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Have you ever wondered, what is the best way to buy Bitcoin and other cryptocurrencies?

Cryptocurrencies are on their way to becoming mainstream and are here to stay.

No one can say how long they’ll be around, but they have already made a mark on the world and are becoming more popular by the day.

Not only do they make it easier for people to send and receive money, but they also offer a level of privacy that traditional currencies don’t.

While many people are still wondering what all the fuss is about, many others are busy buying cryptocurrencies.

So, if you are one of those sitting on the fence and wondering what all the fuss is about and how you can get involved in this growing market, then you’ve come to the right post.

This post will discuss all the ins and outs of cryptocurrencies, including why they are valuable, where to buy as well as how to buy them.

So, before you get involved in this growing market, let’s understand the basics.

 

Infographic for Best Ways Where and How to Buy Bitcoin and Other Cryptocurrencies psd

Introduction to Cryptocurrency

Many people thought that cryptocurrencies were only a passing fad.

However, in the past years, it has been evident that they are here to stay.

So, what exactly is cryptocurrency?

In simple language, cryptocurrencies are digital currencies that are created and stored on the blockchain.

The blockchain is a digital ledger that keeps track of every transaction ever made with a cryptocurrency.

This allows people to keep track of their money without having to trust any third party like a bank or government.

If we talk about the cryptocurrency types, then the most popular ones are Bitcoin and Ethereum.

  • Bitcoin is the first and foremost valuable cryptocurrency that was created in 2009 by an anonymous developer named Satoshi Nakamoto. It is a decentralized currency, which means no central authority can control it or inflate its value.
  • Ethereum is the second most known cryptocurrency after Bitcoin. It was developed in 2013 by a team of developers led by Vitalik Buterin and is used more as a platform for decentralized applications (dApps).

Apart from this, there are many more, like IOTA, Litecoin, Neo, and Cardano.

So, it’s difficult to answer which one is better than the others. The only thing that matters is what you want to achieve with the currency.

If you want a cryptocurrency that can be used for payments and storing value, then Bitcoin is the best choice.

On the other side, if you choose a platform to create dApps or smart contracts, then Ethereum is your best bet.

Why are They Valuable?

Cryptocurrencies are valuable because they are decentralized, meaning no one governing body controls it.

It’s also encrypted so that only the owner of the wallet has access to their funds.

This makes it super challenging for hackers to steal your money.

Also, the fact is that cryptocurrencies are global means they can be sent anywhere in the world without any hassle.

This makes them highly valuable to those who need to send money overseas.

How to Buy Crypto?

If you are a beginner or new to the world of cryptocurrencies, then you will feel lost in this big sea.

But no panic; here is a step-by-step guide to help you understand the process of buying cryptocurrency.

1. Choose a cryptocurrency to invest in

There are many different cryptocurrencies, so the the first step is to decide what cryptocurrency you want to invest in.

Bitcoin (BTC) is one of the most popular choices because it’s been around since 2009 and has proven itself a valuable investment option.

You can also choose Ethereum (ETH), Ripple (XRP), Litecoin (LTC), and others, depending on which ones appeal to you most.

2. Choose a broker or crypto exchange

The next step is to choose a broker or crypto exchange.

A broker will help you to purchase cryptocurrency, but you’ll need to be careful to choose a reputable one.

A crypto exchange is like an online bank where you can buy and sell cryptocurrency.

This option is easier than using a broker, but it’s also less secure because it doesn’t have the same security measures in place.

However, some exchanges are better than others, so make sure that you research the ones that interest you before choosing one.

If you are looking for a list of recommendations, you can check our full list of tools and resources.

3. Create your account

Feeling excited? You should be!

The next crucial step is to open up your crypto account.

Once you have chosen a broker or crypto exchange, you’ll need to sign up for an account with them.

This will involve providing some personal information like your name and address, but it also means that the company has all of your details in case anything goes wrong.

4. Fund your account

You will need to fund your account before you can buy any cryptocurrency.

This means that you need to deposit some money into the exchange so that it can be used as a base currency amount for buying or selling cryptocurrencies.

The amount of funds you need to deposit will depend on how much cryptocurrency you want to buy and what type of coin it is (e.g., Bitcoin or Ethereum).

5. Place your order

Once you have deposited funds into your account, it’s time to place an order.

This is when you tell the exchange what type of coin you want to buy and how much of it.

You should also specify which currency should be used as a base (e.g., USD) and whether or not you want immediate delivery or if you want to set up a future date for receiving the coins.

6. Store safely

Once your order has been placed, you will receive your coins at the specified wallet address, and it is then crucial to keep it safe.

Storing your crypto assets on an exchange might be convenient, but it is also more vulnerable to theft.

So, if you want to avoid this, then consider using an offline hardware wallet. They allow you to store your private keys on secure devices that are not connected to the internet.

This way, if someone were to steal them from you, they would be unable to access your coins.

