Beginner's Guide to Cryptocurrency

2018-05-17 | Taylor Letterman

Beginner’s Guide to Cryptocurrency

Unless you’ve been living under a rock, you’ve probably become aware of this thing called cryptocurrency. Or you’ve seen some headlines with either of the words “Bitcoin” or “blockchain.” So if you’ve found yourself on this post, then you at least have some intrigue around the idea – even if that intrigue is merely to rebuke your crazy Uncle’s claim that cryptocurrency is a scam. Or hey, maybe you’re the crazy Uncle yourself. And so we are pleased to present you with this beginner’s guide to cryptocurrency to tell you exactly what it is.

After all, we here at Simpler Trading want to help you get a basic grasp on cryptocurrency. Then as any well educated person does, you can formulate your own opinions on it. We’ll stick to discussing it and trading it – nothing more.

So What Exactly is Cryptocurrency?

At the baseline, it’s a form of money. The difficult part for many people to grasp is that it isn’t tangible. You can’t hold crypto in your hands the same way you can hold the dollar or the yen. But that doesn’t make it any less real. Currently there are hundreds of cryptocurrencies out there. The big one, of course, being Bitcoin. But then there’s Ethereum, Litecoin, Ripple, and Dash, just to name a few. These other coins are conveniently named “altcoins.” Bitcoin was the original crypto, and after it started taking off, a multitude of alternative coins have popped up – clever name isn’t it?

And an additional perk? No chance of fraud. One upside, if not the biggest, to cryptocurrency is that it’s incorruptible. It’s a decentralized form of money, so it doesn’t have to rely on any finite government. So even if the U.S. Treasury plummets today, crypto will be chugging along.

The Beauty and Brains Behind Crypto

And there’s a beauty and brains behind this incorruptible operation: blockchain. Blockchain is the foundation of cryptocurrency, and for many people, the reason they invest in crypto altogether. It’s the technology aspect. It kind of works like Legos. Most people remember building with Legos when they were younger. You stacked them, then stacked them some more, and some more, and some more. Until finally, you had this more than likely, slightly wonky tower that started out from a single Lego. That’s how blockchain technology works.

Blockchain is a concept and crypto is the application using that concept. Each blockchain builds on the previous one – collecting the data from all subsequents blockchains and storing them within itself. It’s a system of computers that validates and verifies transactions simultaneously.

The Inevitable Fork in the Road

However, with any major operation, you run into forks in the road. That’s what actually happens with certain coins. The blockchain will “fork,” the code will be altered, and an entirely new strand off the original will be created. For instance, in December of last year, Bitcoin experienced a fork in its blockchain. This fork resulted in the creation of Bitcoin Cash.

Even though it’s a deviation from the plan, forks can be a good thing for investors. If you invested in the coin before the fork, you could make some money once the fork occurs. If you want to learn more about crypto trading and take advantage of these “forks,” join our community of crypto traders. Learn more about it here.

How Do Cryptos Come Into Being?

You could even take it a step further past trading, and do what some of our traders do, mining. It’s a guaranteed reward, assuming you can solve the code. Mining is where you solve the previous transactions algorithmical code, and then you’re rewarded with a coin. It requires a computer, a program, and (I imagine) a quick thinking brain. As a miner, you compete with other miners to solve the latest transaction on the blockchain. This occurs about every ten minutes, and if you win, you’re attached to that chain forever.

But remember, if you want to start mining, you better start now (for Bitcoin at least). Bitcoin has a set amount. There will only ever be 21 million Bitcoin, but Ethereum is also mined currently. So if you want to diversify, that’s one way to go about it.

The Potential Future of Crypto

As you can see, there’s a lot to crypto, and some say it’s only just beginning to really take off. Right now, there’s discussion about Amazon integrating cryptocurrency as a form of payment, and possibly looking to create an altcoin of its own. If this comes to fruition, it could revolutionize the crypto world. Whether or not that happens is still up in the air, but regardless it paints an interesting future. Suddenly we can use something that your grandma would’ve called “Monopoly money” to pay for our favorite espresso machine. Just imagine the possibilities!

Learn more about cryptocurrency and how to trade it with our Simpler Crypto membership here.