Cryptocurrency for Beginners – The Complete 2021 Guide

If you are new to cryptocurrency, this article will explain everything you need to know in order to start your amazing journey into this fascinating tech.

Cryptocurrencies are digital currencies that are not issued by any central bank or government. They are a means of transferring value in a fast, cheap and permissionless way across the world and in 2020 they are gaining popularity. Let’s dig deeper into this fascinating technology.

 

 

What are cryptocurrencies?

In the middle ages, the Church and the State was one single entity of government. When we read about it today, it sounds bizarre and even impossible to comprehend. Yet after a few decades our grandchildren will say the same about our current monetary system. They will ask themselves how strange it was when the central banks and governments were almost inseparable from each other.

This symbiotic relationship has created countless problems and reckless policies that after ( yet another ) big financial crisis have finally given birth to the very first alternative currency; Bitcoin. It was the first cryptocurrency and for the sake of simplicity we will mainly focus on it in this first chapter. 

Cryptocurrency is a digital form of money whereby the trust and faith in the value thereof is achieved by cryptography, math and a decentralized ledger of accounts that is forever stored on an open network called a blockchain. Yes it’s quite a mouthful to digest all at once, so let’s just compare traditional fiat currency to crypto currencies in order to understand the essence. 

While dollars, pounds and euro’s are “printed” and controlled by central banks, crypto currencies are 100% decentralized. Nobody “owns” the Bitcoin network. That means even if you’re a Mongolian steppe dweller with a horse and a smartphone, you can work with bitcoin ( and all other crypto currencies ) at your own leisure from whatever location you chose. While traditional fiat currency can be “weaponized”, meaning used to sanction any given country, cryptocurrencies are open to everyone in the world. This is the first property that gives them their value. 

While the printer goes BRRRRRRR and cranks out endless trillions of paper notes, Bitcoin is limited to only 21 million. There will never be more than than. EVER! That means Bitcoin is a deflationary asset. Imagine what would happen if the price of gold rises by 500% next year? That would spark a new gold rush where dozens of ambitious companies would unleash their heavy machinery upon the soil and eventually produce more gold to meet the demand. With Bitcoin this is simply impossible due to the finite supply. Again it’s one of those unique properties that give Bitcoin its value. Let’s move on and uncover the mystery of how this amazing tech works. 

How Cryptocurrencies work?

 

In the past, we only had the SWIFT system. Imagine you want to send 100 usd to your aunt Sylvia who lives in Wisconsin USA. You happen to live in New Zealand. The electronic bank transaction that you send via an ancient electronic network of rusted pipes ( called SWIFT ) will take you days to send, while every step of the way your crisp 100 usd will be nibbled away by intermediary banks who gladly charge you “middleman fees” just because they are in this system. If you think; a monopoly on global financial transactions, you’re absolutely right! 

Now imagine that your aunt Sylvia has listened to your ramblings during the 2019 thanksgiving dinner where you passionately discussed cryptocurrency with your family. Being a tech savvy lady, she’s now rocking a cryptocurrency wallet and will gladly accept 100 usd in Bitcoin. From New Zealand, this transaction will literally take minutes to send and will cost you almost nothing in fees in comparison to the SWIFT bank transfer. How is that even possible? 

You see the SWIFT system uses centralised servers to process payments, while the cryptocurrency system uses millions upon millions of computers scattered across the globe. Hell, even North Korea has computers that help the Bitcoin network. These computers are run by students in their dorm rooms, hobbyists in their garage or by professional owners of huge server farms ( called “mining farms” ). The beauty of this system is that people who provide the computational power of their machines get rewarded in bitcoin, while simultaneously securing the whole network for everyone who uses Bitcoin to transact with. There is no conflict of interest going on here. Miners ( meaning computers ) get paid for their energy and computational power and Bitcoin users enjoy a system that is unbreakable, unhackable and unstoppable. Aside from that every computer that’s mining bitcoin, stores within its memory a copy of the complete ledger of transactions. Imagine a solar flare hitting 99% of the computers around the world. If only 1 single computer survives, the Bitcoin network can still function. We call this system a proof of work. You provide computational power, you get rewarded in bitcoin. Done deal! 

Bitcoin’s network of computers uses a mechanism called proof of work ( because the computers need to sweat and provide computational power ), however there are also cryptocurrencies out there that are using what’s called a “proof of stake” mechanism. This is a system where the network is secured by people who already have cryptocurrency, but they need to “lock up” their coins and provide them to the network.  By doing so they are helping to secure the network and process new transactions. Imagine you want to hire a contractor, but you don’t want him to do a half assed job. In a proof of stake system the contractor would have to cough up his OWN money and “lock it up” with a 3rd party. Upon the completion of the job ( and only if the work was done in the best way possible ) the contractor gets paid by you and also gets to keep his locked up capital. This system ensures that the contractor will be honest and professional.  Same system is at work here. By “locking up” capital the cryptocurrency network ensures that everyone is playing by the rules. If any given user tries to cheat the cryptocurrency network ( by trying to pass false information into a transaction and reward himself a handsome bounty ) he can wave his locked capital goodbye! You give the money to the network and play by the rules, you get rewarded with cryptocurrency, while the users get to enjoy a solid and trustworthy network. Done deal! There is off course much more to learn about the proof of work and proof of stake systems, but now that you have your basics covered, let’s check out what kinds of cryptocurrencies live in the wild. 

