Cryptocurrency is one of the most trending topics of 2019. Cryptocurrencies are still growing rapidly. With the increase of cryptocurrency wallets and services, Cryptocurrency is becoming a real thing even for non-techie people. Each and every blogger, youtuber and influencer who writes about making money has at least once mentioned about cryptocurrency like Bitcoin, Ethereum etc.
Well, what is cryptocurrency in the first place ??
Is that a new Sci-Fi thing that doubles our money in a few hours ??
Is that a get rich quick scheme ??
Is it even legal to buy/sell cryptocurrency??
In this guide of cryptocurrency for dummies, we are going to answer each and every question that comes to a beginner’s mind when we talk about cryptocurrency.
Since all of these are huge topics, we will just be covering the surface here and we will write separate posts in future on those topics. So stay tuned 😀
Cryptocurrency for dummies : what is cryptocurrency ?
Cryptocurrency is a digital currency which can be used to buy stuff, pay your bills or any other activity which you would do with your money. But, since it is digital, there is a lot of complexity involved in the usage of cryptocurrency in real world applications. Here are the things that differentiate cryptocurrency from real world money:
- Cryptocurrency is completely digital or virtual currency.
- Cryptocurrencies are not governed/controlled by any individual or authority.
- Cryptocurrencies are the best way to send money with low transaction fee.
- Cryptocurrency transactions are highly secured and private. There is no chance of identifying who purchased something using cryptocurrency such as bitcoin.
Sounds cool, isn’t it ?
But there is a silly problem, you cannot visit your near by shop and say “I need Coffee and I will pay using Bitcoin “. Even though this sounds funny, It may become a normal sentence which use everyday in the future. Enough of these old school jokes, Let’s move on and we will see how cryptocurrencies work in this guide of cryptocurrency for dummies 😀
How does cryptocurrencies work ?
Here is a quick video on the same topic which is very detailed from techquickie :
Cryptocurrencies store the individual currency information in computer databases or digital ledger and uses cryptography ( Using algorithms and mathematical formulas to encrypt/decrypt data ) to securely store it. Since, the data is highly encrypted, it is almost impossible to extract information related to transactions, change the individual data of ownership on coins etc.
Cryptocurrencies are usually stored in Crypto wallets like Zebpay, Wazirx or Unocoin etc. Each wallet has a unique wallet address which is used for sending or receiving cryptocurrencies. Not all cryptocurrencies use the same wallet addresses. Crypto wallets provide N Number of unique ID’s for N cryptocurrencies.
An easy explanation would be ( Take this as a piece of salt, it is just for complete beginners ) :
Consider database/digital ledger as a network of N number of banks that are connected over internet and the currency as cryptocurrency. Let’s say crypto wallet is your bank in which you have a bank account. Consider your crypto wallet address as account number.
When you want to deposit money, You go to your bank and fill up a deposit form and submit it along with money. Now your bank account has the money which you deposited. A good point to make here is, You can withdraw/deposit from any branch of your bank.
Cryptocurrencies do work like normal money, but they are private, secured and highly digital currency. I hope, this small explanation gave you a better idea on cryptocurrencies. Those who already know a lot about cryptocurrency might find this as pure false info, but I think it is a good way to let people know that cryptocurrencies are same as normal currency, but is virtual. If you read the article up to here properly, I hope you got a good idea on what is cryptocurrency and now you will know why it even exists in the first place.
Why are cryptocurrencies even a thing?
Now you have basic understanding of what cryptocurrencies are and how they work. If you don’t, I highly suggest you to read this article from blockgeeks. Even though it uses some advanced phrases, it is still a informative resource on cryptocurrencies.
Cryptocurrencies are mainly used because:
- Low transaction Fee. Normal currency, when transacted through online services like Paypal will take huge amounts of transaction fee. Cryptocurrencies charge very low transaction fee which make it great option for international payments
- Good privacy : Cryptocurrencies are not governed by any organisation/authority. Cryptocurrency transactions are also very confidential, private and secured.
- Good Investment option: Cryptocurrency is a good place to invest some of your savings and hope that it will grow after sometime. You will know how you can increase savings in the next section.
After you have got an idea of cryptocurrencies, Here is a point that make cryptocurrencies a real deal. Every minute, The prices of cryptocurrencies change. They may go down or high. We would never know. That’s why, Cryptocurrencies are great place to invest for long term holders.
Why do prices fluctuate ?
Cryptocurrencies price depends on a lot of factors :
- Demand and supply theory works here too. Let’s say, people brought a lot of bitcoin and now there is no bitcoin available to buy. Now, it will have high value. When people think that paying high price is no option, Slowly the price drops down.
- Whale’s : There is a well know theory which states that some people hold a huge number of bitcoin or any other cryptocurrency. When they stop releasing crypto to the market, The prices will go higher and higher. When they start releasing crypto again, The prices will eventually go down since there is good amount of crypto available.
There are a lot of other factors on which cryptocurrencies price depends. But, these are the 2 most important ones and I think these are the ones that matter the most.
When the prices fluctuate, a new door is opened for buyers/sellers to make money. You can buy cryptocurrency when the price goes low and sell it for good profit. This is called Cryptocurrency trading. It is a good technique to make good profit in not so long amount of time ( But still takes some ).
Are cryptocurrencies legal ?
In some countries, cryptocurrencies are legal. Cryptocurrencies are legal in these countries : Japan, U.S, U.K, France, Canada and much more.
In some countries, cryptocurrencies are illegal such as
In some countries, Cryptocurrencies are neither legal nor illegal. Even though I won’t say, it is completely safe to buy cryptocurrency in these countries, it is not a risk too.
Is cryptocurrency legal in India ?
There is no official statement released by RBI or government of India regarding cryptocurrencies. A lot of companies are allowing buying/selling/trading crypto in India. Hence, There is no risk associated with cryptocurrencies in India.
Where to start ?
Here is how you can trade cryptocurrency using wazirx:
- Click on this link and signup for wazirx.
- Verify your E-mail.
- Verify your KYC and Bank account with wazirx.
- Deposit some amount to your wazrix wallet.
- Start buying some cryptocurrency and sell it when the price goes high.
So, I hope after completing this cryptocurrency for dummies guide, you now know what cryptocurrency is and how it works. If you are still confused or didn’t understood any of the topics mentioned above, Let me know in the comments and I will try my best to answer your queries.
Disclaimer: I disclose information to my best and I’m not responsible for any losses, risks associated with cryptocurrency.