CRYPTOCURRENCY IS... THE BEGINNERS GUIDE TO INVESTING IN CRYPTO
At its core, cryptocurrency is typically decentralized digital money designed to be used over the internet. Bitcoin, which launched in 2008, was the first cryptocurrency, and it remains by far the biggest, most influential, and best-known. In the decade since, Bitcoin and other cryptocurrencies like Ethereum have grown as digital alternatives to money issued by governments.
The most popular cryptocurrencies, by market capitalization, are Bitcoin, Ethereum, Bitcoin Cash and Litecoin. Other well-known cryptocurrencies include Tezos, EOS, and ZCash. Some are similar to Bitcoin. Others are based on different technologies, or have new features that allow them to do more than transfer value. Crypto makes it possible to transfer value online without the need for a middleman like a bank or payment processor, allowing value to transfer globally, near-instantly, 24/7, for low fees. Cryptocurrencies are usually not issued or controlled by any government or other central authority. They’re managed by peer-to-peer networks of computers running free, open-source software. Anyone who wants to participate is able to.
If a bank or government isn’t involved, is crypto secure?
It’s secure because all transactions are vetted by a technology called a blockchain. A cryptocurrency blockchain is similar to a bank’s balance sheet or ledger. Each currency has its own blockchain, which is an ongoing, constantly re-verified record of every single transaction ever made using that currency. Unlike a bank’s ledger, a crypto blockchain is distributed across participants of the digital currency’s entire network.
No company, country, or third party is in control of it; and anyone can participate. A blockchain is a breakthrough technology only recently made possible through decades of computer science and mathematical innovations.
Most importantly, cryptocurrencies allow individuals to take complete control over their assets.
Transferability: Crypto makes transactions with people on the other side of the planet as seamless as paying with cash at your local grocery store.
Privacy: When paying with cryptocurrency, you don’t need to provide unnecessary personal information to the merchant. Which means your financial information is protected from being shared with third parties like banks, payment services, advertisers, and credit-rating agencies. And because no sensitive information needs to be sent over the internet, there is very little risk of your financial information being compromised, or your identity being stolen.
Security: Almost all cryptocurrencies, including Bitcoin, Ethereum, Tezos, and Bitcoin Cash are secured using technology called a blockchain, which is constantly checked and verified by a huge amount of computing power.
Portability: Because your cryptocurrency holdings aren’t tied to a financial institution or government, they are available to you no matter where you are in the world or what happens to any of the global finance system’s major intermediaries.
Transparency: Every transaction on the Bitcoin, Ethereum, Tezos, and Bitcoin Cash networks is published publicly, without exception. This means there's no room for manipulation of transactions, changing the money supply, or adjusting the rules mid-game.
Irreversibility: Unlike a credit card payment, cryptocurrency payments can’t be reversed. For merchants, this hugely reduces the likelihood of being defrauded. For customers, it has the potential to make commerce cheaper by eliminating one of the major arguments credit card companies make for their high processing fees.
Safety: The network powering Bitcoin has never been hacked. And the fundamental ideas behind cryptocurrencies help make them safe: the systems are permissionless and the core software is open-source, meaning countless computer scientists and cryptographers have been able to examine all aspects of the networks and their security.
Why is cryptocurrency the future of finance?
Cryptocurrencies are the first alternative to the traditional banking system, and have powerful advantages over previous payment methods and traditional classes of assets. Think of them as Money 2.0. -- a new kind of cash that is native to the internet, which gives it the potential to be the fastest, easiest, cheapest, safest, and most universal way to exchange value.
"Cryptocurrencies are the first alternative to the traditional banking system, and have powerful advantages over previous payment methods and traditional classes of assets. Think of them as Money 2.0. -- a new kind of cash that is native to the internet, which gives it the potential to be the fastest, easiest, cheapest, safest, and most universal way to exchange value that the world has ever seen."
Cryptocurrencies can be used to buy goods or services or held as part of an investment strategy, but they can’t be manipulated by any central authority, simply because there isn’t one. No matter what happens to a government, your cryptocurrency will remain secure. Digital currencies provide equality of opportunity, regardless of where you were born or where you live. As long as you have a smartphone or another internet-connected device, you have the same crypto access as everyone else.
