospects. As you become more familiar with the market and understand when cryptocurrencies are likely to increase or decrease in value, you can invest more if you wish. The future of these currencies looks set to stay with us and grow in importance, so it makes sense to consider the benefits of investing.

 

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