We know it can be a little daunting when you're new. This guide is here to gently introduce you to some of the key concepts you need to kick-start your journey into the world of blockchain tech.
Without further ado, let's dive down the rabbit hole.
A cryptocurrency is just like a digital form of cash. You can use it to pay friends for your share of the bar tab, buy that new pair of socks you've been eyeing up 👀, or book flights ✈️ and hotels 🏨 for your next holiday. Because cryptocurrency is digital, it can also be sent to friends and family anywhere in the world.
You see, traditional online payment gateways are owned by organizations. They hold your money for you, and you need to ask them to transfer it on your behalf when you want to spend it.
In cryptocurrencies, there isn't an organization. You, your friends, and thousands of others can act as your own banks by running free software. Your computer connects with other people's computers, meaning you communicate directly – no middlemen required!
To use cryptocurrency, you don't need to sign up for a website with an email address and password. You can download a wide variety of apps onto your smartphone to begin sending and receiving within minutes.
So, this magical internet money isn't owned by anyone and uses cryptography to secure the system. But you've already got apps for paying people – why should you care?
No one can stop you from using cryptocurrency. Centralized payment services, on the other hand, can freeze accounts or prevent transactions from being made.
Because of the way the network is designed, it's virtually impossible for hackers or other attackers to shut it down.
When you make a transaction to someone at the other side of the world, your money can be with them within seconds – at a fraction of the cost of an international wire transfer.
Bitcoin provided the foundation for many other cryptocurrencies. Some were based on the same software, while others took a very different approach. Ok, but what's the difference between all the cryptocurrencies?
To even make a list of all the different cryptocurrencies would take us weeks. Some are faster than others, some are more private, some are more secure, and some are more programmable.
Before investing your money into a particular project, make sure you do your due diligence.
Don't be spooked by the technobabble that people use to describe "blockchain." A blockchain is just a database. It isn't a particularly sophisticated one, either - you could create it in a spreadsheet with minimal effort.
And that's it! Since each fingerprint points back to the last one, you end up with a chain of blocks. Or - as the cool kids like to call it - a blockchain.
Underwhelmed? That's fair. The innovation here isn't some cumbersome alternative to Google Sheets. It's that everyone can download blocks from other people on the network to build identical copies of the blockchain on their computers. That's what the software we mentioned earlier does.
Suppose that you and your friends Alice, Bob, Carol, and Dan are running the software. You might say "I want to send five coins to Bob." So you send that instruction to everyone else, but the coins aren't sent to Bob immediately.
Carol might decide at the same time to send Alice five coins. She also sends her instruction out to the network. At any time, a participant can gather up the pending instructions to create a block.
If anyone can make a block, what stops them from cheating?
It probably seems very attractive to you to create a block that says "Bob pays me a million coins." Or to start buying Lamborghinis and fur coats from Carol by making transactions with funds you don't own.
Did you know all that already, and just want to learn how to trade or invest? Let's get onto that next.
Trading generally implies a shorter-term approach to generating profit. Traders may jump in and out of positions all the time. But how do they know when to get in and out?
One of the most common ways to make sense of the cryptocurrency market is through an approach called technical analysis (TA). Technical analysts look at price history, charts, and other types of market data to find bets that have a good chance of returning a profit.
You must be dying to get started right away. And technically, you could. It's that easy! But, like most things worth pursuing, trading is hard! It would take us a long time to talk about all that you need to keep in mind.
Investors look for long-term bets based on the fundamentals of an investment. For example, how much profit a company is making. While cryptocurrencies are a new and unique type of assets, they can also be viewed through a similar lens.
The onboarding process is smooth and quick. You don't have to jump in with large amounts, either. You could start with as little as 15 dollars! So, what is some mind candy that you should be looking into related to crypto investing?
So far, we've talked about trading and investing. These methods generally require a lot of time, which not everyone has. If you're one of those busy but efficient people, we have some other options for you.
As Warren Buffett, one of the most successful investors of all time, said: "If you don't find a way to make money while you sleep, you will work until you die."
Why isn't everyone doing this? Well, they probably don't know. But now you do!
One of the ways to earn passive income is by securely lending your holdings to other people. In exchange for the opportunity to borrow your funds, they'll pay interest to you.
We're a cryptocurrency website, but we also ❤️ privacy and security topics – and you should, too!
The digital age brought with it some serious innovation. Your fridge can text you when you forget to close the door, you can summon your car from a smartphone app, and it looks like you'll soon be receiving mail by drone.
Hopefully you can leave this guide with a better understanding of cryptocurrency and how it works. On Binance Academy, you'll find a huge variety of articles, ranging from beginner's guides to overviews of more advanced topics.