The Complete Beginner’s Guide to Cryptocurrency

Cryptocurrency is just about everywhere we turn on the internet’s financial streets. From blockchain, which is its underlying technology, to Bitcoin. Newbies can’t seem to tell the difference between all the terms and how this new technology works.

We all know it’s a marvellous technology, true. But, we also know it could pass for a financial instrument like mutual funds. So, where do we even start?

In this cryptocurrency guide, we’ll be taking a walk through crypto and explaining all the important nitty-gritty and how you can make this thing work for you.

In this article:

What is cryptocurrency?
How many cryptocurrencies exist?
What are the most popular cryptocurrencies?
Why is cryptocurrency so popular?
Is cryptocurrency a valuable investment?
How can I buy/sell a cryptocurrency?
Which cryptocurrency should I invest in?

What is Cryptocurrency?

Cryptocurrency is money that’s neither printed on paper (like Naira or Dollars) nor is it minted in coins (like Pennies or Kobo). Crypto is digital money.

Cryptocurrency is built on blockchain technology ?. Yes, we know blockchain sounds complicated so let’s take a paragraph to break it down.

Think of blockchain as a book in which all transactions for a particular cryptocurrency are recorded. The interesting thing about this book is that it has several copies in different parts of the world. So, each cryptocurrency transaction is written across all the copies of the book and once a transaction is recorded it can’t be deleted or cancelled. Imagine that book was a computer and you’ve got what it means when blockchain is described as distributed ledger technology.

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How Many Cryptocurrencies Exist?

Bitcoin came into inception in 2009. Since then, several other cryptocurrencies have been created. At the time of this post, there are about 2,368 cryptocurrencies listed on Coinmarketcap. You may be wondering why there are so many cryptocurrencies and if it’s that easy to produce.

Truth is, given the right tools, resources and technical know-how, cryptocurrencies can be created by just about anyone who wants to. Often times, new tokens are released as initial coin offerings (ICOs) by startups looking to raise funds but that’s beyond the scope of this cryptocurrency guide.

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If you’re new to crypto, chances are you heard the word “Bitcoin” about 5-7 times before you heard “Ethereum”, “XRP” or “Litecoin”.

Of the over existing 2,000+ coins and tokens, a few pull more weight than others. It’s important to keep in mind that every cryptocurrency has a problem it seeks to solve. And this problem, amongst other things, plays a crucial role in the coin’s value. 

That said, we’ll only touch on some of the most popular cryptocurrencies in this cryptocurrency guide.

Here’s a brief run-through of each one:

Bitcoin (BTC): Often described as the grandmaster of cryptos, Bitcoin blazed a trail by becoming the first cryptocurrency to go mainstream. At a market price of over 10,000 US dollars at the time of this post, Bitcoin is currently the most valuable cryptocurrency in the world.

Ethereum (ETH): Ethereum is the second-largest cryptocurrency by market cap. Launched by Buterin Vitalik in November 2013 when its white paper was released, the Ethereum blockchain provides an avenue for developers to build decentralized applications as well as facilitate smart contracts. Ethereum runs a cryptocurrency called Ether and that’s what we’re interested in.

Litecoin (LTC): Often described as silver to Bitcoin’s gold, Charlie Lee created Litecoin to make up for some of the shortcomings experienced in using Bitcoin as a means of payment. By market capitalisation, Litecoin comes 5th place right after Bitcoin Cash.

XRP: XRP is the coin used on Ripple. Ripple was created to facilitate faster and more effective cross-border transactions with fewer transaction fees. To achieve this, Ripple partners with traditional financial institutions like banks and payment platforms.

Tether (USDT): Tether is a stable coin. This means that it is way less subject to volatility. A stable coin is a type of cryptocurrency that is pegged to other assets such as gold, fiat currency and/or other cryptocurrencies to make their value relatively stable. In Tether’s case, it is pegged to the USD and is issued by the Tether company.

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Why is Cryptocurrency Popular?

There are a few things that endear cryptocurrency to people. Here are a few:

The underlying technology: A good number of people are endeared to cryptocurrency simply because they are fascinated by its underlying technology, the blockchain.

The future: Another reason cryptocurrency is so popular is that a significant number of people believe that it’ll play a significant role in the future of money because of blockchain. They want to become a part of it now in order to become a part of that future.

Decentralization: Cryptocurrencies seek to remove the middlemen in transactions by making it possible for people to send and receive money directly to each other.

As a financial asset: People use cryptocurrency as a way to hold value beyond cash similar to buying shares or mutual funds.

Anonymous: People can carry out transactions using cryptocurrency without revealing their identity. 

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Is Cryptocurrency a Valuable Investment?

Cryptocurrency is a valuable investment. But, it’s important to keep in mind that there’s a significant amount of risk involved in investing in or trading cryptocurrency. The underlying thought behind cryptocurrency investments is that the price would go up. Most people who invest or trade in it do it with the expectation that the price of the digital asset will rise between the time they buy and the time they sell.

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How Can I Buy/Sell a Cryptocurrency?

You can buy and sell cryptocurrencies on a cryptocurrency exchange. A cryptocurrency exchange allows you to trade one cryptocurrency for another or exchange cryptocurrency for your local currency or vice versa.

Quidax enables you to buy several cryptocurrencies including Bitcoin, Ethereum, XRP and Litecoin with your local currency and also sell for Naira.  We also provide wallet services for each of these cryptocurrencies and a couple more.

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Which Cryptocurrency Should I Invest In?

There’s no one size fits all answer to this question. To decide what cryptocurrency to invest in, you should begin by researching cryptocurrencies listed on major exchanges.

When most people start investing in cryptocurrency, they first invest in Bitcoin because it’s the most valuable by market cap. But, you can also begin your crypto journey with altcoins (other cryptocurrencies other than Bitcoin).

Just ensure to carry out your own research before buying any cryptocurrency.

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