Now that you are equipped with how to buy Bitcoin and other cryptocurrencies let’s move on to where to buy.

Where to Buy Crypto?

You will be mesmerized to know that the value of Bitcoin has increased from $0.5 to $20,000 in just months.

This is the reason why people are investing in Bitcoin and other cryptocurrencies today.

However, with numerous such choices available, it can be confusing to find a reliable place to buy your coins.

That’s why we’ve come together with this handy guide on the best places to buy Bitcoin and other cryptocurrencies online.

There are two ways to get started.

One is going through a broker, and the second is using a cryptocurrency exchange.

Below are the pros and cons of both options so that, in the end, you are piped line with the right information to make an informed choice.

a) Broker:

A broker is simply a person or a company that acts as an intermediary between you and the cryptocurrency exchange.

They provide a platform where you can buy, sell, and trade cryptocurrencies.

The benefit of using a broker is that they offer a simple and convenient way of purchasing Bitcoin or other cryptocurrencies.

You can also use a broker to sell your coins when you want to close your positions or rotate back to fiat currency.

The only drawback is that they charge higher fees than cryptocurrency exchanges do.

b) Cryptocurrency exchange:

A cryptocurrency exchange is a platform where you can buy and sell cryptocurrencies.

It works much like a stock exchange, except that it deals with digital currencies instead of stocks or bonds.

The primary benefit of using a cryptocurrency exchange is that it provides you with a wide range of coins to choose from.

You can also use it to trade different cryptocurrencies against each other.

The only drawback is that you’ll have to pay fees for each transaction, which can be pretty high if you make a lot of trades.

Concluding Thoughts

Cryptocurrencies are becoming increasingly mainstream, and with that comes an increase in the number of ways to buy Bitcoin and other digital assets.

While there are many different exchanges available, not all of them are created equal.

It is supreme to do your own research to find an exchange that is reputable and offers the features that you are looking for.

Now that I have shared where and how to buy Bitcoin and various cryptocurrencies, which do you think is the best way to do it?

Let me know in the comments below.

 

thumbnail the ultimate guide to blockchain and crypto assets

If you would like to learn more about crypto & DeFi, also check out: “The Ultimate Guide to Blockchain & Cryptocurrencies”

How to Stake on Proof of Stake Blockchains for Passive Crypto Income thumbnail

Did you know that you can generate additional passive income just by staking your existing crypto holdings?

Proof of stake (PoS) is an alternative to proof of work (PoW) that is being increasingly used in crypto blockchains, where nodes are rewarded for validating transactions instead of miners working to earn coins through their processing power.

The good news is that the process tends to be much easier than mining and also generates passive income on the side.

So, how do you stake your crypto?

In this blog post, I will explain what this new proof of stake system is all about, and how you can stake your crypto on this system to generate passive income.

 

Infographic How to Stake on Proof of Stake Blockchains for Passive Crypto Income

 

Understanding DeFi

DeFi, or decentralized finance, is a growing ecosystem of financial protocols and applications built on the Ethereum blockchain.

DeFi represents the shift from traditional, centralized financial systems to peer-to-peer finance enabled by decentralized technologies built on the Ethereum blockchain.

DeFi protocols offer a wide range of services, from lending and borrowing platforms to stablecoins and tokenized BTC.

Using DeFi protocols, you can earn interest on your crypto, trade with leverage, and do much more. And with over $63 billion worth of value locked in Ethereum smart contracts, it is clear that DeFi is here to stay.

With this increased ease of access to investment opportunities, there are more and more DeFi projects being created every day.

Some notable examples include MakerDAO Dai stablecoin, Augur prediction market platform, and Compound (COMP) leveraged cryptocurrency interest accounts.

Basic PoS Terminology

Before we dive any deeper, let’s go over some basic PoS terminology:

  • A stake is simply the amount of cryptocurrency you have staked.
  • The stakeholder is the person who stakes their cryptocurrency.
  • A validator is a node that creates new blocks on the blockchain.
  • The block reward is the amount of cryptocurrency rewarded to the validator for creating a new block.
  • Delegated proof-of-stake (DPoS) is a type of PoS where stakeholders can delegate their staking power to a validator.

What is Proof of Stake (PoS)?

To understand how proof of stake works, we must first understand what a consensus algorithm is.

A consensus algorithm is a set of rules that everyone in a network agrees upon to validate transactions and prevent fraud.

The most popular consensus algorithm is called proof of work, which is used by Bitcoin.

However, there are many other consensus algorithms that have been developed, including proof of stake.

Proof of stake is a popular type of consensus algorithm, by which a cryptocurrency blockchain network aims to achieve distributed consensus.

The term “proof of stake” was coined by a “Bitcointalk forum” user called QuantumMechanic.

The fundamental point was that it would be wasteful to open up mining to everyone and let them compete against one another.

Therefore, in PoS-based cryptocurrencies, the creator of the next block is chosen via various combinations of random selection and wealth or age (i.e., the stake).

