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Cryptocurrency - March 24th
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– Read moreA cryptocurrency is a digital currency that is nearly impossible to replicate, spend twice or counterfeit. Each digital token has value, just like a $2 coin is a physical token that has an attributed value worth $2. The difference is that the digital token exists online on a network that is distributed across a large number of computers. This is made possible by blockchain technology, with the most popular innovation known as Bitcoin blockchain.
Blockchain technology is an essential part of most cryptocurrencies. This allows for cryptocurrencies to be decentralised, meaning it is not issued by a central authority, allowing it to exist outside of government or centralised control. The word “cryptocurrency” comes from the way the digital tokens are encrypted to secure the network.
Bitcoin was the first blockchain-based cryptocurrency and to this day, it remains the most valuable and popular. At the time of writing, there are thousands of alternative cryptocurrencies on the market all with their own functions and purpose. Some are similar to Bitcoin and others are entirely new currencies that have been built from scratch. As Investopedia reports, the “aggregate value of all the cryptocurrencies in existence is around $214 billion—Bitcoin currently represents more than 68% of the total value.” Other types of cryptocurrencies include Ethereum, Litecoin, Ripple and Stablecoin.
Getting started in investing in cryptocurrency can be as easy as setting up a new online bank account. Many people who invest in cryptocurrency use an online exchange where dollars are traded for their choice in crypto.
To get started, the investor chooses a cryptocurrency. Most Investors start with Bitcoin or Ethereum before exchanging other types of cryptocurrency. Once you’ve decided on the crypto that’s right for you, the next step is to find an exchange to buy it. Most commonly beginners exchange fiat currency (for example, Australian Dollars) for your chosen cryptocurrency. The next time you buy cryptocurrency, you might trade crypto for crypto. After you purchase your cryptocurrency, you can choose how to store it. Some choose to store it on an exchange but it is generally more secure to store it in a crypto wallet.
Check out our guide on How to Buy Bitcoin in Australia
The crypto exchange allows the investor to exchange one cryptocurrency for another, the buying and selling of coins, and the exchange of fiat money into crypto. Crypto exchanges set the rate of the currencies — both coins and tokens much like how the stock exchange works. Investors can keep their crypto on the exchange but it is generally more secure to keep your own crypto wallet.
A crypto wallet is a place to store, send and receive cryptocurrencies which is generally more secure as it often uses two-factor authentication.
Cryptocurrency exchanges are the interface between fiat currencies such as the Aussie or US dollar and a selection of cryptocurrencies such as Bitcoin, Ethereum or Ripple.
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