Cryptocurrencies create unique opportunities for expanding people’s economic freedom around the world. Digital currencies’ essential borderlessness facilitates free trade, even in countries with tight government controls over citizens’ finances. In places where inflation is a key problem, cryptocurrencies can provide an alternative to dysfunctional fiat currencies for savings and payments. As part of a broader investment strategy, crypto can be approached in a wide variety of ways. One approach is to buy and hold something like bitcoin, which has gone from virtually worthless in 2008 to thousands of dollars a coin today. Another would be a more active strategy, buying and selling cryptocurrencies that experience volatility.
One option for crypto-curious investors looking to minimize risk is USD Coin, which is pegged 1:1 to the value of the U.S. dollar. It offers the benefits of crypto, including the ability to transfer money internationally quickly and cheaply, with the stability of a traditional currency. USD Coin is an example of a cryptocurrency called stablecoins. They are designed to minimize volatility and maximize utility. Stablecoins do this by pegging their value to an external factor, typically a fiat currency like the U.S. dollar or a commodity like gold.
Why invest in cryptocurrency?
Online exchanges like Coinbase have made buying and selling cryptocurrencies easy, secure, and rewarding.
- It only takes a few minutes to create a secure account, and you can buy cryptocurrency using your debit card or bank account.
- You can buy as little (or as much) crypto as you want, since you can buy fractional coins. For example, you can buy $25.00 worth of bitcoin.
- Many digital currencies, including USD Coin and Tezos, offer holders rewards just for having them.
- On Coinbase, you can earn 1% APY on— that’s much higher than most traditional savings accounts.
- You can also earn up to 5% APY when you stake Tezos on Coinbase.
- Unlike stocks or bonds, you can easily transfer your cryptocurrency to anyone else or use it to pay for goods and services.
- Millions of people hold bitcoin and other digital currencies as part of their investment portfolios.
Where do cryptocurrencies get their value?
The economic value of cryptocurrency, like all goods and services, comes from supply and demand. Supply refers to how much is available—like how many bitcoin are available to buy at any moment in time. Demand refers to people’s desire to own it—as in how many people want to buy bitcoin and how strongly they want it. The value of a cryptocurrency will always be a balance of both factors.
How to buy bitcoin and other cryptocurrency
The easiest way to acquire cryptocurrency is to purchase on an online exchange. On Coinbase, you can buy major cryptocurrencies like Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Bitcoin Cash (BCH), Ethereum Classic (ETC). Or you can explore emerging coins like Stellar Lumens or EOS. For some cryptocurrencies Coinbase offers opportunities to earn some for free. One good approach is to ask yourself what you’re hoping to do with crypto and choose the currency that will help you achieve your goals. For example, if you want to buy a laptop with crypto, bitcoin might be a good option because it is the most widely accepted cryptocurrency. Over 8,000 global merchants accept cryptocurrency via Coinbase Commerce. On the other hand, if you want to play a digital card game, then Ethereum is a popular choice. Keep in mind that you do not need to buy a whole coin. On Coinbase, you can buy portions of coins in increments as little as 2 dollars, euros, pounds.
How do you store cryptocurrency?
Storing crypto is similar to storing cash, which means you need to protect it from theft and loss. There are many ways to store crypto, but the simplest solution is via a trusted, secure exchange like Coinbase.
- Coinbase customers can securely store, send, receive, and convert crypto by signing into their account on a computer, tablet, or phone.
- Want to transfer money from your wallet to a bank account? The Coinbase app makes it as easy as transferring funds from one bank to another. (Much like conventional bank transfers or ATM withdrawals, exchanges like Coinbase set a daily limit, and it might take from a few days to a week for the transaction to be completed.
"The easiest way to acquire cryptocurrency is to purchase on an online exchange. On Coinbase, you can buy major cryptocurrencies like Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Bitcoin Cash (BCH), Ethereum Classic (ETC). Or you can explore emerging coins like Stellar Lumens. For some cryptocurrencies Coinbase offers opportunities to earn some for free."
About Coinbase: We are building the cryptoeconomy – a more fair, accessible, efficient, and transparent financial system enabled by crypto. We started in 2012 with the radical idea that anyone, anywhere, should be able to easily and securely send and receive Bitcoin. Today, we offer a trusted and easy-to-use platform for accessing the broader cryptoeconomy.
For more information: www.coinbase.com