Unlike proof of work-based systems, there is no concept of blocks being mined — rather, validators are staking their own crypto holdings to have their blocks included in the chain.

Bear in mind that the validators are not chosen in a completely arbitrary fashion.

A certain amount of coins must be staked into the network by a node before it can be considered for the validator’s role.

The size of the stake has a bearing on the probability that a validator will be chosen to forge the next block.

Let’s assume that John contributes $100 to the network while Cindy contributes $500.

Cindy’s chances of making the cut to forge the next block are five times higher!

It is worth noting that the stake is always more than what the validator earns from the transaction fees to keep the validator financially motivated.

Among the many blockchain networks, such as Polkadot (DOT), Algorand (ALGO), Solana (SOL), Cardano (ADA), and the upcoming Ethereum 2.0, proof of stake represents an evolution in consensus algorithms.

How To Stake Tokens in a PoS Network?

To stake tokens in a PoS network, you first need to find a supported wallet or exchange that offers staking for the coin you hold.

Then, you will need to deposit your tokens into the wallet or exchange.

Keep in mind that a certain number of tokens must be staked to participate in some protocols.

For example, to stake on Tezos, you will need a minimum of 8,000 Tezos (XTZ).

The PoS implementation in Ethereum 2.0 will call for 32 ether (ETH).

Once your tokens are deposited, you can choose how many you want to stake and for how long.

The amount of interest you earn will depend on the amount of time your coins are staked, as well as the specific rules of the network.

For example, some networks may require that you keep your coins staked for a minimum of 30 days, while others have no minimum requirement.

In any case, the longer you stake your tokens, the more rewards you will earn.

The good news is that once you have deposited your coins into a staking wallet, the process is completely passive — meaning you can earn interest without having to do any work.

There are many coins that can give you an Annual Percentage Yield (APY) of 4-8% or even higher, so the income potential in staking is relatively high.

When you are ready to stop staking, simply withdraw your tokens from the wallet or exchange.

Why Should You Stake for Passive Income?

Proof of stake blockchains offer a unique opportunity for earning passive income from cryptocurrency.

Unlike proof of work blockchains, which require mining equipment and expensive electricity, proof of stake blockchains only require you to hold coins in your wallet to earn rewards since you are not solving complex mathematical problems.

This makes staking a much more accessible way to earn crypto.

PoS algorithms also tend to be more censorship resistant than PoW algorithms.

This is because, in a PoS system, the network is not controlled by a small group of miners who can choose to censor certain transactions.

Instead, everyone who has a stake in the network (i.e., everyone who owns coins) has a say in what happens.

This makes it much harder for anyone to censor transactions or refuse to process them.

Issues with Proof of Stake

While PoS does away with mining (and, in theory, reduces energy consumption), it has its own set of issues.

Firstly, no PoS system today can scale to the level of Bitcoin or Ethereum.

These systems are not yet as decentralized or safe as the most advanced PoW systems.

However, these flaws could be fixed with more advanced consensus mechanisms like Casper (CSPR).

When the validator does not show up to complete their job, this might be another source of possible issues.

However, this problem can also be easily solved by choosing a large number of backup validators in case the primary ones fail.

And though PoS systems might use fewer resources overall, they can be less secure than PoW systems.

One reason is that the hashing power in a PoS system is spread out among all users, while in a PoW system, it is centralized among miners.

This means that a PoS system is more vulnerable to a Sybil attack, where an attacker creates multiple fake identities to gain control of the network.

Another issue with PoS is that it can be more vulnerable to 51% attacks, where one entity controls more than half of the currency.

The blockchain is also technically at risk of fork if two different blocks are created at exactly the same time and one gets included in a new block before being confirmed by a sufficient number of validators, depending on your staking setup.

To increase security in such cases, many projects use vaults where stakeholder deposits are locked up until they can be periodically released and rewarded with new coins (i.e., interest on your crypto holdings).

One popular alternative is so-called delegative proof of stake, which involves stakers delegating their stake to another party who will stake on their behalf.

Concluding Thoughts

To summarize, in Proof of Stake blockchain networks, the miners do not actually mine the coins.

Instead, they essentially lock up their coins for a set amount of time and take turns validating transactions on the network.

In return, these stakers receive rewards based on the number of coins they have staked and their specific network’s staking fee schedule.

So if you are looking for a way to earn some passive income from your cryptocurrency holdings, staking might be the perfect solution.

Staking is the process of holding onto your coins to support the network and earn rewards.

By doing so, you can earn interest on your holdings and help keep the network secure.

Now that you know how staking works and how it earns you passive income from your crypto holdings, would you consider staking your crypto tokens?

Do you think the reward to risk profile of such an investment is better than those in traditional finance?

Let me know in the comments below.

 

thumbnail the ultimate guide to blockchain and crypto assets

If you would like to learn more about crypto & DeFi, also check out: “The Ultimate Guide to Blockchain & Cryptocurrencies”

proof of work vs proof of stake thumbnail

Did you know there is an epic battle between the two main cryptocurrency verification systems?

