A Beginner’s Guide to Cryptocurrency

Written by Carly Hallman

The advancement of technology has led to the emergence of new coding systems and modes of earning money. Amongst these modes is a new and increasingly popular option known as cryptocurrency. But what exactly is cryptocurrency and how does it work?

What is Cryptocurrency?

Cryptocurrencies are becoming more popular by the day, but not everyone knows what they are or how they work. Cryptocurrency, also known as crypto assets or digital currencies, is a digital asset designed to work as a medium of exchange that uses a process known as cryptography to secure its transactions, verify them, and keep them confidential. It’s called a cryptocurrency because of the way it uses mathematics to have its own intrinsic value, or utility, instead of being controlled by a central financial institution like a bank or government. Important information that every cryptocurrency beginner should be familiar with includes types, purchasing, safety, security, and taxes.

Types of Cryptocurrency

Cryptocurrencies have taken the world by storm, with investors clamoring to get a piece of the action. You may have heard about Bitcoin, but do you know about the other cryptocurrencies available? There is a wide variety of cryptocurrencies to choose from and a trader/investor is at liberty to select their preferred currency and trading factor. Some of the most popular cryptocurrencies include Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), and USD Coin (USDC). In addition, there is also Tether (USDT), Binance Coin (BNB), Binance USD (BUSD), Cardano (ADA), Solana (SOL), and Dogecoin (DOGE).

Purchasing Cryptocurrency

Purchasing cryptocurrency works in a similar fashion to investing in stocks. The first step in purchasing cryptocurrency is to choose a broker or crypto exchange that will act as a guide to the behavioral nature of the market. Secondly, investors will need to create and verify a cryptocurrency account that allows them to delve into the market. Once the account has been established, an investor can deposit cash to invest, place cryptocurrency orders, and select a preferred storage method.

Safety and Security

Cryptocurrency is an exciting investment opportunity that offers high potential rewards. At the same time, it can be a risky investment option for new and inexperienced investors. Therefore, crypto security should be just as important as any other aspect of an investor’s overall risk management strategy. Maintaining a secure cryptocurrency environment to safeguard one’s assets against cyber-attacks and other risks is a necessary step in becoming a smart cryptocurrency investor.

In an era where cryptocurrencies are gaining more popularity, targeted attacks on cryptocurrency accounts are a real possibility. There are people out there who would love to see these currencies succumb to hacks and swindles. Similarly, over the years, the price of some cryptocurrencies has skyrocketed, making them targets for more fraud attempts.

Cryptocurrencies are also increasingly being used for goods and services, but it’s important to know that most merchants are not equipped to accept them as a mode of payment yet. If a merchant does not have the necessary software and training, cryptocurrency payment won’t be an option. Despite this, the notable improvements and growing popularity make it evident that cryptocurrency is here to stay. To ensure its continued development, technicians need to provide improvements in the sectors of safety and security, which are still far from perfect.

Crypto and Taxes

Due to its growing popularity, the IRS has taken the initiative to classify cryptocurrency as property. Being a property, it is thus the mandate of every investor to pay taxes depending on the currencies and the equivalence they have decided to invest in. Take, for example, bitcoin; in an instance where an investor in the cryptocurrency market trades and receives a lump sum as payment, they are expected to pay certain types of taxes. The major types of taxes in cryptocurrency include income tax on the value of the payment.