The concept of Cryptocurrency is intimidating to most. While the world is full of “self-proclaimed” Crypto experts, it is still difficult to gain a tight grasp on what it actually means in laymen’s terms.
To put it simply, Cryptocurrency is a form of digital money. It is often referred to as “coins” which are secured through cryptography (the enciphering and deciphering of messages in secret code). Essentially it removes the middleman altogether to allow for a faster, cheaper, and more discreet transfer of “money”.
With the innovation of Crypto, we may be able to remove banks and other centralised middlemen completely. This is because cryptocurrencies rely on a technology called blockchain which is decentralised, meaning no single entity oversees it.
A blockchain is:
“A cryptographically protected distributed ledger made up of blocks that contain transaction history. As the blockchain grows longer and longer, it becomes increasingly difficult to alter older transactions.”
Confusing right?
Essentially it is a way of recording information that makes it difficult to hack or change. It stores data in “blocks” that are then chained together. Think of it like an incredibly difficult to read book of receipts.
How are these currencies created you ask?
Through a concept known as Mining. This is how new cryptocurrencies (e.g Bitcoins) are generated and supply is controlled by an algorithm. This algorithm grants immunity to oversupply and manipulation by a central bank.
Are you thinking of investing in Cryptocurrency?
Here are our five tips to note before investing:
1 – Do Your Research
Always do your own research and due diligence before investing. There are several forms of cryptocurrency such as Bitcoin, Ethereum, Ripple, Stellar etc. All of these have different rates of inflation, popularity and different people investing.
It is also important to educate yourself on the basics of cryptocurrency like what is a key? Do you understand the concept of a “wallet”, “fork” or an “ICO”?
When researching make sure you are aware of scammers. Be careful of who you trust when it comes to investing your money.
2 – Make A Plan – What? When? and How much?
This depends on what your goal is for investing in Crypto. You may want to be an active investor which includes buying and selling dynamically to maximise profit, or you may want to save your coins for potential growth in the future. This is where you can control the controllable.
You also have power in what type of Cryptocurrency you invest in. Whether it is Bitcoin or Ripple, it helps to look at the fluctuations before investing and choose the best time to buy.
Also think about how much you want to invest and how much equity you are prepared to lose per trade (is it 2-5%? Or more?).