When it comes to crypto, the debate over what type of consensus mechanism or algorithm should be used to verify transactions continues to rage on.

Proof of work (or PoW) and proof of stake (or PoS) are two ways new transactions can be added to a blockchain without needing an intermediary.

While PoW has been around since the birth of Bitcoin (BTC) in 2009 and has been used by most cryptocurrencies since then, PoS is relatively new and has only been adopted by a few coins so far, including Cardano (ADA) and Solana (SOL).

In this blog post, I’m going to break down everything you need to know about this ongoing battle of cryptocurrency algorithms, and the pros and cons of each system.

proof of work vs proof of stake infographic

 

What is Proof of Work (PoW)?

In a proof of work system, a group of computers compete to solve complex mathematical problems to validate transactions and add new blocks to the blockchain.

The first one to solve the problem receives a reward in the form of cryptocurrency.

Because the energy and computing resources required to solve the mathematical puzzle are often considered the digital equivalent of the actual process of mining precious metals from the earth, this process is often known as mining.

The book Digital Gold by Nathaniel Popper uses an analogy to describe the PoW function in the Bitcoin system:

It is easy to get 2,903 times 3,571 by simply writing the numbers on a piece of paper and multiplying, but it is much harder to figure out which two numbers can be multiplied together to create 10,366,613.

The miner who solves the complex mathematical problem first gets to add the next block of transactions to the blockchain and broadcast it to the network of nodes, who will then audit the existing ledger and the new block individually.

If everything checks out, the new block is linked to the preceding block, forming a transactional chain. The miner is then compensated with bitcoins for contributing their resources (energy).

PoW, Mining & Security

Mining consumes a lot of power and secures the network by ensuring that only those who can verify they have invested resources are allowed to add new transactions to the blockchain.

By virtue of this feature, attacking a PoW system like Bitcoin is exceedingly difficult, time-consuming, and expensive.

Attackers would have to buy and rig up expensive mining equipment and pay for electricity to power the equipment. They would then race to solve the problem and add a transaction block with counterfeit bitcoins to the chain.

If the unscrupulous miner solves the equation first, they will broadcast a new transaction block to the rest of the network.

The nodes of the network would then conduct an audit to evaluate the authenticity of the block and the transactions recorded within it.

The counterfeit bitcoins would be detected as soon as the nodes audited the new block against the previous version of the ledger. The consensus mechanism would then render the block invalid.

PoW makes it virtually impossible to counterfeit bitcoin unless an attacker owns over 50% of the entire network — this means they must own at least 51% of both the combined computing power of miners (the hashrate) and the network’s nodes.

If they did own over 50% of the network, they could simply broadcast a bad block to it and have their nodes accept it into the chain.

Given the size of the Bitcoin network and the amount of energy miners contribute to the PoW system, however, a 51% attack would be almost impossible today.

If PoW checks all the boxes, why is the crypto world slowly transitioning to the PoS mechanism?

What is Proof of Stake (PoS)?

A member on the Bitcointalk forum who went by QuantumMechanic devised a mechanism he called “proof-of-stake” in 2011. The fundamental point was that it would be wasteful to open up mining to everyone and let them compete against one another.

Therefore, PoS relies on an electoral system in which one node is chosen randomly to validate the next block in the chain.

PoS does not have miners — instead, it has “validators.” PoS also does not allow people to “mine” blocks — instead, they “forge” or “mint” blocks. As a reward, the validator receives the fees associated with each transaction.

Bear in mind that the validators are not chosen in a completely arbitrary fashion. A certain amount of coins must be staked into the network by a node before it can be considered for the validator’s role.

The size of the stake has a bearing on the probability that a validator will be chosen to forge the next block.

Let’s assume that Walt contributes $100 to the network while Skyler contributes $1,000. Skyler’s chances of making the cut to forge the next block are ten times higher!

It is worth noting that the stake is always more than what the validator earns from the transaction fees to keep the validator financially motivated.

Advantages of Proof of Work

Mining cryptocurrency is a very competitive industry. Miners are always looking for ways to mine that are more efficient and cost-effective so that they can lower their costs.

Those that are able to find the least expensive forms of energy and develop innovative technological solutions that allow for the production of mining chips that are both quicker and more efficient would automatically benefit from this process.

Proof of Work has also been shown to be the most effective way to maintain consensus while simultaneously ensuring users’ security within a distributed ledger.

This is attributable to the fact that it requires the initial cost of hardware and the continued spending of resources to participate, in contrast to PoS, which just requires a single upfront payment.

Disadvantages of Proof of Work

The amount of energy that goes into powering Bitcoin’s Proof of Work algorithm is often criticized because it creates a large carbon footprint.

In fact, it is estimated that the Bitcoin network alone consumes as much energy as the entire countries of Ukraine and Norway.

