WHAT IS CRYPTOCURRENCY, WHAT IS IT FOR AND HOW TO INVEST




WHAT IS CRYPTOCURRENCY, WHAT IS IT FOR AND HOW TO INVEST

If you follow the financial market, you may have read or heard about the rise of cryptocurrency. Its price, for example, already exceeds $10 thousand per unit in the US, a price seen for more than two years.

But do you know how it is possible to take advantage of this monetary resource? First of all, you need to understand what cryptocurrency is.

It is a digital currency that promises gains above that of the Bovespa Market and without state regulation.

Cryptocurrency, however, goes far beyond virtual money. In the same way that physical currency has serial numbers, watermarks, and other security devices, cryptocurrencies use encryption.

That is codes that are difficult to break, to ensure much more secure transactions.

Cryptocurrency is a virtual code that can be converted into real values. Generally, it is necessary to buy from the issuer or from someone who already has the currency.

Their trading takes place over the internet, without bureaucracy, without intermediaries, characterized by the absence of a regulated monetary system and submission to a financial authority.

HOW DOES CRYPTOCURRENCY WORK?

The quotation, purchase and sale take place anonymously over the internet. The digital currency is stored in a wallet and administered on a personal computer or mobile device.

The technological innovation behind cryptocurrency is known as blockchain or “trust protocol”.

This consists of shared records and databases, with decentralization as the main security measure.

In the blockchain, a global index is created for all transactions within the same market. It is a kind of ledger, totally public and shared.

The absence of third party mediation creates a sense of trust in direct communication between the parties to the transaction.

Virtual currency is already an investment reality for big players like Microsoft and IBM. In addition to governments such as the United Arab Emirates, Estonia and Singapore.

Many view cryptocurrency as a passing wave. However, on the contrary, the data show that it may be here to stay.

Want an example? Bitcoin, the world's most popular cryptocurrency, has been breaking price records.

WHAT IS CRYPTOCURRENCY FOR?

The logic of digital currency is the same as cash. Its function is, basically, to allow transactions of purchase and sale of goods and services.

Large companies, such as WordPress, DELL and Soundcloud, already accept payment with cryptocurrency.

Another possibility is the transfer of values ??over the internet , without the need for fees charged by financial and banking institutions.

In practice, the terms cryptocurrency;  virtual currency; and digital currency have the same meaning.

The first refers to cryptography, while the expressions “digital” and “virtual” refer to the intangible and abstract character of online money.

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UNDERSTAND THE COIN MINING PROCESS

To better understand how the coin mining process works, let's make a comparison. First, imagine that you have a virtual wallet.

It only allows digital currencies to be saved, such as bitcoins, Ethereum or Ripple. To have one of these coins, you have to work. It is this work that is known as mining.

The procedure, in theory, is simple. The user must solve a problem with complex mathematical calculations on his computer.

Every ten minutes, a new problem is added to the blockchain so that the person can solve it.

Whoever manages to solve the problem, sends the solution to the blockchain . If right, the user earns cryptocurrency units for work. Such users are known as miners.

In short, cryptocurrency mining is finding the key that encrypts the blocks, called a "hash".

In the case of bitcoin, every time a miner finds a valid block, he is rewarded with 12.5 bitcoins. However, this work requires computational effort and cost.

Anyone can try to find the hashes. But only a few people are able to reach the solution.

This is because it requires a large capital investment in servers and computers that are powerful to perform this type of work.

For this reason, it is easier to buy a cryptocurrency from those who already have one.

GET TO KNOW THE PROFILE OF THE CRYPTOCURRENCY INVESTOR

It is common for cryptocurrencies to suffer from fluctuations in value, as the trend is that this will reduce as the mining of coins ends. Therefore, the profile indicated for investing in this type of application is very restricted.

Since not everyone is able to see equity suffering reductions or increases greater than 50% in less than two months.

Therefore, there are two profiles of investors who can get along with cryptocurrencies: the most aggressive and the people politically oriented towards more liberal perspectives.

To help you understand which of the two profiles you fit, let's get to know each one of them:

Aggressive investors

Investing in cryptocurrencies is very attractive for investors with an aggressive profile. This is due to the high chances of gain and the risk of losses involved.

This investor can take advantage of the growth of virtual currencies to expand equity. In addition, there are less famous currencies that are more risky and therefore more likely to win.

However, they must be analyzed carefully before investing the money. This will prevent you from having a big loss.

And for those who like to invest and do not suffer from capital fluctuations, this can be an alternative to following the investment rule . Which is "the more risky an application is, the greater its profitability".

People with a liberal political perspective
This profile is for those who have economic and political beliefs that are favorable to the investment of cryptocurrencies. That's because by buying this type of currency, you have your money controlled only by you. 

Therefore, neither the government nor the banks will be able to charge fees on their assets.

HOW TO INVEST IN CRYPTOCURRENCIES?