 

Different Types of Cryptocurrency

Back in 2009 an anonymous prophet called Satoshi Nakamoto created Bitcoin and he saw that it was good. So in order to keep his digital Jesus decentralised, he promptly disappeared from cyberspace and was never heard from again. Nowadays the world needs much more than only a means of payment that can give our fiat currency a run for its money ( pun intended ). Our fast digital generations want more bells and whistles than ever, so there are many types of cryptocurrencies that solve so many problems for people across the world and they all have their place under the sun. 

There is Bitcoin, Bitcoin Cash, Monero, Zcash, Nano and others that are used for transferring value between companies and people across the world without having to kiss the ring of the Pope that’s presiding over the London or New York financial districts. 

There is Ethereum, Polkadot, NEO, Cosmos and others that are used as digital platforms for building new and amazing applications that we all can benefit from. These are more than cryptocurrencies alone. They are financial lego blocks in the purest sense. We’re talking about lending, borrowing, taking out an insurance policy, selling your car, buying a rare piece of art and even using an invoice from your small business as collateral, all done in cyberspace! Oh yeah and you don’t have to show your ID or navigate nose first through a mountain of forms and regulations. Is your head spinning yet? Well, this world is already here and it’s only growing bigger. 

There is DAI, Tether, USDC and many other coins that hold a stable peg to the US dollar. Hence they are called stable coins. While these can have great value in their utility, stable coins have come under fire from the US regulators in 2019 and 2020, therefore we don’t recommend holding them for long periods of time. 

There is Vechain, Origin Trail, Digibyte and others that can help to track any type of product from the stage of raw materials to the customer’s shopping cart. Imagine cracking a cold one and having full knowledge about where the barley, yeast and water came from in order to make that can of beer. This technology is also used for digital identification of pretty much anything and anyone. This will lead to a world where we won’t need passwords any longer.

By now you can see that in a short decade we went from having only Bitcoin, to having a complete blooming ecosystem of wild and exotic cryptocurrencies that bring new and exciting innovations to the somewhat stagnant financial system that we were cursed by for such a long time. Every year new projects spring up and bring something fresh to the table. When you navigate the cryptocurrency space, it sometimes feels like being back in the 1990’s when the internet was just taking off. What’s the next Google or Amazon going to look like? Before your spidey senses start to tingle with possibilities of making a killing in this space, let’s explore ways of how to get your hands of these cryptocurrencies. 

How to Buy Cryptocurrencies?

 

 

The fastest and easiest way to buy cryptocurrencies would be by using an exchange. Luckily for you, the time of shady exchanges ( like MtGox ) is long past and nowadays we can safely buy crypto currencies from reputable platforms such as Coinbase, Gemini, Kraken, Binance and many others. Any kind of fiat currency is welcome on exchanges and it will be promptly swapped for the coins of your liking. If you plan to keep your crypto currency for a long time ( more than 1 year ) it’s generally best to transfer your coins into a cryptocurrency wallet. This way you control your private key and by doing so, you literally take full physical possession of your crypto currency. More on that in later articles. 

Just like with everything digital, there are certain rules you must follow in order to protect your crypto from malicious actors who are constantly trying to separate people from their cryptocurrency. A bulletproof password is one of the most important security features out there. Sadly it won’t be enough to fully secure your account on an exchange. In order to beef up your security, always be sure to use 2 factor authentication ( 2FA ). Simply explained you use 2 devices in order to log on to your account on an exchange. You log in via your computer and you confirm the login via your smartphone’s app ( google authenticator or via a 6 digit code sent through a text message ). This way you limit your risk of being hacked. 

Some traders even use a dedicated computer that is only used for working with cryptocurrencies and nothing more. It can be a bit over the top, but remember in this space you take 100% responsibility for your finances. You can’t have huge rewards without having risks too. In case you’re wondering if you can invest in crypto currencies with little to no knowledge about them, let’s explore the science of trading.

 

Invest in Crypto without knowing about Crypto

 

 

The main reason why trading cryptocurrencies is very profitable is because this market is unregulated and remains a Wild West with crazy rollercoaster-like volatility. Traditional markets have to wait years until they see profits ( or losses ) expressed in 2 digits. In cryptocurrency this is a daily occurance. Traders from all over the world are earning handsome returns in this market. Even the people who HODL ( Hold On to Dear Life ) their cryptocurrency for months and even years, have to trade it at some point, usually after seeing face melting gains. 

But there are of course many dangers. If the trader is inexperienced and uneducated, the wild force of the unpredictable market can swallow him without a hint of mercy. In the past one had to plow through books with grunt, sweat and determination just to be able to navigate these treacherous waters. Nowadays there are off course better options like the tycoon.io platform.  

In the old days a trader took on a single apprentice who had to spend years learning the profession by making countless mistakes in order to excel and become consistently profitable. Now the knowledge and experience of world’s leading traders is at the fingertips of anyone. Any person without a hint of knowledge about trading can simply “connect” to a successful trader and directly copy his strategy automatically and in real time through the use of an API ( Application Programming Interface ). Is it really that easy? Absolutely! You earn money when the trader you’re connected to earns money. It’s as simple as that.  

Tycoon.io has been created by a professional trader with a passion for cryptocurrency and it has been in development for years. The platform is live and becoming one of the leading copy trading platforms in cyberspace. More and more people are welcomed daily and it only grows in popularity with time. 

Now you know more about cryptocurrency, we will help you to explore more fascinating topics in the next chapters, so that the gospel of Satoshi Nakamoto can live and prosper. In 2020 we are already seeing big institutions jumping on the cryptocurrency train. With this knowledge you definitely won’t miss it.