This high level of energy consumption is due to the fact that miners need to solve complex math problems to validate transactions and add new blocks to the blockchain.

The solution to these problems requires a lot of computational power 24/7, which in turn requires a lot of electricity.

The traceability of blockchain can also be a double-edged sword. On the one hand, it adds transparency and builds trust between users.

On the other hand, it also means that every single transaction is out there for everyone to see. This could be a problem for people who value their privacy.

For example, the US Internal Revenue Service (IRS) has successfully tracked down suspected tax evaders by matching records from bitcoin exchanges with data obtained from other financial institutions such as banks and brokerages.

Traceability will likely remain an issue as long as cryptocurrencies are used as a payment system rather than just an investment vehicle.

Advantages of Proof of Stake

One major advantage of Proof of Stake (PoS) over Proof of Work (PoW) is that it is more energy efficient.

With PoW, miners need to expend a lot of energy to power their computers and solve complex mathematical problems to earn rewards. This can be expensive and damaging to the environment.

With PoS, however, miners do not need to use as much energy since they are not solving complex mathematical problems.

Instead, they can simply stake their coins and earn rewards based on how many coins they have staked.

Proof of Stake algorithms also tend to be more censorship resistant than PoW algorithms.

This is because, in a PoS system, the network is not controlled by a small group of miners who can choose to censor certain transactions.

Instead, everyone who has a stake in the network (i.e., everyone who owns coins) has a say in what happens.

This makes it much harder for anyone to censor transactions or refuse to process them.

Proof of Stake also has a lower barrier to entry. To start mining a PoS coin, you only need an Internet connection and enough money to buy a fraction of a coin.

That’s it! You can even mine from your smartphone.

Since there is no need for expensive hardware, PoS is much more accessible to the average person.

Disadvantages of Proof of Stake

There is no Proof of Stake system currently that can scale to the level of Bitcoin or Ethereum. These systems are not yet as decentralized or safe as the most advanced PoW systems.

However, these flaws could be fixed with more advanced consensus mechanisms like Casper (CSPR).

When the validator does not show up to complete their job, this might be another source of possible issues. However, this problem can be easily solved by choosing a large number of backup validators in case the primary ones fail.

And though Proof of Stake systems might use fewer resources overall, they can be less secure than PoW systems.

One reason is that the hashing power in a PoS system is spread out among all users, while in a PoW system, it is centralized among miners.

This means that a Proof of Stake system is more vulnerable to a Sybil attack, where an attacker creates multiple fake identities to gain control of the network.

Another issue with PoS is that it can be more vulnerable to 51% attacks, where one entity controls more than half of the currency.

PoW vs. PoS: Which is Better?

It is safe to say that both PoW and PoS have their pros and cons.

And while there is no clear winner, each algorithm seems to have its own strengths and weaknesses.

Ultimately, it will be up to the developers and miners to decide which algorithm is best for their needs.

But one thing is for sure; the cryptocurrency world is in for an exciting ride as these two algorithms battle it out.

Concluding Thoughts

The cryptocurrency world has been buzzing about the future of the blockchain, especially the debate between Proof of Work (PoW) and Proof of Stake (PoS).

While PoW has led to some of the most famous cryptocurrencies like Bitcoin and Ethereum, it may not be long before PoS takes over as the dominant algorithm.

For example, in the upcoming Ethereum merge, Ethereum will be transiting from a PoW system to a PoS system.

So far, PoW has also been the most proven way to maintain consensus and security within a distributed ledger.

This is because it requires the initial cost of hardware and the ongoing expenditure of resources rather than a single upfront expense to participate like PoS.

On the other hand, PoW is unsustainable due to high energy consumption, and runs into scaling problems, for example high fees and slow transactions.

Now that you know the difference between Proof of Work (PoW) and Proof of Stake (PoS), which system do you think is better in the long run?

Which consensus mechanism do you think will dominate future cryptocurrencies and tokens?

Let me know in the comments below.

 

thumbnail the ultimate guide to blockchain and crypto assets

If you would like to learn more about crypto & DeFi, also check out: “The Ultimate Guide to Blockchain & Cryptocurrencies”

What is a Cryptocurrency and is it a Good Investment thumbnail

Many people think that crypto is going to be the biggest innovation of our generation, while many others think it it simply a scam.

So, which is it?

Cryptocurrencies have been in the news frequently over the past few years, and more people are becoming aware of them every day.

In fact, over 30% of all U.S. adults now own crypto. However, despite their growing popularity and astronomical gains in value, many people still don’t actually understand what cryptocurrencies are.

In this blog post, I will share everything you need to know about cryptocurrencies, how they work, and whether or not you should invest in them.

 

Infographic What is Cryptocurrency and is it a good investment

What is Cryptocurrency?

A cryptocurrency (or “crypto”) is any peer-to-peer digital currency that uses cryptography to create and manage the money supply and confirm the transactions.

