If you are entering the world of cryptocurrencies, the first thing you need to know is which transactions are possible. Knowing about these types of transactions will be incredibly useful whether you would like to invest, trade, or send and receive payments using these digital assets. Keep reading to find out the different types of transactions you can do with different types of cryptocurrencies.
Mining is typically the first transaction in a cryptocurrency’s life cycle. To mine a cryptocurrency, you need to verify blocks of complex transactions and calculations. Once you complete a transaction, you will be rewarded with the cryptocurrency you were mining.
Since you are rewarded directly for solving complex mathematical problems, mining is the most common way of getting cryptocurrencies without buying them. You can be gifted cryptocurrency by someone, but that would not be considered trading as you are not exchanging something valuable, i.e., time and electricity in the case of mining, for the cryptocurrency.
Apart from mining and being gifted, buying is another popular way of getting cryptocurrency. To do this, you have to register at a cryptocurrency exchange and deposit funds. Some exchanges will ask you for your personally identifying details and documents when signing up while some will ask for the details when you initiate a withdrawal.
Once you deposit the funds, you can choose from one of the hundreds of cryptocurrencies to buy. Some people buy cryptocurrency to hold it, wait for the value to increase, and sell it at a higher cost. Some buy one coin to exchange it for another they deem more valuable or useful to them.
It is important to know what the going exchange rate for a cryptocurrency is before buying it. One way of doing so is using a crypto converter which will tell you how much it will cost to buy cryptocurrency. It will also help you compare different pairs when you wish to exchange one coin for another.
Selling a cryptocurrency happens at the fair market rate at the time of asking which you can find out using the crypto converter mentioned above. You typically sell cryptocurrency through an exchange. You point out the price you would like for the number of cryptocurrency you’re willing to sell. If the network finds someone willing to buy the amount at that price, you are paired up and the transaction completes.
In some cases, an automatic smart contract is drawn between two parties, buyer and seller, to ensure everyone gets what they want without anyone running off before the transaction completes. If one or both parties don’t get what they want before time runs out, the transaction is invalidated.
As mentioned above, you can also exchange one cryptocurrency for another. These types of transactions are very common, especially when there is a shortage of a certain cryptocurrency in the market. Do note that taking advantage of these shortages is very difficult as the market and its prices correct very quickly.
If you are interested in crypto, you need to know about the different transactions you can do. Each transaction will depend on your needs at the time, and you can choose the one that suits you best.