The best way to start talking about cryptocurrencies is to do so by mentioning the word bitcoin. If you do not know exactly about the subject, surely you have at least seen or heard the term, it is in many, many places.
Other related words would be: Ethereum, Litecoin, Ripple, Dash, Dogecoin, zcash, AntShares, Monero.
They are all cryptocurrencies, cryptocurrencies, or digital currencies. Three identifying terms that generally refer to the same issue, with some differences and specificities; but enrolled in the same conceptual and usage philosophy. They are digital means of exchange.
Is it really that important to understand and understand about cryptocurrencies?
I can assure you that knowing about this topic is relevant. And you will not have to be any type of businessman, small or medium entrepreneur for you to have information about this field.
More if you are, it will not be enough to tell you that you have to update yourself; it's too outstanding to pass up.
We will shortly be developing a brief but practical exposition of some types of cryptocurrencies and useful tips for investing in them.
It is an intrinsically valuable and even exciting matter, we could say, that it is worth paying attention to, even if you do not plan to invest or make use of it at the moment.
The point is that you can need it at any time, even It could be decisive in particular circumstances that you may face soon; in the midst of a changing world, where we have to constantly adapt due to various crises and circumstances, and this at any level or scope: personal, family or institutional.
Why were cryptocurrencies born, triumphed and advanced?
Due to its importance, we are going to invest space in this post, to refer to these primary and fundamental issues before entering the topics that we want to highlight the most.
Let's evaluate now why cryptocurrencies emerge and triumph.
In 2009, Bitcoin began to operate, which was the first cryptocurrency. Since then many others have appeared with specific characteristics and particular protocols, but very similar to Bitcoin.
We already mentioned some: Dogecoin, Monero, Ethereum, Litecoin, ripple-dash, zcash, AntShares.
Let's list some benefits of the use of Bitcoin, since it is the reference cryptocurrency, and we can understand its value and why digital currencies have triumphed.
Taking Bitcoin as a reference, we see that:
- It does not belong to any particular country or state, for this reason it can be used globally.
- Like any other currency it can be purchased with specific currencies, such as euros, etc. The opposite case is equally valid. You can see the cryptocurrency price in the link we just left you.
- When someone uses it, it will not be necessary to reveal the identity and therefore privacy is preserved. There will be security for both buyers and sellers. You will not have to provide confidential and sensitive information such as card numbers or bank accounts.
- The intermediaries do not exist, transactions will be carried out from person to person, directly.
- It is not controlled by any State, company or financial institution, therefore it is decentralized.
- It is not possible to duplicate or falsify it, as it has a highly sophisticated cryptographic system.
- Your transactions will be irreversible.
- The money will be totally owned by whoever owns it, no one can intervene or freeze an account in any way.
- Its immediacy is amazing, it can be shipped to any region of the world in an expedited manner.
- Costs are greatly reduced as there will hardly be intermediaries, therefore the fees or commissions resulting from this fact will not exist. The money will flow from person to person, from one individual to another, or from a buyer to a seller.
Have you seen how outstanding are the possibilities offered by the use of this first cryptocurrency that existed?
There are plenty of reasons then for it to have gone ahead, and also for other cryptocurrencies to emerge.
Types of Cryptocurrencies
Let's talk about the most important existing cryptocurrencies and some peculiarities of them.
Bitcoin:
We already know that it is the most relevant cryptocurrency and the first to emerge, it must be taken as a reference.
In the previous section we commented on its characteristics. We will just add that has a total limit of 21 million Bitcoin and this figure can never be exceeded, in this way it has been established by this market.
In recent years it has grown notably and has multiplied its value by nearly 1.000. Today each unit ranges from $ 400 to $ 500.
Ethereum
It will not compete directly with Bitcoin, but rather complements it. Meanwhile, a blockchain will control the ownership of Bitcoins, this other currency will run with security programs that will only be executed in user applications.
Many people will use Ethereum in order to create crowdfunding platforms (custom - trusted) and online organizations that will be autonomous. They are decentralized applications and can only be built on the Ethereum network.
Litecoin
It works very similar to Bitcoin but its value is a little lower (84 million Litecoin in existence). It will be easy to get and with a lot of mobility from person to person. Very useful and easy to use for those who are starting in the world of cryptocurrencies.
It presents a downloadable wallet from its official website with full encryption. For those who want to move tiny amounts of money, it is a recommended network, very simple and easy to use.
Ripple
It is a cryptocurrency that bet on the relationship with banks. It allows them to make payments globally in a faster and less expensive way, allowing cross-border transactions with fewer intermediaries. Ripple will allow them a more fluid and direct operation.
Dogecoin
Its reference system is Litecoin, this unlike most other cryptocurrencies for which it is Bitcoin. It allows a very fast generation of blocks, practically one per minute.
It therefore has the capacity to carry out around 40.000 transactions daily. Very popular as of 2014, being widely used to make donations to non-profit organizations such as NGOs etc.
With a market value of around $ 0.00015 per unit.
Dash
Used to carry out transactions between consumers, very convenient to buy.
In many businesses Dash is accepted, with a very fast transaction, without having to wait so long to see the payment charge. Similarly to any cryptocurrency it is possible to buy Dash and keep it in a wallet. There is the possibility of adding a business to the commercial map of this cryptocurrency.
Monero
With great advantages for users who need to strengthen their privacy. Those who trade this cryptocurrency individually will have full control over their money. There will be the possibility for those who choose to use this currency, to choose who will be able to see or not where their money goes.
Tips for investing in Cryptocurrencies
Now we are going to talk about good sense in the possibility of investing in Cryptocurrencies.
See for yourself what we would recommend for those just starting out.
- Don't believe every tabloid story that gets published, whether they are success stories or failures.
- You have to understand as much as you can logically how cryptocurrencies work. This will help you assess how much to risk your money.
- Try to understand how bitcoin and blockchain work, not everyone does. It will allow you to clarify and answer many questions that will influence your operational skills and decision making.
- Diversify: Don't just focus on Bitcoin. As we have already seen, there is a wide variety of cryptocurrencies, many with very interesting characteristics that work very well when Bitcoin falls.
Diversifying your funds will be a risk management technique.
- Be extremely cautious, cryptocurrencies are something new and their volatility can be extreme, it is undoubtedly a risk space. A good rule and control mechanism would be "Only invest what I could afford to lose"
- Study the diversity of investment strategies that exist. We can affirm that the tendency to success is in the more conservative ones.
Ex: "Dollar cost averaging": This is a strategy where a similar amount of money is invested in a joint investment every month or week.
Example: it is known that bitcoin is very volatile and this terrifies many investors. If it falls a lot it does not exactly mean that the disaster will remain.
There is a well-known bitcoin investment strategy called “hold” where the investment will be held without valuing the volatility of the market so much.
You could buy and not be so aware for a while of market movements, in order not to despair and sell.
We recommend studying all the strategies and carefully choosing the variants to be used.
- Coins should not be stored in exchanges: Once a coin has been purchased, it is advisable to take the money out of the exchange and proceed to move it to a wallet that only you can control, just like a hardware wallet.
The world of cryptocurrencies is undoubtedly exciting, but also complex and often confusing. Sometimes it can even generate panic in those who have invested when the media highlights not encouraging news, and this for different reasons; such as country positions or IT regulations.
Many have even come to think at the beginning of 2018 that the cryptocurrency bubble has burst, however another sector considers very seriously that the current downward trend is an opportunity to buy in the long term.
Let's not lose sight of digital currencies. They are already ours, and they are here influencing the world economy, we have no choice but to live with them, understand them and adapt.