In this article you will learn:

1. What is cryptocurrency in simple words?
2. Gold standard
3. How to use cryptocurrency?

Cryptocurrency has already become a full-fledged part of the new financial world, attracting with its prospects not only numerous private investors but also large businesses. The rules of the game in this rapidly growing market are becoming clearer every year, and the processes are becoming more transparent. But the volatility and specific risks associated with digital currencies have not gone away, and in order to make money in this market, you need to study all its features. Let’s try to figure out what cryptocurrency is and how to work with it.

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What is cryptocurrency in simple words

Cryptocurrency is a program code, it does not have an offline option. All digital money lives only in the network space. However, they are not backed by gold. Anyone who has enough money to buy special equipment can mine (extract) cryptocurrency, but there are restrictions on the extraction of coins, so the rate of digital money should grow.

As everyone knows, in the world of fiat, that is, conventional currencies, everything is different. World central banks periodically turn on the printing press at full capacity, which inevitably leads to inflation. The exchange rates of world currencies are regulated by the states that issue this money. In the crypto world, everything is decentralized, and there is no single control center. The speed of payments and the number of fees for the transfer of cryptocurrencies are generally lower than in the conventional currency market.

The advantage of the crypto world, which attracts new and new users to it, can be called anonymity, here it is impossible to find out who participated in the transaction. At the same time, the disadvantages are the same – ultra-high volatility and the impossibility of widespread circulation of digital money in public life due to the scarcity of infrastructure.

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Gold standard

When answering for the first time the question of what is a cryptocurrency and how to use it, it is best to take a closer look at bitcoin . Bitcoin is the gold standard and the first coin of the cryptocurrency market. The exchange symbol for bitcoin is BTC. From English, this word roughly translates as a coin the size of one bit or a minimal coin.

The coin is completely decentralized, and its release is not controlled by any state or the Central Bank. Answering the question of what a cryptocurrency is, we can say that bitcoin is a full-fledged means of payment that can be used to buy and sell goods and services, or as a means of saving capital. Bitcoin can be exchanged through an online exchange or an exchange office for any currency in the world at the rates that have developed in accordance with the market situation.

After the success of bitcoin, miners began to mine other digital currencies. In the crypto world, they are called altcoins. This is a fairly broad concept, which includes alternative coins – coin and the so-called token. However, digital coins are mined and used as a full-fledged means of payment. And tokens are shares in projects that can “shoot”, such a venture investment with rather high risks.

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Bitcoin and its friends

Without mentioning altcoins, a conversation about what a cryptocurrency is would be incomplete. Popular altcoins include Ethereum, Ripple, Litecoin, and Monero. All of this digital money is based on the blockchain and is not affected by the initial algorithm like bitcoin. Bitcoin competitors’ transactions are faster due to differences in encryption codes.

However, the problem of Bitcoin’s friends is simple – they are very dependent on the rate of the “gold standard”. Bitcoin rushed up – competitors joined it, the rate of the main currency of the crypto world fell – the rates of neighbors fell.

Tokens are a more aggressive and risky mechanism. These are shares of the cryptocurrency market. You can buy tokens at the ICO, and then wait for this mechanism to detonate, and try to get out of it, fixing losses.

Buying coins is a conservative investment if you can say that about a volatile market. In a rising market, your capital increases, and in a falling market, it decreases.

The acquisition of tokens indicates a high-risk appetite of the investor. This is a venture capital investment. Tokens should not be bought with the last money, because the rapid growth of the project will give super profits, and the collapse will completely nullify the capital without the possibility of recovery.

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How to use cryptocurrency

Before you start using cryptocurrency, you need to think about where to store it. Wallets are used to store currencies. A cryptocurrency wallet is a mobile application, a special program or a separate stand-alone device designed to carry out all transactions with electronic money.

There are five types of wallets in the digital world: software wallets, online wallets, hardware wallets, mobile wallets, and paper wallets. Let’s talk briefly about each of these types.

Software wallets store money on the hard drive of a computer or laptop. Their advantage lies in a fairly high level of security.

The downside is that a lot of space is required for storage: from 150 gigabytes for just one currency.

Online wallets store your digital capital on third-party servers (in the cloud). You can use money from any device. Mobility fees – low security. When hacked, all money is lost.

The same advantages and disadvantages of mobile wallet applications that are installed on phones and tablets. If the phone falls into the hands of scammers, you have to say goodbye to the money. Thus, there is no simple answer to the question of how to use cryptocurrency through a wallet.

A much more secure hardware wallet is a standalone device. It’s pretty hard to crack it. A clear disadvantage is that you must always have the device with you and remember all the pin codes.

A paper wallet is just a private and public key generated using a special website. It can be written in a paper notebook or printed out, or even better, written down in several notebooks at once because the loss of the key leads to the loss of money.

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We buy a number

To work with digital money, you must first buy it. Recall once again what a cryptocurrency is and where you can buy it. One of the most common ways to buy bitcoin and other cryptocurrencies is through an exchange. There are many exchanges, and they differ from each other in the number of commissions and ease of use.

Another important aspect is reputation. Scandals happen, and it is advisable not to fall into the same networks as unlucky investors. There are exchange aggregators in the network that take on this part of the task, collecting reliable resources. But the risks still remain, and this fact must be taken into account. As for the technology of exchanging fiat money for cryptocurrency resources, it is almost the same as offline. We choose a course, drive in the details and confirm the transaction.

An equally popular way to get cryptocurrency is to register on the exchange. There are two types of exchanges: some specialize exclusively in cryptocurrency transactions, others work with both digital money and fiat currencies.

The selection criteria are the same as when looking for an exchange office: reliability, reputation, transaction speed, and convenience when working with services. To work with large amounts of money, you will need to verify your account.

As an option, you can search for a seller of cryptocurrencies through sites that work on p2p (peer-to-peer) technology. This is a site with frequent announcements where sellers and buyers meet. Before making a transaction, you need to check the seller. Such sites have a rating system similar to the one that is actively used by foreign online stores. But you need to understand that the risks in such transactions are higher than when working with exchanges and exchange offices.