While Bitcoin (BTC) is the first and most well-known cryptocurrency, there are many others available, including:

  • Ethereum (ETH)
  • Ripple (XRP)
  • Cardano (ADA)
  • Solana (SOL)
  • The asset-backed cryptocurrency stablecoin Tether (USDT)

Most cryptocurrencies are decentralized systems based on blockchain technology, which enable transactions to be verified by the network without the need for central authorities, such as banks or governments — in other words, they are not subject to government or financial institution control.

The Difference Between Real Money and Cryptocurrencies

Real money, like the U.S. dollar, is fiat currency. That means it is not backed by a physical commodity like gold or silver but rather by the full faith and credit of the U.S. government.

In contrast, cryptocurrencies are decentralized digital assets not subject to government control or regulation. In fact, Bitcoin was created in 2009 as a peer-to-peer electronic cash system that could function without the need for a central authority.

Also, since cryptocurrency relies on public blockchains rather than banks, transaction fees are lower, allowing you to send funds across borders cheaply and quickly.

Blockchain: Proof of Work Vs. Proof of Stake

Most cryptocurrencies, including Bitcoin, follow a specific pattern called proof-of-work.

Proof-of-work requires miners to solve complex problems with large data sets to find blocks (a group of transactions) with rewards (typically the token).

The difficulty levels vary depending on the type of cryptocurrency, but some standard proof-of-work algorithms include SHA-256, Scrypt, X11, Ethash, Equihash, and Lyra2REv2.

Proof of work can necessitate a significant amount of computing power and electricity. After deducting the expenses of power and computing resources, miners may barely break even with the cryptocurrency they earn for validating transactions.

To limit the amount of power required to verify transactions, some have suggested the transition to the proof of stake verification method instead.

The number of transactions any user can verify with proof of stake is limited by the amount of crypto they are willing to “stake” in exchange for the opportunity to participate in the verification process.

Proof of stake is substantially more efficient than proof of work since it eliminates energy-intensive equation solving, allowing for faster transaction verification.

This is why Ethereum is moving towards the “Ethereum merge”, where it will switch from a proof-of-work to proof-of-stake system.

Is Cryptocurrency a Good Investment?

Since crypto’s arrival on the scene, many people have wondered if cryptocurrencies are viable as investments. Some experts say they will become a global phenomenon, while others say they are an investment bubble destined to pop.

The best thing about them is that once you purchase them, your online wallet gives you control over your assets without any third party being able to intervene. There are no intermediary collecting fees each time a transfer takes place between different digital wallets.

Another significant benefit of investing in crypto is the transparency it offers. All crypto transactions are stored on a public ledger. This means that anyone can view the transaction history of any given cryptocurrency. The identity of all the parties involved in each transaction is hidden, but we know who has made every purchase.

The consensus mechanism (e.g., proof-of-work) used to verify these transactions makes for an open, democratic system where no one party controls the entire blockchain.

Cryptocurrencies offer investors several other potential benefits, including the potential for tremendous growth, short processing time, fraud protection, and international acceptance.

However, there are also some risks associated with investing in cryptocurrencies.

Risks of Cryptocurrencies

Investing in any cryptocurrency comes with many risks, from outright fraud to exchange hacks. You may lose all of your investment or perhaps even more.

For example, Mt. Gox was a popular exchange for trading Bitcoin for fiat currencies like dollars or Euros until hackers stole $450 million worth of Bitcoin from users’ wallets! It shut down soon after, and today Mt. Gox has filed for bankruptcy protection.

In another case of fraud, CoinDash ICO lost out on $7 million in investor money after their site was hacked shortly before their token sale went live.

Another potential drawback is its volatility — cryptocurrencies carry a risk of big swings up or down in value, which means there is no guarantee they can be relied upon for long-term savings.

And since crypto values fluctuate so wildly — sometimes even more than once per day — they are unsuitable for most people’s needs as general spending money. They are better suited to speculative trading, much like stocks and commodities.

So even with the incredible volatility experienced so far and stories about crypto millions made or lost overnight, would a prudent investor still consider putting their money into the market?

Cryptocurrency might be a good investment for you, provided you are willing to take the chance and consider it a risky, high-reward gamble that can net you plenty of dough — but know that you can lose all of it, too.

Many people have lost thousands, or even millions, in cryptocurrency, so always ensure you are prepared to manage your investments before committing any significant amount of your wealth.

How to Start Investing in Crypto?

Many potential investors respond to crypto ads or private messages pushing “get rich quick” schemes.

Instead of making an impulsive purchase, you should use these steps to vet a cryptocurrency before buying it:

1. Research the currency.

Verify that the currency is legitimate, secure, and worth the money before providing personal or financial information.

Review the currency’s white paper.

Check the coin’s security ratings with Crypto Rating Council and CertiK, and use a third-party price tracker like CoinMarketCap to see how it has performed in the past.

2. Choose a platform

Which platform should you go with? It is dependent on how you want to use the currency.

Will you buy and hold? Will you make regular trades or cash out your cryptocurrency now and then?

