What exactly is cryptocurrency?
Cryptocurrency is essentially digital money. There is no physical bill or coin, it is all online. Cryptocurrencies are gaining popularity and new ones are continuing to be created Cryptocurrencies are generally used to make quick cashless transactions without having to pay transaction fees. Some might buy cryptocurrencies as a form of investment. They can profit from this when the value goes up. One can buy cryptocurrency using a credit card or through the process of mining. You store cryptocurrency in a digital wallet. This digital wallet is online and saved on your computer or any other hardware.
Bitcoin was created in January 2009. There are no physical or tangible bitcoins. Transactions with the use of bitcoins are stored in a ledger that is public and accessible to all. Everyone can access this ledger at all times and is thus permanent.
Blockchain technology is the core of any cryptocurrency. Consider the blockchain to be a ledger. It is a chain of blocks or parts each consisting of a certain size of data and each gets added to the other. It is like a list of transactions that is public and permanent, that no one can ever change and is thus very reliable. So, any transaction once recorded is going to be on the ledger forever. Blockchain can also be used to safely store a will or store votes in order to avoid voting frauds.
Every time a transaction takes place it is added to a queue which gets added to a block or part. To finalize each block, there needs to be a calculation that is encrypted. This is where miners come in. When a miner gets a calculation correct, that block is finalized when all the other miners confirm the calculation to be right. For every block that miners calculate correctly, their reward is in the form of a certain number of bitcoins. Once that happens, all the transactions in that block get finalized and stored forever. Miners thus, actually run the network of bitcoins. For more information you can visit here bitcoin-profitapp.com
The wallet that you store your bitcoin in is essentially just a key that proves that you access the coins and you own the coins corresponding to a certain address on the blockchain. Your private key gives you the ability to transfer and spend bitcoins, this gives you ownership over the bitcoins associated with it. If someone comes in possession of your private key, they could transfer your bitcoins to their own wallet and you may never get them back.
Is Bitcoin Safe?
The primary risks associated with buying and owning bitcoins are as follows:
- The value of bitcoin may decrease after you buy it. This is associated with any type of investment you decide to make. Just as in the case of investing in any other form of asset such as stocks, bonds, mutual funds or even lending money, where there is a chance that the value of the asset will go down or you will not get back the sum lent, even in case of bitcoin you run the risk of losing your entire investment or incurring a loss in case the value falls.
- Someone can get access to your private key in which case your bitcoins can be easily transferred to their wallet.
- You need to keep your private key safely as in case of such a loss you will lose access to your wallet.
Things you need before investing in Bitcoin
There are not a lot of requirements you need for investing in Bitcoin. All you need are personal identification documents, bank account information and a secure internet connection.
How to Invest in Bitcoin in 4 Steps
- Join a bitcoin exchange
- Get a bitcoin wallet
- Connect your wallet to your bank account
- Place your bitcoin order
- Manage your bitcoin investments
After you have purchased bitcoin, you can:
- Use your coins to make online transactions where they are accepted. When you make a transaction with your coin there is no withdrawal of coins from your account. Only if you buy a coin will money leave your account.
- In case of an investment, you should be patient and hold your coin for a period that is long enough for the value of the bitcoin to rise.
- Take part in day trading activities with your bitcoin, such as buying and selling with other sellers. This can be facilitated by bitcoin exchanges. Any cryptocurrency exchange you choose will provide you with all help and information you need to buy and sell coins.
Thus, bitcoin is a form of online money that you can use in order to make transactions easily without having to pay a fee. Although it comes with risks of theft or losing access to your wallet, it may be a good investment opportunity. When you use it as investment, do remember to diversify your portfolio so that you can maximize your profits from changes in value