Imagine this scenario: a cryptocurrency that appreciates 276%, while the stock exchange is up  25% in the same period.

Which option would you invest in? It looks easy, but watch out! Be aware of the fluctuations of this currency, with daily drops and hikes, and not investing more than 5% of the equity are some tips from experts in the area.

If you choose the service of a brokerage house , which intermediates these transactions, you will need to meet requirements generally charged in the common financial market.

LIST OF THE MOST POPULAR CRYPTOCURRENCIES

Now that you know what it is, how it works, how to invest in cryptocurrency, and how to use it, you may be wondering what the best cryptocurrencies to invest in. We have prepared a list of the main and most valued ones. Meet!

Bitcoin - Considered the world's first decentralized digital currency (cryptocurrency), it was introduced in 2008 by a pseudonym programmer Satoshi Nakamoto.

litecoin cryptocurrencyLitecoin - Known as bitcoin's younger brother, it has the same characteristics, but with less transaction time, due to a lower blocking rate and more accessibility. The trend is for further growth thanks to familiarity with bitcoin.

EthereumEthereum - It is the newest, presented in 2014 by Vitalik Buterin, funded as a crowdfunding project, the third largest ever funded in this way.

cryptocurrency RippleRipple - Also known as XRP, it is slightly different from other cryptocurrencies, as it translates both a digital currency and an open payment network, with lower fees and processing delays.

OTHER EXAMPLES OF CRYPTOCURRENCIES

MoneroMonero - Uses the open source CrytoNote, encoded from scratch. Among its features are hidden transactions and payments.

The basic difference between it and bitcoin is that it creates a unique address for each transaction, adopting a private password that allows complete process information to be seen only by the person who received the deposit or whoever has the password.

cryptocurrency DashDash - Operations with this currency are confirmed almost instantly, through the Masternodes network (different from bitcoin). And it is this network that allows transactions to be anonymous, characterizing the dash for the privacy of its users.

Siacon - This is considered the most promising currency when it comes to blockchain technology. It does not require large processors to be mined.

Users make space on the computer available for transactions to be processed. In return, people receive units of the cryptocurrency.

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THE MOST VALUED IN 2019

According to data from the Messari website, the cryptocurrency that has most appreciated in 2019 so far was ChainLink (LINK) (+ 657%).

The second place was Project Pai (PAI) (+ 564%) an unknown cryptocurrency. Third, Binance Coin (+ 469%), followed by Tierion (TNT) (+ 359%) (Also unknown and Ravencoin (RNV) (+ 322%) very popular.

ICOS BECOME INVESTMENT ALTERNATIVES

An ICO (Initial Coin Offering) is an initial public offer to sell a cryptocurrency. Created as alternatives to Bitcoin, so-called altcoins have been multiplying at an accelerated pace.

However, an ICO is not limited to just distributing a new altcoin. ICOs can also serve very well as a fundraising tool for any type of project.

Several companies and startups are already using ICOs to raise capital and finance themselves.

In addition to the absence of bureaucracy, launching a project through an ICO is safer and more practical than traditional alternatives for attracting investment.

The dynamics of an ICO can vary from currency to currency. But, normally, its composition is formed by the following steps:

- Release disclosure;
- Fundraising;
- Distribution of tokens to buyers.

ICO Advantages

1 - Less bureaucracy

Traditional means of fundraising have stricter regulations and formalities that are not present in an ICO. Therefore, the process is simpler, faster and more dynamic.

2 - High profit potential

The big incentive for investments is high profit. Obviously, the project is also important, but supporters are generally willing to make higher-risk applications in the face of the promise of high returns.

HOW TO INVEST IN ICO?

The first step in investing in ICOs is to choose an online trading platform . Search the terms and conditions of use, as well as the tools and features offered to facilitate your operations.

The next step is to register. Fill in the digital form. But, remember that this moment should not be rushed. When access is cleared, the next step is to transfer resources.

In this step, you must transfer the money you intend to use to invest in one or more bank accounts and / or the bitcoins of one or more portfolios.

Once the transfers are verified, the amounts will be available for trading in your account.

HALVING: EVENT PROMISES HIGH PROFIT WITH CRYPTOCURRENCIES

Halving occurs every four years, an event that promises high profit with cryptocurrencies . It aims to reduce the supply of digital currencies, initiating a new wave of asset appreciation.

This year's event took place on Monday, May 11. When a  halving happens it means that the number of coins tends to drop in half.

That is, if every ten minutes a bitcoin is at 12.5 it will drop to 6.25 bictoins on the day of the event. Thus, with a declining supply and demand for the asset, the halving phenomenon is a real trigger for the currency's rise.

The event, therefore, is a good alternative for anyone looking to profit by investing in cryptocurrencies. The economic crisis - which grew even more with the coronavirus pandemic - may also accelerate the consideration of bitcoin as a form of investment.



Author Biography.

Gurbaj Singh
Gurbaj Singh

Content Writer

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