Each platform charges a different fee for these activities — and some may even limit the type of transactions. Before making a decision, review the fees and limits, as well as the exchange’s security ranking.

I recommend sticking with the top few players in the market, which I have shared under the tools and resources tab.

Thing to Consider when Investing in Crypto

1. Make sure you have enough emergency savings to last at least six months.

Determine what constitutes your emergency funds — will it be six months’ worth of your expenses (for example, food, transportation, and entertainment), or will it be equivalent to six months’ allowance/salary?

Sorry for boring you, but with risk comes caution. Prioritize this and do not dive into something you do not fully comprehend.

You have heard about the one person who earned a fortune overnight with $1000, but you have never heard of the countless who saw their $1000 turn into $0.1.

2. Next, start small and manageable. Passive investing in ‘blue chip’ currencies such as BTC and ETH is safe.

Because of the volatility of cryptocurrency, this is also known as DCA (dollar-cost averaging), and you either average up or down.

A monthly budget of $50 to $100 is a great starting point.

You can also diversify your portfolio with other investments such as Exchange-traded funds (ETFs) and bonds.

Once you have more earning power, you can continue to allocate more. It can be more, depending on one’s current situation.

3. After establishing your passive investment portfolio, you can consider active investing.

Having the first two things mentioned above is critical to avoid crashing and burning. Again, start small, allocating no more than 10% of your risk tolerance to active investing.

To earn a yield on your crypto, you may look into crypto staking or other yield farming strategies. You may even consider performing leverage trading with your cryptocurrency.

These are all mid to high-risk alternatives, and you must be willing to lose them if something goes wrong.

Concluding Thoughts

Some people see cryptocurrencies as an investment opportunity, while others view them as a volatile gamble.

It all depends on what you try to get out of the market.

The cryptocurrency industry is so new that no venture has a guarantee of success or safety.

However, if you are looking for a high-risk-high-return scenario, investing in cryptocurrencies may be worth your time.

Personally, I think crypto is an exciting investment opportunity, but we should see it as a high risk, high reward type of investment.

This means that we can add it to our portfolio to boost our returns, but it should not form the bulk of your portfolio.

Now that I have shared all about cryptocurrencies as a potential investment asset, is this something you would consider adding to your portfolio?

And if you are already a crypto investor, how many percent of your portfolio have you allocated to cryptocurrency investments?

Let me know in the comments section below!

 

thumbnail the ultimate guide to blockchain and crypto assets

If you would like to learn more about crypto & DeFi, also check out: “The Ultimate Guide to Blockchain & Cryptocurrencies”

what are blockchains and cryptocurrencies thumbnail

Why are blockchains touted as the next big thing in the financial industry and potentially a major game-changer?

If you have heard of blockchain technology, chances are you know it has something to do with bitcoin, decentralised finance or cryptocurrency.

And while those two things have become inextricably linked, they are not the same.

That’s why it is crucial to understand how they work now so that you can take advantage of that potential — both as an entrepreneur and a consumer.

In this blog post, I will tell you everything you should know about how blockchain technology works and what its impact could be going forward.

 

what are blockchains and cryptocurrencies infographic

 

History of Blockchains

Blockchain technology has a long and complicated history.

It was first conceptualized in 1991 by a group of researchers trying to create a system for timestamping digital documents so they could not be tampered with.

But it was not until 2008 that blockchain really came into its own when Satoshi Nakamoto first introduced the concept of blockchains in a white paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System.

In this paper, Nakamoto described how a decentralized ledger could be used to record and verify transactions instead of the unstable traditional banking system.

Since then, blockchain has been hailed as a revolutionary new way of handling data.

What is a Blockchain?

At its simplest, blockchain is a digital database or ledger of transactions.

When someone uses cryptocurrency to buy something, they broadcast their transaction to the entire network of computers running the software.

These computers then race to verify the transaction, and the first one to do so adds it to the chain of past transactions or “block.”

The new block is then broadcast to the network and verified by more computers, and so on.

Each block contains a cryptographic hash of all the previous transactions, and each new block is linked to the one before it via cryptography, creating a “chain.”

How Does Blockchain Technology Work?

It can be difficult to understand how blockchain works by looking at its front-end alone.

The best way to describe blockchain technology is via an analogy…

Imagine a collection of people (nodes) connected by a peer-to-peer network they all possess access to.

Each person has a ledger book (a permanent, public record of all the transactions that take place on the network), and every time someone wants to make a transaction or record one in their ledger, they must first present it to everyone else so everyone can read and mathematically verify it.

Once everything checks out, each person updates their own ledgers with what has been written down.

As soon as this happens, each node checks to see if anyone has rejected the entry — if no one did, it is complete!

If someone did, this entire process starts over again until there is consensus across all nodes.

How is a Blockchain Different from a Typical Database?

A typical database is more vulnerable to data breaches and hacking because it is centralized, meaning all the data is stored in one place.

