Bitcoin may still be the most popular cryptocurrency out there, but a simple Google search will show you there are many more. You may stumble on sites lauding five to ten cryptocurrencies as the only ones worth investing in, or only ones you should be familiar with, but according to CoinMarketCap, at the time of this writing, there are 1,530 cryptocurrencies. In contrast, there are only 180 currencies recognized as legal tender by UN member states.
Just three years ago, in a PWC Consumer Cryptocurrency Survey, 83 percent of respondents said they’re slightly familiar or not at all familiar with cryptocurrencies.
And it’s likely some of you reading this would have fallen into that camp if you took the survey three years ago. However, in the three years since then, you’ll agree that more individuals and businesses have become aware of Bitcoin at least, if not any other cryptocurrency. But even though more people have and are using Bitcoin, some still do not know how it works.
There are just two steps here to help you get started. And that’s solely not to overwhelm you.
1. Educate yourself
This is a general problem even for some users of cryptocurrencies, and for good reason because there’s a lot to learn.
For starters, you should learn what cryptocurrencies really are, how they work, what they are used for, and potential drawbacks to using or investing in cryptocurrencies. That will help you make a more informed decision in choosing or avoiding a virtual currency.
An education also involves learning about many terms associated with cryptocurrencies as you’ll see them used and thrown around a lot. For example, here are common terms you can start with (in no particular order):
- Cryptocurrency exchanges
- Investment portfolio
As a quick example, most people commonly buy and trade cryptocurrencies on exchanges. Simply put, exchanges are places (online of course) where you buy and sell digital currencies using fiat. In the crypto world, “fiat” is any conventional currency recognized as legal tender.
Popular exchanges include:
You don’t need to go the Coinbase, Binance, or Bittrex route these days to get Satoshis. And if you’re wondering what a Satoshi is, it is the unit name for 10 millionth of 1 Bitcoin, i.e 1 Satoshi = 0.00000001 BTC. Stablecoin like Tether USDt was created as an alternative for exchange and wallet audits which are currently unreliable due to constant fluctuation common in other cryptocurrencies like Bitcoin. Unfortunately, Tether is currently experiencing some trouble.
If that makes you skeptical about using Tether, you may opt for an alternative like the Kowala kCoin. Still, the market cannot be stabilized by one or two stablecoin, so having a variety of stablecoin is the solution to a centralized market. Thankfully, there are other stablecoins springing up too.
As you can see already, there’s a lot to learn, and it can get overwhelming. Fast. So go ahead and start with the basics as mentioned earlier, and take it up from there.
2. Use spare money
With all the buzz around cryptocurrencies and their benefits, it’s easy to overlook the risks associated with them generally. But you shouldn’t be oblivious of them. They include:
- Volatility: The prices of digital currencies are rising and falling in the open market. One Bitcoin was worth less than $1000 at the beginning of 2017, but by the end of 2017 it was worth over $15,000. At the time of this writing it is worth over $9,000.
- Security: Do a little digging around and you’ll find terrible stories of hacked exchanges, stolen Bitcoins, and lost private keys. Cryptocurrencies may be lauded for secure and faster payments but you’ll still need to protect yourself, just like you’d shield yourself from phishing scams and credit card fraud.
- Trust issues: Remember I mentioned there are 1,530 cryptocurrencies earlier on? The reality is that some coins are fake or a scam and some could be inactive but people may still try to sell them to you or make you invest in them. And then there are fraudulent exchanges too.
- Regulatory problems: Complete adoption of cryptocurrencies could render banks and online money transfer services useless, so understandably, decision-makers in those sectors are fighting the crypto revolution. Additionally, most governments despise cryptocurrencies because they lack a central authority through which it’s easier to track currency movement and ultimately trace criminal activity. Don’t be surprised if cryptocurrencies are completely banned in your country like they are in China and Vietnam currently.
Considering these problems, you should take the following precautions:
- Invest spare money: This is the most important precaution of all, because if all fails and maybe authorities suddenly ban cryptocurrencies in your area or your coins become valueless due to price fluctuations, it will hurt less. Trust me you don’t want to find out how emotionally attached you can be to your digital currency. Use only money you can afford to lose, because it’s a risky investment.
- Protect your money: You are obligated to protect your digital currencies just like you’d guard your fiat. You can do that by enabling two factor authentication, using secure passwords, and always visiting any sites related to your crypto account directly or from a bookmark and not via a search engine result.
- Use stable coins: There are lots of stable coins out there, invented to help deal with the volatility of cryptocurrencies. Two popular and trustworthy ones are Kowala kCoin and Tether USDt, both mentioned earlier, but if you choose to opt for another, carefully research it like you’d research an exchange platform or cryptocurrency before trading on it or buying it respectively. A common search term you can use is “(insert cryptocurrency or exchange name) scam” and go through the results with a fine comb.
- Always do research and/or ask questions: I’ve said this before but it bears repeating, always research and ask questions about concepts you don’t know or understand. This is valid advice even in other spheres of life. Use the internet. Check multiple sources because sometimes people often have vested interests in tools, exchanges, or coins they recommend to you; or sometimes ask an expert.
Cryptocurrencies are here to stay
Digital currencies have come a long way, but they’re still far from mass adoption at the moment. But like other newer technology before it, there’s hope it will come good. Invest wisely, and try to have fun while you’re at it.
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