On the other hand, a blockchain is decentralized, meaning the data is spread across multiple computers across the decentralized network.

This makes it much more difficult for hackers to access and tamper with the data.

Why is Blockchain Technology Popular?

Blockchain technology is popular because it is seen as a more secure and transparent way to store and share data.

In theory, blockchain technology is highly secure as it is impossible to hack into multiple nodes at once without significant resources.

It also provides transparency by ensuring all records are shared with everyone on the network while preventing any tampering through encryption keys that change with every block of information added to the chain.

This makes it ideal for storing sensitive information like financial transactions.

Plus, since blockchain is decentralized, there is no need for third-party regulatory authorities like a government or bank to verify or approve transactions.

This makes the process faster and more efficient.

As we make our way to ‘Web 3.0’, one of the most popular applications of blockchain technology today is in the form of non-fungible tokens (NFTs).

NFTs are digital assets that are unique and cannot be replicated. They can be used to represent anything from art and collectibles to digital experiences and gaming items.

Because of their unique nature, NFTs have become extremely popular in recent years. In 2021 alone, the market for NFTs surpassed USD 40 Billion.

How to Process Transactions on a Blockchain?

Blockchain-based systems use what is called a hash function to encrypt transaction data. A hash function is a mathematical algorithm that takes input data of any size and converts it into output data of a fixed size.

The output of a hash function is commonly referred to as a hash or hash value.

In a blockchain, every transaction is stored in a block.

Each block has its own cryptographic hash and timestamp, as well as other data that may be specific to that block.

The blocks are stacked on top of each other, creating a digital ledger or chain of blocks.

This process is done through cryptography, which provides security and tamper-proofing for every block in the chain.

The hash from each block is used to create another cryptographic hash for each subsequent block, forming an unbroken chain and linking it all together.

For a new block to be added to the chain, miners must solve a complex mathematical problem.

This problem is known as the proof of work. Once a miner solves the proof of work, they can add the new block to the chain and they are rewarded in cryptocurrency for doing so.

The pieces of data stored in one block cannot be changed without changing all subsequent blocks; doing so would invalidate all following hashes and require massive amounts of computing power just to make a single change.

Types of Blockchains

Blockchain networks can be either public or private.

A public blockchain network is a decentralized network that anyone can join.

Bitcoin and Ethereum are examples of public blockchain networks.

A private blockchain network is a permissioned network where only approved participants can join.

Private blockchain networks are often used by businesses to create shared databases.

There is also a federated or consortium blockchain. In this type of blockchain, there is no one central authority.

Instead, a group of companies or organizations (known as a consortium) come together to form the network.

Each member of the consortium operates a node and has a vote in decision-making.

This type of blockchain is often used in industries where multiple parties must securely share data or conduct transactions, such as banking or supply chain management.

How to Invest in Blockchains?

There are several ways to make your first blockchain investment.

The most common way is to buy Bitcoin or Ethereum on a cryptocurrency exchange such as Coinbase or Binance.

Alternatively, you can purchase blockchain-based security on a traditional stock exchange, such as the Nasdaq.

Finally, you can invest in a blockchain startup through an initial coin offering (ICO) or a token sale.

When it comes to investing in blockchain technology, there are a few things you should keep in mind:

  • The cryptocurrency market is highly volatile. This means that prices can fluctuate wildly from day to day, and you could lose a significant amount of money if you are not careful.
  • You should only invest as much money as you are comfortable losing. Remember, there is always a risk of losing your entire investment when dealing with cryptocurrencies.
  • Finally, make sure you do your research before investing in any blockchain-based project. There are a lot of scams out there, and it is important to know what you are getting yourself into before putting any money down.

 

What are the Implications of Blockchain Technology?

As the technology behind Bitcoin and other cryptocurrencies, blockchain has the potential to revolutionize the way we interact with the digital world.

With its distributed ledger system, blockchain offers a new way of storing and verifying data that is more secure and transparent than traditional methods.

In addition, blockchain could help reduce fraudulent activities, such as identity theft and money laundering.

Ultimately, this could lead to a more efficient and trustworthy online ecosystem.

Concluding Thoughts on Blockchain

Overall, blockchain technology is a way to store and transmit information in a secure, decentralized manner.

Blockchain technology can provide greater transparency and security for online transactions by using a distributed database.

Additionally, blockchain technology has the potential to streamline many business processes and reduce costs.

However, the full potential of blockchain technology has yet to be realized.

As the technology continues to evolve, we can expect to see even more innovative applications of blockchain technology in the future.

Now that you know a little more about how blockchain technology works, what do you think of it?

Do you think it has the potential to revolutionize our financial ecosystem?

And besides the finance world, what other real-world applications do you foresee it being used for?

Let me know in the comments below!

 

thumbnail the ultimate guide to blockchain and crypto assets

If you would like to learn more about crypto & DeFi, also check out: “The Ultimate Guide to Blockchain & Cryptocurrencies”